Prescription Drug User Fee Act (PDUFA): 2017 Reauthorization as PDUFA VI
Released: 2018-03-16T00:00:00

Introduction

In 1992, the Prescription Drug User Fee Act (PDUFA, now called PDUFA I) gave the Food and Drug Administration (FDA) the authority to collect fees from the pharmaceutical industry and to use the revenue to support "the process for the review of human drug applications." That authority, which expired in 1997, has been renewed on five subsequent occasions, by PDUFA II (1997), PDUFA III (2002), PDUFA IV (2007), PDUFA V (2012), and PDUFA VI (2017). The most recent reauthorization was Title I of the Food and Drug Administration Reauthorization Act (FDARA, P.L. 115-52 ), which extends the user fee program through September 30, 2022.

For FY2017, 41% of FDA's enacted total program level came from user fees; however, user fee revenue provided 63% of FDA's Human Drugs Program budget. PDUFA revenue also contributed to the Biologics Program and agency-wide headquarters and rent budgets.

Congress first passed PDUFA to supplement the FDA budget outside of direct appropriations from Congress. The added funds were intended to enable the agency to increase its staff so it could finish new drug application reviews sooner, allowing both earlier patient access to new drugs and earlier industry earnings on those drugs. PDUFA I amended the Federal Food, Drug, and Cosmetic Act (FFDCA) to establish the authority and the process for collecting and using industry fees; it also required FDA and industry representatives to agree on the performance goals and procedures that the PDUFA revenue would support.

This report describes (1) the origin of prescription drug user fees, (2) current law as amended by PDUFA VI, (3) the impact of PDUFA on FDA application review time and the agency's Human Drugs Program budget, and (4) PDUFA VI reauthorization process.

Origin of Prescription Drug User Fees

In the late 1980s, the median time for FDA to approve a new drug application (NDA) was 29 months. Industry, consumer groups, and FDA agreed that the time from submission of a drug or biologics application to FDA's decision was unacceptably long. Patient advocates argued that a drug in review—and therefore not available for sale—could be the difference between life and death. Manufacturers argued that prolonged review times affected their ability to recoup the costs of research and development. During PDUFA I consideration, FDA estimated that each one-month delay in a review's completion cost a manufacturer an average of $10 million.

FDA argued that it needed more scientists to review incoming drug applications, as well as backlogged applications, and that it had insufficient appropriations to hire additional scientists to conduct these reviews. For decades, FDA had asked Congress for permission to implement user fees. The pharmaceutical industry generally opposed them, believing the funds might go into the Treasury to reduce federal debt rather than help fund drug reviews.

The pharmaceutical industry's opposition to user fees was mitigated, thus clearing a path for the 1992 law, when then FDA commissioner David Kessler worked out an arrangement that met two industry demands: (1) performance goals, which would set target completion times for various review processes, and (2) the promise that these fees would supplement—rather than replace—funding that Congress appropriated to FDA. Those steps helped persuade industry groups that the fees would reduce review times—and paved the way for Congress to authorize a revenue source that FDA had sought for over 20 years.

Current Law

PDUFA I—and the subsequent PDUFA II, PDUFA III, PDUFA IV, PDUFA V, and PDUFA VI—authorized the collection of prescription drug user fees and the use of that revenue for specified activities.

FDA Drug Review and PDUFA Coverage

Prior to marketing a drug, a manufacturer must submit to FDA a new drug application (NDA) demonstrating that the drug is safe and effective for its intended use. FDA reviews each NDA with three major concerns: (1) safety and effectiveness in the drug's proposed use, (2) appropriateness of the proposed labeling, and (3) adequacy of manufacturing methods to ensure the drug's identity, strength, quality, and purity.

PDUFA I authorized FDA to use the fee revenue to fund the "process for the review of human drug applications" and defined what that process encompassed. With subsequent reauthorizations, Congress has amended that definition to expand the scope of activities covered by PDUFA. The upper portion of Figure 1 depicts the research and development path of a new drug, from basic research through preclinical development and testing on animals, clinical development in trials on human subjects as an investigational new drug (IND), FDA review of the NDA, and, finally, the postapproval period in which the drug is marketed. The figure's lower portion illustrates the segments of this path during which FDA may use PDUFA revenue to support its activities and how the scope of those activities has been expanded with subsequent reauthorizations.

PDUFA I (FY1993-FY1997). PDUFA I allowed fee revenue to fund "activities necessary for the review of human drug applications and supplements." In addition to the actual review of applications, it covered activities such as letters from FDA to applicants outlining deficiencies in their applications, facility inspections as part of pending approval applications, and monitoring of research necessary for the review of applications. All those activities fit within the timeframe from when a manufacturer submits an NDA until FDA makes its decision on that application. PDUFA II (FY1998-FY2002). PDUFA II expanded the range of activities for which FDA could use prescription drug user fee revenue to include those related to preclinical and clinical trial phases of a new drug's development. PDUFA III (FY2003-FY2007). PDUFA III extended the range of activities for which FDA could use prescription drug user fee revenue to include three years into the postapproval and marketing period. It allowed FDA to use PDUFA revenue for the collection, development, and review of postmarket safety information for up to three years postapproval (for drugs approved after October 1, 2002). That change allowed the agency to double the number of staff monitoring side effects of drugs already on the market. It also allowed FDA to use fees to develop databases documenting drug use. PDUFA IV ( FY2008-FY2012). PDUFA IV removed the three-year limitation on postapproval activities and again expanded the list of postmarket safety activities that the fees could support. New items on the list included developing and using adverse-event data-collection systems, including information technology systems; developing and using improved analytical tools to assess potential safety problems, including access to external databases; implementing and enforcing new FFDCA requirements relating to postapproval studies, clinical trials, labeling changes, and risk evaluation and mitigation strategies; and managing adverse event reports. PDUFA V (FY2013-FY2017) and PDUFA VI (FY2018-FY2022) . PDUFA V and VI did not change the definition of the "process for the review of human drug applications," thus maintaining the PDUFA IV scope of activities that fees could support.

PDUFA I connected prescription drug user fees to performance goals and targets. FDA negotiated those goals and targets with the pharmaceutical industry and presented them to Congress in the form of a letter from the Department of Health and Human Services Secretary (the Secretary), to which the legislation referred without putting the letter's language directly into law (the FFDCA). PDUFA II and III continued that procedure, again referring to the letter ("PDUFA Reauthorization Performance Goals and Procedures"). However, in 2007, PDUFA IV codified the requirements for a goals letter, consultation and public communication, and other processes as FFDCA Section 736B.

Prescription Drug User Fees

Fee Types

Each five-year reauthorization sets a total amount of fee revenue for the first year and provides a formula for annual adjustments to that total based on inflation and workload changes. PDUFA I through V had required that three types of fees each contribute one-third of the fee revenue every year: application fees, establishment fees, and product fees. PDUFA VI establishes a new user fee structure, eliminating the product and establishment fees and adding a program fee , to provide 80% of the total fee revenue. PDUFA VI continues the application fee , to provide 20% of the total fee revenue, while eliminating the fee for a supplemental application.

Application fee : The sponsor of an application (usually the manufacturer) must pay a fee for FDA review each time it submits an NDA or BLA. Program fee: The sponsor of an application must pay an annual program fee for each prescription drug product that is identified in an application.

According to CDER Director Janet Woodcock's March 2017 testimony at a House Energy and Commerce Committee hearing on the then proposed PDUFA VI,

FDA proposes to enhance the program fee structure and related mechanisms, to achieve increased predictability, stability, and efficiency. The current overall PDUFA fee structure and the fee setting process were established in 1992. Both FDA and industry recognize that updating some elements of the fee structure and the fee setting process will enhance administrative efficiency and the predictability and stability of fee amounts and revenues and improve FDA's ability to engage in long-term financial planning...

Fee Adjustments

Under PDUFA I through V, fee revenues were adjusted for inflation and to reflect changes in FDA's workload for the process for the review of human drug applications. The workload adjustment calculation was based on a weighted average of the change in the total number of human drug applications, commercial IND applications, efficacy supplements, and manufacturing supplements submitted. For additional information about fee adjustments prior to PDUFA VI, see CRS Report R42366, Prescription Drug User Fee Act (PDUFA): 2012 Reauthorization as PDUFA V .

PDUFA VI modifies the i nflation adjustment calculation, which is a weighted average of the Consumer Price Index (CPI) figure and FDA personnel cost figures. Because the scientists, statisticians, and clinicians who review human drug applications at FDA do not reflect average personnel costs and benefits for the region, the inflation adjustment includes two calculations. Costs of FDA personnel compensation and benefits are calculated based on FDA's historical costs for those items. Other FDA costs are calculated based on the local CPI.

PDUFA VI also replaces the workload adjustment with a capacity planning adjuster intended to better align fees with the workload and existing staff capacity at FDA. More specifically, PDUFA VI requires the Secretary to "obtain, through a contract with an independent accounting or consulting firm, a report evaluating options and recommendations for a new methodology to accurately assess changes in the resource and capacity needs of the process for the review of human drug applications." After review of the report and any public comments, the Secretary is required to establish a capacity planning methodology, incorporating approaches and attributes the Secretary finds appropriate, to be effective beginning in the first fiscal year for which fees are set after the methodology is established. In the interim before such capacity planning methodology is effective, the workload adjustment would be based on the product of the annual base revenue for the year, adjusted for inflation, and the adjustment percentage for a fiscal year, as specified.

PDUFA VI eliminates the final-year adjustment provisions and instead establishes an annual operating reserve adjustment . Under this provision, the Secretary may increase the fee revenue and fees "to provide for not more than 14 weeks of operating reserves of carryover user fees for the process for the review of human drug applications," a provision similar to PDUFA V's reference to a three-month reserve. PDUFA VI adds the inverse, requiring that if the Secretary has carryover balances in excess of 14 weeks of operating reserves, then the Secretary must "decrease such fee revenue and fees to provide for not more than 14 weeks of such operating reserves."

PDUFA VI also establishes an additional direct cost adjustment , requiring the Secretary to further increase the fee revenue and fees by $8.7 million for FY2018. For FY2019 through FY2022, the amount of the additional direct adjustment would be equal to $8.7 million multiplied by the CPI, as specified.

The total revenue under PDUFA VI for each of fiscal years FY2018 though FY2022 is to equal the sum of

the annual base revenue ($878.6 million) for the fiscal year; the dollar amount equal to the inflation adjustment for the fiscal year; the dollar amount equal to the capacity planning adjustment for the fiscal year; the dollar amount equal to the operating reserve adjustment for the fiscal year, if applicable; the dollar amount equal to the additional direct cost adjustment for the fiscal year; and the additional dollar amounts specified for each fiscal year.

Conditions (or Triggers)

A key element of PDUFA, carried through all reauthorizations, is that user fees are to supplement congressional appropriations, not replace them. The law has included three limiting conditions, known as "triggers," to enforce that goal. FDA may collect and use fees only if (1) FDA's overall Salaries and Expenses direct appropriation equals or exceeds the agency's 1997 Salaries and Expenses appropriation, adjusted for inflation; (2) the fee amounts are provided in the appropriations acts; and (3) the agency spends at least as much from appropriated funds for the review of human drug applications as it spent in FY1997, adjusted for inflation. PDUFA VI does not change these conditions.

PDUFA Impact on Review Time and FDA Budget

Review Time

The approval times for NDAs and BLAs provide a measure of PDUFA's effectiveness in meeting its primary goal: reducing the time between a manufacturer's submission of an NDA/BLA and FDA's approval decision. Under PDUFA I, FDA agreed to specific goals for improving the drug review time and created a two-tiered system of review times: Standard Review and Priority Review. While the goal for standard review is 10 months, a priority review designation means FDA's goal is to take action on an application within 6 months. An application may receive priority review designation if it is for a drug that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. Figure 2 shows the median approval times (standard and priority) of new molecular and biologic entities.

According to a December 2016 FDA presentation, as of September 30, 2016, agency data indicated that FDA had met or exceeded 10 of the 12 specified performance goals for applications submitted in FY2015 and was, at the time in FY2016, meeting or exceeding all (12 out of 12) performance goals for FY2016 submissions.

Budget

Table 1 shows, for the Human Drugs total program level, the relative contributions of the two funding sources—budget authority and user fees—over time. In the first year of PDUFA contributions to the FDA budget, user fee revenue accounted for 9.7% of the Human Drugs total program level. By FY2017, user fee revenue increased to 63% of the Human Drugs program; this includes revenue from PDUFA, generic drug user fees, biosimilar user fees, and outsourcing facility fees.

PDUFA VI Package

The PDUFA VI package consists of two parts: (1) the performance goals and procedures agreement between FDA and industry, which this report refers to as the Commitment Letter or the Agreement (summarized in Appendix A ), and (2) statutory language that reauthorizes the program (summarized in Appendix B ). The timeline for the development of the Agreement and the reauthorization of the program is shown in Figure 3 .

The PDUFA VI reauthorization process began with a public meeting held in July 2015, followed by a 30-day comment period. From September 2015 through February 2016, FDA held meetings with industry and patient and consumer advocacy groups; minutes of the meetings are available on the FDA website. On July 15, 2016, FDA published a notice in the Federal Register announcing the availability of the proposed PDUFA VI Commitment Letter, as well as a public meeting to discuss the proposed recommendations for the PDUFA VI reauthorization. On April 25, 2017, user fee legislation was introduced in the Senate ( S. 934 ) that would have reauthorized PDUFA and the three other human medical product user fee programs, among other things. On May 11, 2017, the Senate Health, Education, Labor, and Pensions (HELP) Committee ordered the bill to be reported with an amendment in the nature of a substitute. In the House, a version of the FDA Reauthorization Act ( H.R. 2430 ) was introduced on May 16, 2017, and referred to the House Energy and Commerce Subcommittee on Health, which approved it with amendments by voice vote on May 18, 2017. The full committee approved the bill on June 7, 2017. The House passed H.R. 2430 on July 12, 2017, and the Senate passed it on August 3, 2017.

H.R. 2430 was signed into law as FDARA ( P.L. 115-52 ) on August 18, 2017. Title I reauthorizes PDUFA, allowing FDA to collect fees and use the revenue to support specified activities for the review of prescription brand-name drugs. FDARA includes eight other titles. A separate CRS report describes provisions in those titles, which cover reauthorization of the medical device, generic drug, and biosimilar biological product user fees, as well as provisions concerning pediatric drugs and devices, reauthorizations and improvements related to drugs, inspections and regulatory improvements related to devices, improvements to generic drug access, and a set of miscellaneous provisions.

Appendix A. Summary of PDUFA VI Agreement: Performance Goals and Procedures FY2018-FY2022

Appendix B. Provisions in FFDCA Sections 735, 736, and 736B

Appendix C. Abbreviations Used in This Report