The Prescription Drug User Fee Act (PDUFA I), in 1992, gave the Food and Drug Administration (FDA) the authority to collect fees from the pharmaceutical industry and use the revenue to support "the process for the review of human drug applications." That authority, which expired in 1997, has been renewed on four subsequent occasions, by PDUFA II (1997), PDUFA III (2002), PDUFA IV (2007), and PDUFA V (2012). This most recent reauthorization was Title I of the Food and Drug Administration Safety and Innovation Act (FDASIA, P.L. 112-144 ); it extends the user fee program through September 30, 2017. For FY2012, 35% of FDA's total budget came from user fees; however, prescription drug fee revenue provided 51% 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 the appropriations process. The added funds would allow 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. For the 2012 reauthorization, FDA posted a draft agreement on its website on September 1, 2011, noting that it was subject to review by the Department of Health and Human Services (HHS) and the Office of Management and Budget (OMB). On January 13, 2012, the HHS Secretary submitted both draft legislative language and the agreed-upon performance goals document (the Agreement) to Congress. The House Committee on Energy and Commerce and the Senate Committee on Health, Education, Labor, and Pensions, which have jurisdiction over the PDUFA reauthorization, held hearings and marked up legislation to extend the prescription drug user fee authority. The PDUFA reauthorization became Title I of the Food and Drug Administration Safety and Innovation Act (FDASIA, P.L. 112-144 ), whose other 10 titles covered reauthorization of medical device user fees, new authorities for generic drug and biosimilar biological product user fees, and other topics such as pediatric drug research, medical device regulation, pharmaceutical supply chain security, antibiotic development incentives, expedited drug approval, drug shortages, and a set of miscellaneous provisions. This report describes (1) the origin of prescription drug user fees; (2) current law; (3) the impact of PDUFA on FDA application review time and the agency's Human Drugs Program budget; and (4) the PDUFA V package (legislative language and the performance goals Agreement). 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 the drug applications that were coming in and the ones already backlogged in its files and that it had insufficient appropriations to hire additional scientists to conduct 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 review. The 1992 law became possible when the then FDA commissioner David Kessler worked out an arrangement that met two industry demands: performance goals, which would set target completion times for various review processes; and the promise that these fees would supplement--rather than replace--funding that Congress appropriated to FDA. Those steps helped persuade industry groups 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. PDUFA I--and the subsequent PDUFA II, PDUFA III, PDUFA IV, and PDUFA V--authorized the collection of prescription drug user fees and the use of that revenue for specified activities. This section of the report presents a brief overview of current law; Table A -1 in Appendix A provides additional detail, also noting significant additions or modifications across PDUFA reauthorizations. Each five-year authorization 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. The law requires that three types of fees each contribute one-third of the total fee revenue each year: Application fee: A drug's sponsor (usually the manufacturer) must pay a fee for the FDA review each time it submits a new drug application or supplemental application, or a biologics license application. Establishment fee: Each manufacturer must pay an annual fee for each of its manufacturing establishments. Product fee: Each manufacturer must pay an annual fee for each product that fits within PDUFA's definition. The latter two were designed to provide a more stable and predictable revenue source because the number of applications may vary from year to year. The law specifies, for all three fees, certain exemptions and waivers, such as for orphan drugs and small businesses. A key element of PDUFA, carried throughout all reauthorizations, is that the user fees are to supplement congressional appropriations, not replace them. The law includes three limiting conditions, known as "triggers," to enforce that goal. FDA may collect and use fees only if the direct appropriations for the activities involved in the review of human drug applications and for FDA activities overall remain at a level at least equal (adjusted for inflation) to the pre-PDUFA budget. PDUFA I authorized FDA to use the fee revenue to fund the "process for the review of human drug applications." It defined what that process encompassed. With each reauthorization, 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 new drug application (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. 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 time window from when a manufacturer submits a new drug application (NDA) until FDA makes its decision on that application. PDUFA II expanded the range of activities for which FDA could use prescription drug user fee revenue to include those related to the clinical trial phases of a new drug's development (from the IND to submission of an NDA). PDUFA III extended the range of activities for which FDA could use prescription drug user fee revenue to include both a drug's preclinical development period and 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 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 maintained the PDUFA IV scope of activities that PDUFA 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 HHS Secretary, to which the legislation referred without putting the letter's language in the FFDCA. PDUFA II and III continued that procedure, again referring to the letter ("PDUFA Reauthorization Performance Goals and Procedures"). PDUFA IV, in 2007, however, codified, as FFDCA Section 736B, the requirements for a goals letter, consultation and public communication, and other processes. A summary of this added FFDCA section, which also codified the requirements for annual performance and fiscal reports that had appeared in every PDUFA version, appears in Table A -2 in Appendix A . Table B -1 in Appendix B describes the commitments in the Agreement between FDA and industry representatives for PDUFA V. It also provides selected comments on differences between the PDUFA IV letter and the PDUFA V letter. The approval times for drugs and biologics applications provide a measure of PDUFA's effectiveness in meeting its primary goal: reducing the time between a manufacturer's submission of an NDA and FDA's approval decision. FDA and industry analysts have presented review time data in various ways--such as looking at all applications or distinguishing between standard and priority review. Figure 2 , for example, shows the median approval times of new molecular and biologic entities; these applications are important because they involve either "significant advances" in treatment or are "the first drugs approved in their therapeutic class." A December 2011 FDA presentation indicated that, as of September 30, 2011, the agency data indicated that FDA had met or exceeded 10 of the 12 specified performance goals for applications submitted in FY2010 and were, thus far in FY2011, meeting or exceeding 11 of the 12 performance goals for FY2011 submissions. Figure 3 presents the total program level for FDA's Human Drug Program for each year from FY1990 to FY2012, with dollars adjusted for inflation to show the budgets' usefulness across years. Beginning in FY1994, when prescription drug user fee revenue became part of the total budget, Figure 3 shows the separate contributions of budget authority and user fee revenue to the total program level. 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, the fee revenue accounted for 9.7% of the Human Drugs Program total program level. For FY2012, fees provide 51.8% of the total. PDUFA V consists of two parts: (1) statutory language that reauthorizes the program and (2) the performance goals and procedures agreement between FDA and industry, which this report refers to as the Agreement. There are few differences between PDUFA IV and PDUFA V statutory language. The differences between the PDUFA IV and PDUFA V Agreements reflect the kinds of incremental changes and fine tuning that have occurred at each reauthorization. As described below, the changes address both communication and timing concerns about the review process, and support of a broader range of FDA activities to continue the development and use of regulatory science "[t]o enhance communications between FDA and sponsors during drug development and to meet the challenges of emerging science." As discussed below, tables in Appendix A relate to statutory language and tables in Appendix B relate to the FDA-industry Agreement. In describing PDUFA in current law (reflecting PDUFA V in FDASIA), this report refers to Appendix A for detail. Table A -1 shows current law, noting where the PDUFA V statutory language for FFDCA Section 736 differed from PDUFA IV. ( Table A -2 describes procedural steps outlined in FFDCA Section 736B, which PDUFA V did not change.) PDUFA V sets total PDUFA fee revenue for FY2013 at $693 million, a 1.2% decrease from the $702 million in PDUFA fees in the FY2012 budget. PDUFA V modified the formulas for calculating inflation and workload adjustments in FY2014 through FY2017, and made technical changes in dates payable and collection procedures. PDUFA V omitted several provisions that Congress had added to PDUFA IV. First, PDUFA IV had added $225 million over the five-year authorization for postmarket safety activities. These additional fees are not explicitly mentioned in PDUFA V. Second, PDUFA I and all its reauthorizations have required what FDA and industry have called triggers: In order to collect and use PDUFA fees, Congress must maintain the levels of appropriated budget authority, adjusted for inflation, committed to both the review of human drug applications and to FDA overall. PDUFA IV had added a reverse trigger for FY2009 and FY2010: if appropriations had exceeded the amounts appropriated for FY2008, PDUFA IV would have allowed a reduction in PDUFA fee revenue. PDUFA V does not include the reverse trigger language. PDUFA V includes a requirement for sponsors to submit NDAs and BLAs electronically. The requirement, a new FFDCA Section 745A, is to begin no earlier than two years after the Secretary issues final guidance on electronic format standards, waivers, and exemptions, and a timetable. As directed by FFDCA Section 736B(d), FDA held regular meetings with industry representatives to negotiate commitments the agency would make regarding performance goals and procedures that the user fee revenue would support. FDA also held required meetings with other stakeholders (including academic experts, and representatives of patient and consumer advocacy groups) and held a public meeting to obtain comments before completing the Agreement. Items new to the PDUFA V Agreement fit into several general areas: (1) drug review performance goals, communication, and timing; (2) regulatory science; (3) risk-benefit assessment in decision-making; (4) drug safety; and (5) information technology and performance management. Table B -1 in Appendix B summarizes the elements in the performance goals letter, the Agreement, noting changes from the PDUFA IV letter where appropriate. The following paragraphs present highlights of those commitments. Drug review performance goals, communication, and timing. At the core of PDUFA's history is FDA's commitment to completing review within a specified timeframe in exchange for an industry source of revenue to support that activity. Although subsequent PDUFA laws have added other kinds of commitments, the review time goals continue to be a focus of PDUFA Agreement negotiations. The PDUFA IV Agreement for NDAs specified that FDA would review and act on 90% of standard submissions within 10 months of receipt of the application and on 90% of priority submissions within 6 months of receipt; these continue in PDUFA V. The PDUFA V Agreement modified those goals for all original biologics license applications (BLAs) and for the subset of NDAs that involve new molecular entities (NMEs): it adds another 60 days, by specifying that the clock (toward the 10 or 6 month goals) begins 60 days after the receipt of those applications. The PDUFA V Agreement establishes a new review model called "the Program" to "promote greater transparency and improve communication between the FDA review team and the applicant." It specifies circumstances under which FDA may extend the review time clock, new reporting requirements, procedures for agency response to applicants' questions on protocol design, and timeframes and requirements for certain meetings with applicants. Regulatory science. The PDUFA V Agreement describes five areas in which FDA will use PDUFA revenue to enhance regulatory science to expedite drug development. Specific activities relate to enhanced communication with sponsors, developing meta-analysis methodologies, advancing the use of biomarkers and pharmacogenomics in drug review, advancing the development of patient-reported outcomes, and advancing the development of drugs for rare diseases. Risk-benefit assessment in decision-making. The PDUFA V Agreement says FDA will plan and begin to develop a "structured benefit/risk assessment in the new drug approval process." The Agreement also says the agency will develop a process to obtain patient perspectives on risks and benefits. Drug safety. The PDUFA V Agreement calls on FDA to evaluate Risk Evaluation and Mitigation Strategy (REMS) requirements that FDAAA added in 2007, as well as working toward standardizing REMS for classes of drugs and integrating the REMS process into the health care system. The Agreement also includes activities around the Sentinel Initiative, other pharmacovigilance systems, and related information systems and infrastructure. Information technology and performance management. The PDUFA V Agreement includes items on required electronic submissions; data standardization; investments in automated, standards-based information technology; and improved FDA performance management. Across all these areas, the PDUFA V Agreement specifies FDA commitments to produce draft and final guidance documents and to hold public meetings and workshops. These items are shown in Table B -2 in Appendix B . The five-year authority pattern that Congress first set with PDUFA I in 1992 has created a legislative vehicle that, every five years, attracts additional provisions--some closely related to user fee activities and others peripherally so. The urgency to pass PDUFA reauthorization stems from PDUFA revenue's accounting for more than half the FDA Human Drugs Program budget. In 2012, again, Congress built a multi-titled bill, the first of which was the Prescription Drug User Fee Amendments. The overall vehicle, FDASIA, included 10 other titles. A separate CRS report describes provisions in those titles, which cover reauthorization of the medical device user fee act, new user fee authorization for generic drug and biosimilar biological products, and provisions concerning pediatric drug development and labeling, medical device regulation, pharmaceutical supply chain security, antimicrobial development incentives, expedited drug approval, drug shortages, and other topics. Appendix A. Provisions in FFDCA Sections 735, 736, and 736B Appendix B. PDUFA V Agreement: Performance Goals and Procedures

Summary:
Title I of the Food and Drug Administration Safety and Innovation Act (FDASIA, P.L. 112-144) reauthorized the Prescription Drug User Fee Act (PDUFA) through September 30, 2017. Known as PDUFA V, this was the program's fourth five-year reauthorization. The Prescription Drug User Fee Act (PDUFA), in 1992, 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." PDUFA fees provided 52% of the Human Drugs Program funding for FY2012, accounting for more than 2,000 full-time equivalent employees. Therefore, as each reauthorization deadline approaches, FDA, industry groups, and most Members of Congress see PDUFA as must-pass legislation. Congress originally intended PDUFA to diminish the backlog of new drug applications at FDA and shorten the time from submission to decision. The general view is that PDUFA has succeeded. FDA has added review staff and reduced its review times. At each reauthorization, however, discussion returns to certain issues in the context of PDUFA that also reflect broader FDA concerns. The issues--and results--differ. PDUFA II expanded the user fee program's scope to include activities related to the investigational phases of a new drug's development, and to increase FDA communications with industry and consumer groups. PDUFA III again expanded the scope of activities that user fees could support to include both preclinical development and a three-year postapproval period. PDUFA IV concentrated on new measures concerning postmarket drug safety. The PDUFA V statutory language does not differ much from PDUFA IV. The accompanying FDA-industry agreement on performance and goals and procedures for FY2013 through FY2017 includes revised communication procedures and timing goals during the application review process and addresses expanded FDA efforts in regulatory science, drug development, drug safety, and information technology. In addition to PDUFA reauthorization, FDASIA included 10 other titles that reauthorized medical device user fees, established generic drug and biosimilar biological product user fees, and addressed pediatric drug research, medical device regulation, pharmaceutical supply chain security, antibiotic development incentives, expedited drug approval, drug shortages, and a set of miscellaneous provisions.