Generic Drug User Fees: Application Review Times Declined, but FDA Should Develop a Plan for Administering Its Unobligated User Fees
Released: 2017-06-26T00:00:00

Letter

Background

FDA’s Generic Drug Program Organization

Four components within FDA have primary responsibility for ensuring the safety and effectiveness of generic drugs. Among other activities, these components evaluate the safety and effectiveness of generic drugs prior to marketing, monitor the safety and effectiveness of marketed products, oversee the advertising and promotion of marketed products, formulate regulations and guidance, set research priorities, and communicate information to industry and the public.

The Center for Drug Evaluation and Research (CDER) is responsible for overseeing drugs and certain therapeutic biologics. It coordinates federal government efforts to ensure the safety and efficacy of generic drugs as well as new and over-the-counter drugs.

The Center for Biologics Evaluation and Research (CBER) is responsible for overseeing generic drug applications for biologics, which are products such as blood, vaccines, and human tissues. These products make up a smaller proportion of the generic drug applications than those reviewed by CDER.

The Office of Regulatory Affairs (ORA) is responsible for conducting field activities for all of FDA’s medical product centers, which include CDER and CBER, such as inspections of domestic and foreign establishments involved in manufacturing medical products.

FDA headquarters (HQ), specifically the Office of the Commissioner, includes several offices that perform a variety of activities that contribute to indirect costs related to the GDUFA program. FDA HQ provides agency level shared services; policy, financial, and legal support; and other overhead support that is provided to all FDA programs and activities.

Within CDER, the Office of Generic Drugs (OGD) is responsible for providing regulatory oversight and strategic direction for FDA’s generic drug program to expedite the availability of safe, effective, and high- quality generic drugs to patients. These activities include reviewing generic drug applications, which comprises such actions as examining bioequivalence data and evaluating proposed drug labeling. In addition, the Office of Pharmaceutical Quality, also within CDER, is responsible for examining chemistry-related data and providing quality control across all manufacturing sites, whether domestic or foreign, across all drug product areas.

Generic Drug Review Activities

FDA begins review of a generic drug when a generic drug applicant submits an Abbreviated New Drug Application (ANDA). Generic drug applications are termed “abbreviated” by FDA because they are generally not required to include preclinical study data (studies involving animals) and clinical trial data (studies involving humans) to establish safety and effectiveness. Because generic drugs must be bioequivalent to a brand- name drug already approved by the FDA, and because animal studies and clinical trials have already been conducted for the brand-name drug, generic drug applicants do not need to repeat these animal or human studies.

FDA’s approval of a drug’s application is required before a generic drug can be marketed for sale in the United States. FDA will meet the performance goals outlined in its Commitment Letter when it completes its review and issues an action letter for a specified percentage of applications within a designated period of time. An action letter is an official statement informing a drug applicant of the agency’s decision about an application review. FDA can issue four types of action letters:

Refuse to receive letter: FDA issues a refusal to receive letter when it determines that an application is not sufficiently complete to permit a substantive review.

Approval letter: FDA issues an approval letter to an applicant when the agency has concluded its review of a generic drug application and the applicant is authorized to commercially market the drug.

Tentative approval letter: FDA issues a tentative approval letter when the agency has completed its review of an application, but patents or other exclusivities for the original, brand-name product prevent approval. A tentative approval letter does not allow the applicant to market the generic drug product until the related patents and other exclusivities no longer prevent approval.

Complete response letter: FDA issues a complete response letter to an applicant at the completion of a full application review where deficiencies are found—the complete response letter describes any deficiencies that must be corrected in order for an application to be approved.

In order to close the review cycle, FDA must complete its review and issue an approval, tentative approval, or a complete response letter. If the agency has not issued one of these letters, the application is considered a pending application. (See fig. 1 for a summary of the generic drug application review process.)

Once an ANDA is filed, an FDA review team—medical doctors, chemists, statisticians, microbiologists, pharmacologists, and other experts— evaluates whether scientific data in the application demonstrates that the drug product meets the statutory and regulatory standards for approval. For example, applicants must, in most cases, demonstrate that the generic product, in relation to an already-approved brand-name drug contains the same active ingredient(s); is identical in strength, dosage form, and route of administration; is labeled for conditions of use approved for the brand-name drug; is bioequivalent to an already-approved brand-name drug; meets the same requirements for identity, strength, purity, and quality; is manufactured under the same strict standards of FDA’s good manufacturing practice regulations required for brand-name products.

The application must also contain information to show that, with permitted deviations, it has the same labeling as the brand-name product.

FDA communicates with applicants when issues arise during its review of an application that may prevent the agency from approving the application. In response, applicants can submit additional information to FDA in the form of amendments to the original application. FDA review time for an original application (i.e., the first review cycle) is calculated as the time elapsed from the date FDA receives the application and associated user fee to the date it issues an action letter. The application review process will also be closed if the application is withdrawn by the applicant. The date on which one of these actions occurs is used to determine whether the review cycle was completed within FDA’s committed time frames. If FDA issues a complete response letter listing the deficiencies in the application that were encountered by FDA’s reviewers, the applicant may choose to submit a revised application to FDA. Resubmissions and their review are covered under the user fee paid with the original submission, but a new review cycle with its own performance goals is started.

If an applicant wants to change any part of its original ANDA after its approval—such as changes to the manufacturing location or process, the type or source of active ingredients, or the labeling—it must submit an application supplement to notify FDA of the change. If the change has a substantial potential to adversely affect factors such as the identity, quality, purity, or potency of the drug, the applicant must obtain FDA approval for the change through submission of a Prior Approval Supplement (PAS).

Outside of the application review process, FDA also responds to correspondence submitted to the agency by, or on behalf of, an applicant requesting information on a specific element of generic drug product development. This communication between FDA and applicants, known as controlled correspondence, allows applicants to submit formal questions seeking the agency’s input on issues capable of affecting the review of a product prior to their submission of an ANDA.

Funding for the Generic Drug Program

The generic drug program is supported by both regular appropriations and generic drug user fee appropriations. Generic drug user fees provide funds to FDA to support its efforts to review applications for generic drugs in a timely manner. GDUFA authorizes FDA to collect from the generic drug industry $299 million in user fees annually through September 30, 2017, adjusted for inflation, to supplement the regular appropriations the agency receives to support the generic drug program. GDUFA established several types of fees associated with generic drug products that together generate the annual collections. These include fees for (1) ANDAs in the backlog as of October 1, 2012 (assessed in fiscal year 2013 only); (2) ANDAs and PASs submitted after October 1, 2012; (3) facilities where active pharmaceutical ingredients and finished dosage forms are produced; and (4) Drug Master Files that are associated with generic drug products. Although GDUFA authorizes FDA to collect user fees, the law specifies that the total amount of user fees collected for a fiscal year be provided in appropriations acts. FDA establishes the generic drug user fee collection amounts annually to generate revenue levels as specified in appropriations acts. Once appropriated and collected, user fees are available for obligation by FDA until expended. As a result, any user fees not obligated in the fiscal year in which they were appropriated and collected may be carried over into subsequent fiscal years (referred to as a carryover). In addition, GDUFA specifies that user fees may be spent only for generic drug activities, including the costs of reviewing and approving generic drug applications.

Each year as part of the annual appropriations process, FDA develops and submits supporting information for its funding request, which includes user fee and non-user fee funds, in the budget justification that is submitted to the congressional appropriations committees. This information reflects how FDA proposes to meet its mission, goals, and objectives, and it assists Congress in determining how much funding to appropriate for FDA. This information also includes an estimate of how many generic drug applications are likely to be received in the coming year.

GDUFA Reporting Requirements and Reauthorization

Authority for the generic drug user fee program established under GDUFA expires at the end of fiscal year 2017. During the 5-year period of the current authorization, FDA has been required to submit two annual reports to its oversight committees: (1) a report on the progress made and future plans toward achieving the performance goals identified in its Commitment Letter, and (2) a report on the financial aspects of FDA’s implementation efforts. These reports contain descriptions of relevant oversight activities over the previous year, data on FDA’s performance toward meeting the commitments, and information about how FDA addressed the implementation and use of the user fees over the previous year.

In addition, to facilitate Congress’s reauthorization of the program, GDUFA requires FDA to develop recommendations to present to Congress with respect to the goals, and plans for meeting those goals, during fiscal year 2017 through fiscal year 2022. FDA is to develop these recommendations in consultation with various stakeholders, including the generic drug industry. FDA and generic drug industry stakeholders conducted negotiations regarding the program’s reauthorization, which is referred to as GDUFA II, in October 2015 through August 2016. According to FDA, the negotiated objectives of GDUFA II differ from the objectives of the original GDUFA agreement (i.e., GDUFA I). While the primary objective of GDUFA I was to restructure FDA’s generic drug program to improve the speed and predictability of reviews, the primary objective for GDUFA II, as outlined in the proposed Commitment Letter negotiated by FDA and the generic drug industry, is to improve the completeness of drug application submissions and reduce the number of review cycles. Other features include enhanced review pathways for complex drugs, enhanced accountability and reporting, and modifications to the user fee structure.

GDUFA Increased Generic Drug Program Resources Significantly, but the Agency Lacks a Plan for Administering Its Carryover User Fees Supported an 85 Percent Increase in Generic Drug Program Obligations, Increasing FDA’s Reliance on Such Fees During the Implementation Period

GDUFA supported an 85 percent increase in total FDA obligations for its generic drug program in the first 4 years of implementation. User fees primarily supported generic drug application evaluation and review activities. FDA has accumulated carryover balances from unobligated user fee collections, but it lacks a plan for administering the carryover, which is inconsistent with best practices identified in our prior work on the management of user fees and federal internal control standards.

Total obligations for FDA’s generic drug program (from both regular appropriations and generic drug user fee appropriations) increased by about 85 percent in the 4 years following GDUFA’s implementation, from about $267 million in fiscal year 2013 to about $494 million in fiscal year 2016. (See table 1.) FDA’s reliance on generic drug user fees increased throughout this period. Obligations from generic drug user fees grew in both absolute terms and as a share of total program obligations, from about $121 million (45 percent of total obligations) in fiscal year 2013 to about $373 million (76 percent of total obligations) in fiscal year 2016. In contrast, obligations from regular appropriations decreased as a share of total program obligations during this period, and while these regular appropriations increased in absolute terms from fiscal years 2013 to 2014, they declined afterwards.

User Fees Primarily Supported Generic Drug Evaluation and Review Activities

In the first 4 years of the generic drug user fee program, FDA obligated over $1 billion (about 70 percent) of the anticipated 5-year, $1.5 billion in user fee collections. CDER, the office with responsibility for drug evaluations and generic drug submission reviews, obligated the largest share of user fees—almost 70 percent—while the three other FDA components with responsibility for the generic drug program obligated smaller shares. Figure 2 shows cumulative user fee obligations by each FDA component and account in fiscal years 2013 through 2016. According to FDA officials, the percentage of user fees allocated to each of these four components did not vary much from year to year. However, FDA officials also reported that each year the agency allocated a percentage of the user fees to centrally managed accounts that are used for rent, utility costs, telecommunications, and other support costs such as information technology (IT) investments that support FDA programs and activities, but which do not necessarily align with the four offices supporting the generic drug program. User fee obligations from the centrally managed account were the second largest component of such obligations each fiscal year since the implementation of GDUFA, trailing only CDER.

In addition, approximately 60 percent of cumulative user fee obligations supported non-personnel activities and about 40 percent supported personnel-related activities, such as employee salaries and benefits, in the first 4 years of GDUFA’s implementation (see table 2). In addition to IT investments and capital asset purchases, CDER also obligated funds for non-personnel activities such as consulting services to integrate GDUFA requirements into its new IT system and regulatory science projects with the potential to improve the development of generic drugs. (See Appendix I for more information on GDUFA-supported regulatory science projects.)

User fee obligations for personnel-related activities increased from fiscal year 2013 to fiscal year 2016, both in absolute numbers and as a percentage of total user fee obligations. Personnel-related obligations increased sharply in the first 4 years of GDUFA, from about $18 million (14 percent) of all user fees obligated in fiscal year 2013, to about $181 million (49 percent) in fiscal year 2016. According to FDA officials, the increase in personnel-related spending was due, in part, to hiring for the generic drug program consistent with the agency’s GDUFA goals.

FDA Accumulated a User Fee Carryover from Unobligated Collections but Lacks a Plan on How it Will Administer the Carryover

FDA has accumulated a large unobligated user fee carryover balance, which it uses as an operating reserve. At the beginning of fiscal year 2017, FDA had a carryover of approximately $174 million. During the first two years of GDUFA’s implementation, FDA had obligated about half of the user fees it had collected and thereby amassed a cumulative carryover of about $278 million by the end of fiscal year 2014—an amount nearly as great as the annual, inflation-adjusted user fee collection amount of $299 million. In fiscal years 2015 and 2016, FDA’s program obligations from user fees exceeded the amount collected and FDA used part of the carryover to make up for the gap. (See table 3.) In fiscal year 2015, FDA obligated about $47 million from its carryover in addition to its total generic drug user fee appropriation for that year, and in fiscal year 2016, the agency obligated about $58 million from its carryover in addition to its total generic drug user fee appropriation for that year, yielding a carryover balance of about $174 million.

Despite the large carryover amounts, FDA has not developed a planning document on how it will administer its carryover—one that includes a fully documented analysis of program costs and risks to ensure that its carryover reflects expected operational needs and probable contingencies. Although FDA uses an internal management report to show GDUFA collection amounts, obligations, and end-of-year carryover amounts, the agency was unable to produce evidence describing whether the carryover of $174 million at the beginning of fiscal year 2017 (or carryover amounts in other years) was within a targeted goal, and it does not have targets for future years in general. We have previously found that when unobligated balances are used as carryover, it is important for entities to establish a target range for the carryover to ensure user fee resources are used efficiently and responsibly and that the amounts carried over into the following year are reasonable to meet program needs, risks, and probable contingencies. In addition, the lack of such a planning document is inconsistent with federal internal control standards, which state that management should have a control system in place to communicate necessary quality information externally to help the agency achieve its objectives and address related risks.

During GDUFA II negotiations, FDA officials acknowledged the need for more fiscal transparency and accountability and announced plans to build financial systems to facilitate operational and fiscal efficiency and reporting. However, agency officials also stated that their internal management report, which is used to report its user fee cash flows, was sufficient to analyze the program’s needs. By not developing a planning document FDA cannot effectively communicate to external stakeholders the amount of its carryover balance and its plans for using it. These external stakeholders include Congress, which determines the total amount of generic drug user fees FDA is to collect through the annual appropriations process. Likewise, Congress also considers GDUFA reauthorization levels based on recommendations that FDA is to develop in consultation with other external stakeholders, who do not have access to FDA’s internal reports.

FDA Implemented Various Changes to Improve the Generic Drug Application Process and Made Additional Refinements in Response to Applicant Concerns

FDA has made changes to the generic drug program since the enactment of GDUFA in order to establish a better-managed drug application review process. In response to stakeholder input, FDA incorporated additional changes to the application review process.

FDA Made Changes to Its Organizational Infrastructure, Information Technology, and Communication Processes

Key changes to FDA’s generic drug review process have included revising its organizational infrastructure, upgrading IT, and formalizing external communication processes.

Organizational Infrastructure

To enable FDA to meet the evolving needs of application review and GDUFA performance goals, the agency undertook steps to reorganize OGD in December 2013. Specifically, under this reorganization OGD was elevated to the status of a “super office” within CDER, providing OGD with centralized administrative support and its own governance structure. Under the reorganization, OGD was given the responsibility to coordinate and manage the application review process; provide safety, surveillance, clinical, and bioequivalence reviews for generic products; and develop policy and regulatory science for generic drugs. Four subordinate offices within OGD were created to fulfill these responsibilities: the Office of Research and Standards, the Office of Bioequivalence, the Office of Regulatory Operations, and the Office of Generic Drug Policy. Additionally, in January 2015 FDA established a new Office of Pharmaceutical Quality—another “super office” within CDER—to provide better alignment among all drug quality review functions, including application reviews, inspections, and research.

As part of its GDUFA hiring goals, FDA planned to hire approximately 923 new staff by the end of fiscal year 2015 and to this end established incremental goals to hire 231 (25 percent), 462 (50 percent), and 231 (25 percent) of the 923 total new staff during the first 3 fiscal years of the program, respectively. However, FDA surpassed the targeted goal in total, hiring nearly 1,200 new staff over the 3 year period (227, 562, and 387 in each fiscal year, respectively). (See fig. 3.) Additionally, in fiscal year 2016 FDA hired 346 new staff to support the GDUFA program, although there was no associated GDUFA hiring goal for that fiscal year. The majority of these new hires support generic drug program evaluation activities within CDER, with additional hires distributed across other FDA offices.

To fulfill its GDUFA commitments, FDA established a new Informatics Platform to improve the efficiency of application reviews and to support the agency’s ability to track its performance. Prior to rolling out this platform in fiscal year 2015, FDA officials said that the agency used many disparate and disconnected databases, systems, and spreadsheets to manage different aspects of the generic drug review program. Officials said that the new platform integrates all these review functions, tracking the work flow from the time FDA receives an application until a decision is made on it. Furthermore, officials told us the platform can provide information on an application as it proceeds through the review process, and agency officials can also track when each assignment related to this process has been completed. Backlog applications are also tracked by the platform. During the initial launch, officials said that the platform was able to track the application review process and its related work flow, including analytics and metrics reporting. Since then, FDA has also incorporated data about facility inspection decisions as well as provided access to historical reviews and actions taken by FDA on generic drug applications submitted prior to fiscal year 2015. FDA officials said that the agency has plans to expand the use of the platform in the future to track additional incoming submissions, such as reports of drug shortages and applications for brand-name drugs. According to FDA officials, the launch of the platform has provided the following benefits to FDA and to stakeholders: (1) faster review times, (2) easier collaboration and communication with industry, (3) improved application review consistency, and (4) more predictable application review times and target completion dates due to having all pertinent information regarding an application in one location that is accessible to all FDA reviewers.

External Communication

As part of FDA’s GDUFA commitments to streamline the review process, the agency took steps to change how it communicates with generic drug applicants. According to FDA officials, prior to GDUFA, deficiency letters were sent to applicants by specific types of reviewers within CDER—such as labeling reviewers or chemistry reviewers—in an uncoordinated fashion, making it difficult for applicants to obtain a comprehensive picture of their application’s status. Starting in fiscal year 2013, FDA committed to consolidating all application deficiencies into one letter to the applicant, called a complete response letter. According to FDA officials, this systemic approach to provide a single deficiency letter was one of the biggest changes the agency made to the review process since the enactment of GDUFA.

Additionally, in September 2013, OGD issued guidance that established regulatory project managers as the central point of contact for each application throughout its lifecycle. FDA officials said that regulatory project managers are also responsible for overseeing the review of each application across all disciplines. Prior to GDUFA, FDA officials said that no one individual at the agency had responsibility for an application throughout its entire lifecycle.

FDA has also issued new and revised guidance documents to educate applicants about changes to the generic drug application review process made in response to GDUFA. According to FDA officials, since fiscal year 2013 FDA has issued 31 new and revised draft or final guidance documents related to the application review process. Additionally, officials said that FDA has also issued almost 600 new or revised product-specific recommendations to assist the applicants with identifying the most appropriate methodology for developing generic drugs and generating evidence needed to support application approval.

FDA Has Made Additional Refinements to Its Generic Drug Program in Response to Applicants’ Concerns about Program Changes

FDA has made additional refinements to its application review program in response to applicant concerns about program changes. Specifically, to provide more timely communication on individual applications, FDA instituted a mechanism known as real time communication in late 2014. As described above, as one of its initial changes, FDA identified all deficiencies found in its review of an application in a single, complete response letter to the applicant. However, applicants told us that they found that only providing information in the complete response letters resulted in fewer informal communication opportunities with FDA and requested that FDA send information concerning individual application deficiencies on a rolling basis so that they could address deficiencies in real time. FDA acknowledged that the initial changes to how it communicated to applicants made it harder for applicants to assess the status of their applications and to plan the market launch of generic medicines. To remedy applicants’ concerns and to enhance the review process by increasing transparency and decreasing the number of review cycles, FDA implemented real-time communications—specifically “information requests” and “easily correctible deficiencies.” According to FDA officials, information requests are used by application reviewers to informally notify applicants of any preliminary application concerns as well as to seek resolution and clarification on some of the minor issues related to the application. Similarly, application reviewers communicate easily correctible deficiencies to applicants to obtain missing information that should be readily available, to seek clarification of data already submitted, or to request final resolution of technical issues. FDA data show that the numbers of information requests and easily correctible deficiencies substantially increased in the first 9 months following their inception in early 2015 and have decreased somewhat since then, suggesting that both FDA and applicants have found these new forms of communication useful. (See fig. 4.)

FDA also revised its policy outlining the roles and responsibilities of various FDA staff in communicating with applicants during the application review process in August 2015. FDA made this revision to address stakeholder concerns that establishing regulatory project managers as the primary point of contact for all communication with applicants limited the opportunities for informal communication with FDA staff directly responsible for reviewing applications. The revised policy expanded and set forth responsibilities and procedures for communications between FDA staff and applicants concerning the review status of applications. Specifically, OGD’s regulatory project managers would remain responsible for communicating the review status of applications they manage, including transmitting complete response letters, while discipline project managers and Office of Pharmaceutical Quality regulatory business process managers—both of whom are more directly involved in an application’s review—would be responsible for issuing all information requests and easily correctible deficiencies. According to FDA officials, these changes were made as part of a broader effort to bring communications between the agency and applicants closer to “real-time.”

Lastly, FDA has communicated target action dates to applicants since 2015 at the request of industry stakeholders. Target action dates are the agency’s internal deadlines for taking action on generic drug applications pending with the agency on October 1, 2012, and those submitted in fiscal years 2013 and 2014 (years for which there were no GDUFA performance goals established). According to FDA, although GDUFA did not require the agency to establish and communicate target action dates to applicants, these dates help applicants plan product launches, which promotes timely access to generic drugs.

Generic Drug Application Review Times Have Decreased, with FDA Meeting Its GDUFA Performance Goals for Fiscal Year 2015

FDA’s review times for generic drug applications have decreased since the implementation of GDUFA, with FDA surpassing multiple fiscal year 2015 GDUFA performance goals as described in table 4.

With respect to ANDA review times, the average time for FDA to complete the first review cycle decreased from 26 months for ANDAs submitted in fiscal year 2013 to about 14 months for those submitted in fiscal year 2015. Additionally, the dispersion in review times has decreased. (See fig. 5.) However, as of December 31, 2016, 929 ANDAs (34 percent) submitted since the start of the generic drug user fee program in fiscal year 2013 were still pending review. As these applications are reviewed, the average review time and the dispersion of review times for each fiscal year will increase since all of the applications that remained to be acted on are at least 15 months old. As of December 31, 2016, FDA had also acted on 89 percent of all ANDAs submitted in fiscal year 2015 within 15 months of receipt, exceeding its GDUFA goal of acting on 60 percent of ANDAs received in fiscal year 2015 within 15 months.

For PASs, the average time for FDA to complete the first review cycle also declined from 12 months in fiscal year 2013 to 4.5 months in fiscal year 2015. Additionally, the dispersion in review times decreased, as shown in figure 6.

FDA acted within 6 months on 95 percent of the PASs it received in fiscal year 2015 not requiring a facility inspection, exceeding its GDUFA goal of acting on 60 percent of PASs received within 6 months of receipt. For PASs received in fiscal year 2015 that required a facility inspection, FDA acted on 92 percent within 10 months, again exceeding its GDUFA goal of acting on 60 percent within 10 months of receipt.

FDA has also met performance goals related to controlled correspondences and its review of backlogged applications. As of December 31, 2016, FDA acted on 97 percent of the 1,519 controlled correspondences it received in fiscal year 2015 within 4 months, exceeding its GDUFA goal of acting on 70 percent within 4 months of receipt. FDA was unable to provide more detailed information on the review times for controlled correspondences submitted in the first 2 years of the program; however, according to FDA officials, 2,027 of the 2,040 correspondences submitted in that period have been reviewed as of August 2016.

In addition, as of December 31, 2016, FDA had acted on 92 percent of the 4,743 applications in the backlog pending review as of October 1, 2012, exceeding its GDUFA goal of acting on 90 percent of such applications before the end of fiscal year 2017. Fifty-eight percent of these applications were approved; approximately 20 percent were withdrawn by the applicant; and the applicants for the remaining 12 percent received a complete response letter.

Conclusions

As with any appropriations, the user fee funding provided to FDA brings with it a great responsibility to manage funds in a way that demonstrates prudent stewardship of resources. FDA has used its user fee funding to enhance OGD’s ability to increase hiring, and undertake numerous activities to improve and speed-up the review of generic drug applications. However, at the end of each fiscal year FDA has had large GDUFA carryover balances, and FDA has not fully documented the underlying assumptions for the size of the carryover, including anticipated obligations. Such a documented plan could aid Congress in determining the appropriate amount of user fees to be collected by the agency during the annual appropriations process and when considering a reauthorization of the user fee program. Making this information publicly available would also help to ensure that FDA’s recommendations to Congress are fully informed by the views of external stakeholders with whom FDA has an obligation to consult.

Recommendation for Executive Action

To ensure efficient use of generic drug user fees, facilitate oversight and transparency, and plan for risks, we recommend that the Commissioner of FDA develop a plan for administering user fee carryover that includes analyses of program costs and risks and reflects actual operational needs and contingencies.

Agency Comments

We provided a draft of this report to HHS for comment. In its written comments, which are reproduced in appendix II, HHS concurred with our recommendation. HHS agreed that it should incorporate an analysis of program risks and contingencies into its existing 5-year financial planning process and that it will review appropriate actions. HHS also provided technical comments, which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the Secretary of HHS, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact John E. Dicken at (202) 512-7114 or DickenJ@gao.gov. Contact points for our Office of Congressional Relations and Office of Public Affairs can be found on the last page of this report. Other major contributors to this report are listed in appendix III.

Appendix I: Regulatory Science Projects Supported by G eneric Drug User Fees, Fiscal Years 20 13 through 2016

Regulatory science projects support the development of generic drugs in part by helping to address gaps the agency faces between rapid changes in science and technology and the agency’s capacity to regulate those technologies. We previously reported that the Food and Drug Administration (FDA) traditionally funds regulatory science projects with resources from the agency’s regular appropriations, but projects funded within the Center for Drug Evaluation and Research (CDER) have also been supplemented by funds collected from user fee acts, such as the Prescription Drug User Fee Act and the Generic Drug User Fee Amendments of 2012 (GDUFA). GDUFA funds accounted for approximately $20 million in annual obligations for regulatory science projects from fiscal years 2013 through 2016.

The Office of Generic Drugs (OGD), located within CDER, established the GDUFA Regulatory Science Research Program to support projects that could potentially enhance the development of generic drugs. In fiscal year 2013, OGD created a list of GDUFA Regulatory Science Priorities that includes five broad priority areas (see table 5). The list is based in part on discussions with stakeholders during annual public meetings on GDUFA and in part on stakeholder comments to FDA’s GDUFA regulatory science funding announcements. However, generic drug industry stakeholders have raised concerns about the need for more meaningful scientific dialogue about FDA’s requirements for the development of generic drugs, and for more clarity on how the agency develops its regulatory science priorities list. FDA officials we interviewed were cognizant of stakeholders’ concerns and noted that they have reconsidered the five broad categories each year. However, officials told us they have not made changes to the priority areas since they were established in fiscal year 2013 and do not envision annual changes to the broad categories, though the sub-priority areas in each category have been revised from year to year. The officials acknowledged that while some information about their process for judging the merit of regulatory science proposals is public, details about how proposals are scored is not public in order to promote a process whereby applications submitted are evaluated free of bias from stakeholders. The officials explained that the priorities list is created internally at FDA in part to protect the privacy of applicants that submitted proposals, to avoid potential conflicts of interest from stakeholders who may want to steer research away from competitors, and to incorporate internal FDA capabilities to conduct research at lower costs. Although the officials said that decisions about which projects to fund is an inherently governmental function and should be made internally to support public health, they noted plans to improve communications with industry about the priorities list and plan to more clearly announce the sub-priority areas available for research on the OGD webpage.

In the first 4 years following GDUFA’s implementation, OGD obligated a cumulative amount of about $77 million from generic drug user fee collections for 103 regulatory science projects. Data provided by FDA showed that 15 of these projects supported research into post-market evaluation of generic drugs, 30 projects supported the equivalence of complex drug products, 20 projects supported the equivalence of locally acting products, 20 supported therapeutic equivalence evaluation and standards, and 18 supported cross-cutting computational and analytical tools. Obligations from user fees for regulatory science projects remained relatively stable each year, from a low of $16 million in fiscal year 2016 to a high of $24 million in fiscal year 2015. (See table 6). According to FDA officials, the agency is not required by law or otherwise committed to spend a certain amount on regulatory science projects, but agency officials anticipate funding projects at similar levels in future years.

Appendix II: Comments from the Department of Health and Human Services

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

John E. Dicken, (202) 512-7114 or dickenj@gao.gov.

Staff Acknowledgments

In addition to the contact named above, individuals making key contributions to this report include Robert Copeland (Assistant Director); Carolina Morgan (Analyst-in-Charge); Enyinnaya David Aja; Nick Bartine; Taylor Dunn; Sandra George; Laurie Pachter; and Said Sariolghalam. Muriel Brown and Laurel Plume also made contributions to this report.