Priority and Standard Review For a priority review, the Food and Drug Administration (FDA) directs its resources to applications for new drugs that prevent, diagnose, or treat a serious condition and, if approved, would provide significant improvements in safety or effectiveness compared to available drugs. A drug may also receive priority review if the drug sponsor redeems a priority review voucher, among other things. FDA’s goal is to complete the review of a priority application within 6 months. Drugs that do not receive priority review receive standard review. FDA’s goal is to complete the review of a standard application within 10 months. FDA, an agency within the Department of Health and Human Services (HHS), is responsible for overseeing the safety and efficacy of drugs and biological products, such as vaccines, sold in the United States. Before a drug sponsor can market a new drug, it generally must submit evidence of the drug’s safety and effectiveness to FDA in a new drug application or biologics license application. While FDA reviews most drug applications using its standard review process, FDA’s priority review designation is intended to reduce the review time needed to bring a drug to market for certain drugs that treat serious conditions. A drug application typically receives a priority review designation if the drug would provide a significant improvement in the safety or effectiveness of the prevention, diagnosis, or treatment of a serious condition when compared to available drugs, among other things (see sidebar). FDA reviews all applications to determine if they qualify for priority review. FDA is also responsible for the implementation of the three PRV programs, which are intended to encourage development of drugs for tropical diseases, rare pediatric diseases, and medical countermeasures. Qualifying diseases and conditions for the tropical disease PRV program and criteria for the rare pediatric disease PRV program are set forth in statute—though the list of eligible tropical diseases can be updated by order of the Secretary of HHS. For the medical countermeasure PRV program, HHS publishes a list of high- priority threats that qualify for a PRV, including those that the Department of Homeland Security determines to pose a material threat sufficient to affect national security. (See table 1 for the types of drugs eligible for a PRV.) In order to be awarded a PRV, drug applications must meet additional criteria. For example, for all three PRV programs, the drug application must be eligible for priority review and a drug may be disqualified if its active ingredient has been previously approved by FDA in another drug application. If a drug application meets the eligibility criteria for one of the PRV programs, the drug sponsor can include a request for a PRV in its application, including supporting documentation demonstrating how the application meets the PRV eligibility criteria. Once FDA receives a sponsor’s drug application and PRV request, it reviews the information and considers whether the drug should be approved. If FDA approves the drug application, it includes its decision regarding whether to award a PRV in its approval letter. Once FDA awards a PRV to a drug sponsor, the sponsor can redeem the PRV with the submission of a future drug application for a drug intended to treat any disease or condition, shortening FDA’s targeted review time from the 10-month standard review to 6 months, even if the drug in that future application would not qualify for priority review on its own merits. The drug sponsor also has the option of selling or transferring the PRV to another drug sponsor, which may then choose to use it or similarly sell or transfer it. PRVs may be transferred any number of times before they are used. When the drug sponsor possessing the PRV ultimately decides to redeem it, the sponsor must notify FDA at least 90 days in advance of submitting its drug application that is using the PRV. Figure 1 provides a general overview of the PRV programs. The drug sponsor redeeming a PRV must also pay a PRV user fee (about $2.5 million in fiscal year 2019), in addition to other user fees required for all drug applications. Because drug applications submitted to FDA with a PRV would not otherwise qualify for priority review, PRV user fees are intended to cover FDA’s additional costs incurred when reviewing new drug applications with a PRV. When a drug sponsor notifies FDA of its intent to redeem a PRV, its notification serves as a legally binding commitment to pay the PRV user fee. Of the three PRV programs, two—the rare pediatric disease and the medical countermeasure PRV programs—are set to expire in the coming years, unless they are reauthorized by Congress. The rare pediatric disease PRV program will begin to expire on September 30, 2020, and the program will end in September 2022. The medical countermeasure PRV program will expire on October 1, 2023. After these end dates, FDA could no longer award a PRV for a rare pediatric disease or a medical countermeasure; however, the expiration dates do not affect PRV redemptions, as drug sponsors may redeem PRVs earned at any point in the future. As of September 30, 2019, FDA awarded 31 PRVs across the three PRV programs, with the majority being awarded through the rare pediatric disease PRV program (see fig. 2). According to FDA, all PRVs were awarded for drugs that met unmet medical needs. The 31 PRVs were awarded to 26 different drug sponsors; three sponsors were awarded two PRVs each and one sponsor was awarded three PRVs. FDA awarded the 31 PRVs for drugs that treat 27 different diseases. For five diseases— malaria, tuberculosis, smallpox, spinal muscular atrophy, and Duchenne muscular dystrophy—FDA awarded PRVs to two different drugs for their treatment, and FDA awarded one PRV for a drug that prevents two different diseases. (See appendix I for more information about the drugs for which FDA awarded PRVs.) The first PRV was awarded in fiscal year 2009, 2 years after the start of the tropical disease PRV program, and none were awarded in fiscal years 2010 through 2012. The first rare pediatric disease PRV was awarded in fiscal year 2014—about 2 years after that PRV program was authorized— and, beginning in fiscal year 2015, the majority of PRVs awarded were for rare pediatric diseases. In fiscal year 2018, FDA awarded eight PRVs, including the first medical countermeasure PRV, the most awarded in a single fiscal year (see fig. 3). Of the 31 PRVs that FDA awarded to drug sponsors, available data indicate 17 PRVs were subsequently sold to another drug sponsor, providing revenue to the sponsor selling the PRV. For 14 of these 17 PRVs, we were able to determine a sales price, which ranged from $67.5 million for a PRV sold in fiscal year 2014 to $350 million for a PRV sold in fiscal year 2015. However, the available sales prices of the PRVs sold since February 2017 have varied less than those sold previously, ranging from $80 to $130 million (see fig. 4). Because drug sponsors are only required to notify FDA of sales of rare pediatric disease PRVs at the time the sale occurs, additional transfers or sales of PRVs may have occurred. The drug sponsors, stakeholders, and researchers we interviewed noted that several factors could influence whether a drug sponsor keeps a PRV for future use, sells the PRV to another drug sponsor, or purchases a PRV to use on a drug that would not otherwise qualify for priority review. The PRV programs allow PRVs to be transferred multiple times, and according to stakeholders and drug sponsors we spoke with, the revenue gained from such sales may be a motivating factor for drug sponsors to sell them. For example, three stakeholders we interviewed said they believe drug sponsors consider the drugs in their development pipeline when deciding to keep, sell, or purchase a PRV, and one stated that drug sponsors need to determine if they would benefit more from using the PRV or the money they could make from selling it. One researcher commented that price variation for PRVs can affect how a drug sponsor perceives the incentive and that low prices for PRVs may signify the need for additional incentives for drug development. However, two drug sponsors told us that they would continue to pursue PRVs as long as they were available and useful for a particular drug in their pipeline. As of September 30, 2019, drug sponsors redeemed 16 of the 31 PRVs— that is, they submitted the PRV to obtain priority review for a drug application for a drug that would not otherwise qualify for a priority review. The drugs for which the PRVs were redeemed treat or prevent a variety of conditions and diseases, including human immunodeficiency virus (HIV), type 2 diabetes, and different forms of arthritis. (See appendix II for a complete list of PRV redemptions.) The first PRV was redeemed in fiscal year 2011, about 2 years after the first PRV was awarded, and the second PRV was redeemed in fiscal year 2015. Since 2017, drug sponsors have redeemed between three and six PRVs each year (see fig. 5). The 16 PRVs were redeemed by 10 different drug sponsors. Twelve of the 16 redeemed PRVs were purchased and redeemed by a drug sponsor different from the original PRV awardee. All 16 redeemed PRVs were redeemed within 4 years of FDA awarding them (see fig. 6). Of the 15 PRVs that were not redeemed as of September 30, 2019, 12 were awarded in fiscal years 2018 or 2019, and one was awarded in early fiscal year 2016. (See fig. 7.) Drug sponsors we contacted told us that decisions on when to redeem PRVs are largely strategic and take into consideration their drug development pipeline and market competition. For example, three of the drug sponsors told us they might choose to redeem a PRV to help a drug reach the market faster than a competitor’s drug, and two drug sponsors told us they may hold a PRV to use to obtain priority review for a particular drug that is in development. Another drug sponsor told us it considers the likelihood of a drug receiving approval from FDA when deciding when to use a PRV (since the PRV only affects the time frames for FDA’s review and does not guarantee approval), and if a drug in its pipeline could receive priority review from FDA on its own merit. Almost half of the awarded PRVs had not been redeemed as of the end of fiscal year 2019, which may affect FDA’s ability to forecast resources needed in the future. In 2016, we reported that FDA told us that the rare pediatric disease PRV program placed a substantial strain on its workload, explaining that performing a priority review on a drug that would otherwise merit a standard review requires the agency to conduct significant work in a compressed time frame. Between fiscal years 2011 and 2018, PRV redemptions have accounted for less than 1 percent of FDA’s reviews in any given year, according to FDA. While FDA receives 90 days’ notice of a PRV redemption, the notice period may not be enough time to ensure the appropriate staff are available to review a drug application that the agency does not consider to be a public health priority, according to FDA. However, one researcher noted that this uncertainty exists for all drug applications, as FDA cannot know in a given year how many drug applications will be submitted in any particular therapeutic area or how many of these applications will qualify for priority review. Furthermore, two drug sponsors, one researcher, and one stakeholder we spoke with noted that FDA collects additional user fees for PRV redemptions specifically to support the priority review for a drug that would not normally qualify for one. Since fiscal year 2011, FDA has collected almost $44 million in PRV user fees for the 16 redeemed PRVs. FDA does not track the resources it uses specifically for the PRV programs, so the agency cannot determine if the PRV user fees paid when PRVs are redeemed cover the associated costs. According to FDA, the agency cannot anticipate the therapeutic area for which a PRV will be redeemed, so PRV user fees may not ameliorate the effect of PRV redemptions on the review divisions or provide for rapid hiring of additional review staff with relevant experience and technical expertise. FDA officials told us that each new PRV program—and changes made to existing PRV programs—requires additional resources to implement. The agency reports that the services of over 11 offices within FDA are required to work on some aspect of the PRV programs, which may at times require FDA to shift resources from its public health priorities. According to FDA, the PRV programs also expend and divert agency resources to draft and revise PRV-related guidance; update webpages; research, draft, and publish notices and orders to add or decline to add diseases to the list of eligible tropical diseases; respond to inquiries from sponsors, potential sponsors, investors, attorneys, and other interested individuals; and respond to requests for a rare pediatric disease designation. Our literature review found three studies—one for each of the PRV programs—that examined and drew conclusions about how PRV programs affect drug development; of these, one study found evidence of an effect of a PRV program on drug development. Specifically, it found that drugs to treat rare pediatric diseases, which could be eligible for a rare pediatric disease PRV, were more likely to advance from phase I to phase II clinical trials when compared to rare adult disease drugs. The studies examining the other two PRV programs did not find an effect on drug development. Rare pediatric disease PRV program. A 2019 study found that the rare pediatric disease PRV program was not associated with an increase in the number or rate of new pediatric disease drugs that started or completed clinical trials. However, the study found that, after the creation of the rare pediatric disease PRV program, drugs the study authors determined could be eligible for a rare pediatric disease PRV were more likely to advance from phase I to phase II clinical trials compared to rare adult disease drugs, which are not eligible for a PRV under this program. Additionally, the study found the time it took for drugs to progress to the next stage of development was shorter among drugs eligible for a rare pediatric disease PRV compared to drugs for rare adult diseases, across all three phases of clinical development. Tropical diseases PRV program. A 2017 study found that this PRV program was not associated with an increase in tropical disease drugs starting clinical testing. The study found the proportion of tropical disease drugs among all drugs in development decreased slightly after the PRV program was created. Study authors suggested the relatively small number of approved tropical disease products in the last decade indicates the PRV program did not serve as a stimulus for completing late-stage drug development. Medical countermeasure PRV program. A 2018 study reported that 25 of 26 medical countermeasures undergoing clinical trials received direct or indirect public support, such as funding from the Department of Defense. Authors stated that, given the extent to which development of medical countermeasures already occurs via direct or indirect federal funding, alternatives other than the PRV program could better stimulate development of medical countermeasures. While the few studies of the PRV program found little to no effect on drug development, the seven drug sponsors we contacted told us the PRV programs were an incentive—that is, a factor in their decisionmaking—for drug development. In contrast, the seven researchers and seven stakeholders we contacted reported mixed views of the PRV programs as an incentive for drug development. Drug sponsors. All seven drug sponsors told us the PRV programs were a factor in drug development decisions—six sponsors said it was one of a number of factors, and one sponsor said it was pivotal in its development of a drug. For example, three drug sponsors told us PRVs were important to help fund drug development and one of these drug sponsors told us the PRV program supported its decision to move a drug already under development to market. Four drug sponsors told us PRV programs may be a more significant incentive for small drug sponsors, with one small, nonprofit drug sponsor noting that it entirely relied on the profits from the sale of its PRV to ensure its drug would become available to those who need it. Additional factors drug sponsors reported considering included whether the sponsor has a drug in their development pipeline that could particularly benefit from a PRV, and whether its drug development program has public financial support, such as direct federal funding. Researchers. The seven researchers reported mixed views of the PRV programs as an incentive for drug development, and their perceptions of the three programs varied. For example, when asked to describe the incentive for drug development provided by the tropical disease PRV program, two researchers described it as “not significant,” and two researchers described it as “somewhat significant.” However, one of these researchers told us the tropical disease PRV program encouraged drug development, particularly for diseases such as tuberculosis and malaria for which a drug is potentially more commercially viable. Regarding the rare pediatric disease PRV program, three researchers told us they have heard anecdotally that the program is an incentive to develop or continue development of rare pediatric disease drugs. In contrast, one researcher told us many drug sponsors have received a rare pediatric disease PRV for drugs they would have produced anyway, and another told us he did not believe the rare pediatric disease PRV provided an adequate incentive for adding new drugs into a drug sponsor’s pipeline. Finally, four researchers told us it was too early to evaluate the medical countermeasure PRV program as an incentive. Stakeholders. The seven stakeholders also reported mixed views on the PRV programs as an incentive for drug development. For example, one stakeholder told us that drug sponsors have entered particular drug development areas because of the PRV programs, and the PRV program has been pivotal to the financial planning of small drug sponsors working in the medical countermeasures and rare pediatric disease spaces. In contrast, two other stakeholders told us the PRV programs are an incentive to obtain FDA approval for a drug that has already been developed and marketed outside of the United States but are not an incentive for developing new drugs. One of these stakeholders and an additional stakeholder also noted that PRVs are often a source of additional revenue to drug sponsors that would have developed their PRV drug anyway and did not need the PRV to finance drug development. The number of PRVs awarded by FDA could influence the effectiveness of the PRV programs as incentives, according to several drug sponsors, researchers, and stakeholders we contacted. Specifically, some indicated that the potential revenue from the sale of a PRV could decline if more PRVs are awarded, and there is an increased supply of PRVs available for sale. Specific comments included the following: One drug sponsor told us that, while the number of PRVs on the market was a concern, they have remained valuable. Another drug sponsor told us it was not concerned with the relative value of PRVs, because it did not plan to sell its remaining PRVs and would purchase more in the future if PRVs would benefit drugs in its pipeline. One researcher told us lower prices for PRVs merited concern, because the PRV alone might not be sufficient to motivate drug development. The researcher indicated that a drug would also need either sufficient sales or additional government incentives. Two stakeholders told us the sales prices of PRVs (and potential revenue from selling them) might be more of a concern for small drug sponsors than large drug sponsors, as these stakeholders told us small drug sponsors are more likely to sell their PRV instead of using it for another drug in their portfolio. Drug sponsors, researchers, and stakeholders we contacted also reported mixed views on whether the rare pediatric disease and medical countermeasure PRV programs—set to expire by 2022 and 2023, respectively—should be reauthorized. While FDA officials reported that, as of April 2019, the agency does not have a position on the reauthorization of these two PRV programs, drug sponsors generally indicated support for their reauthorizations, with some noting that PRV program expirations may negatively affect overall drug development and the willingness of drug sponsors to work in these areas. The researchers we contacted offered mixed opinions on reauthorization. For example, one recommended reauthorizing both PRV programs, but indicated that his opinion could change if a better incentive was developed. In contrast, another researcher supported the expiration of these two programs, noting that their expiration could ultimately raise the potential revenue from the sale of an available PRV and could also make the tropical disease PRV program, which does not require reauthorization, more popular to encourage drug development. Most stakeholders we contacted did not offer a clear opinion on reauthorization; those that did generally supported reauthorization. Drug sponsors, researchers, and stakeholders we contacted suggested several improvements to the PRV programs, including those described below. Require innovation for PRV-eligible drugs. Two researchers and two stakeholders noted that the PRV programs, particularly the tropical disease PRV program, have been criticized for not providing incentives for innovation and suggested PRV awards be limited to drugs new to the global market. Currently, drug sponsors can receive a PRV for a drug that has already been developed and marketed outside of the United States, but which qualifies for a PRV because the drug has not been approved for marketing in the United States. One researcher suggested the federal government should not provide an incentive, like a PRV, for drugs already in existence outside of the United States, for which most research and development was already completed. However, one drug sponsor told us that requiring a tropical disease drug to be approved first in the United States to qualify for a PRV would delay entry of the drug into the international markets that need it the most. Additionally, two stakeholders told us that drugs that have already been developed may have significant benefits to patients when combined or used to treat other diseases. Require drug sponsors to guarantee access to PRV-eligible drugs. One researcher and two stakeholders suggested drug sponsors submit an access plan to help ensure the drug reaches the populations in need of the treatment, and one drug sponsor suggested they supply at cost the drugs for which the PRV was awarded. One of these stakeholders noted that a weakness of the PRV program is that drug sponsors awarded a PRV have no obligation to make the approved drug available at an affordable price. It suggested that requiring an access plan may result in drugs for which a PRV was awarded being more available and accessible to the populations that need them. However, three stakeholders noted that FDA may not have the resources or authority to enforce such access commitments. Limit PRVs to drug sponsors with financial need. One drug sponsor and one researcher suggested awarding a PRV only to drug sponsors that financially require it to develop their drug, such as a nonprofit organization that must leverage potential revenue from the PRV to help offset drug development costs. Make administrative changes. One drug sponsor told us FDA’s process for determining the list of tropical diseases eligible for a PRV was not transparent and wanted clarification on FDA’s timeline for editing this list. Another drug sponsor told us it wanted clarification on whether a drug would merit priority review on its own, so the sponsor could determine whether to redeem a PRV for that drug. In addition to suggesting improvements to the PRV programs, drug sponsors, researchers, and stakeholders we contacted, as well as our literature review, identified potential alternatives to the PRV programs that provide incentives for drug development (see table 2). We provided a draft of this report to HHS for review and comment. HHS provided technical comments, which we incorporated as appropriate. We are sending copies of this report to the appropriate congressional committees, the Secretary of Health and Human Services, and other interested parties. In addition, the report is available at no charge on GAO’s website at http://www.gao.gov/. If you or your staff have any questions about this report, please contact me 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 IV. Sales price (dollars in millions) Gilead Sciences, Inc. Gilead Sciences, Inc. Novartis Pharmaceuticals Corporation Dengvaxia Sanofi Pretomanid The Global Alliance for TB Drug Development (TB Alliance) BioMarin Pharmaceutical Inc. Treatment of mucopolysaccharidosis type IVA (MPS IVA; Morquio A syndrome) PRV Sale date purchaser August 2015 AbbVie Inc. Drug name Drug sponsor Unituxin United Therapeutics Corporation Cholbam Asklepion Pharmaceuticals, LLC Xuriden Wellstat Therapeutics Corporation Strensiq Alexion Pharmaceuticals Inc. Kanuma Alexion Pharmaceuticals Inc. Exondys 51 Sarepta Therapeutics, Inc. Teva Pharmaceutical USA, Inc. Treatment of hypophosphatasia (HPP) Spinraza Biogen, Inc. Gilead Sciences, Inc. Treatment of Duchenne muscular dystrophy (DMD) Treatment of tripeptidyl peptidase 1 (TPP1) deficiency (Batten disease) Marathon Pharmaceuticals, LLC Brineura BioMarin Pharmaceutical Inc. Kymriah Novartis Pharmaceuticals Corporation Mepsevii Ultragenyx Pharmaceutical Inc. Luxturna Spark Therapeutics, Inc. Sales price (dollars in millions) Vertex Pharmaceuticals Inc. Crysvita Ultragenyx Pharmaceutical Inc. Epidiolex GW Research, Ltd. Treatment of X-linked hypophosphatemia (XLH) Inc. Biohaven Pharmaceuticals, Inc. Leadiant Biosciences, Inc. Gamifant Novimmune S.A. Zolgensma Avexis, Inc. Treatment of seizures associated with Lennox Gastaut-Syndrome and Dravet syndrome Treatment of adenosine deaminase-severe combined immunodeficiency (ADA- SCID) Treatment of primary hemophagocytic lymphohistiocytosis (HLH) Treatment of pediatric patients with spinal muscular atrophy (SMA) Legend: ✓ = transferred from original drug sponsor; ✗ = no public announcement of transfer; — = not applicable. Appendix II: Redeemed Priority Review Vouchers (PRV) Appendix II: Redeemed Priority Review Vouchers (PRV) Appendix III: Key Milestones of the Priority Review Voucher Programs FDA may not award any rare pediatric disease priority review vouchers after September 30, 2020, unless the drug has received a rare pediatric disease designation by that date, and FDA has approved the drug application by September 30, 2022. In addition to the contact named above, Kim Yamane (Assistant Director), Erin C. Henderson (Analyst-in-Charge), Kaitlin Farquharson, Laurie Pachter, Vikki Porter, Helen Sauer, Meghan Shrewsbury, and Merrile Sing made key contributions to this report. Also contributing were Leia Dickerson, Hayden Huang, and Yesook Merrill.

Summary: Few drugs are currently available to treat certain tropical and rare pediatric diseases and to use as medical countermeasures, given their small market or potentially limited profitability. To help provide incentives for the development of such drugs, Congress created three PRV programs, which award PRVs to drug sponsors that develop drugs for tropical diseases, rare pediatric diseases, and medical countermeasures (e.g., drugs to mitigate harm from biological, chemical, radiological, or nuclear agents). FDA, an agency within the Department of Health and Human Services (HHS), administers these programs. The 21st Century Cures Act included a provision for GAO to study the PRV programs. GAO examined the number of PRVs awarded and redeemed and the drugs for which they were awarded or redeemed, and what is known about the extent to which the PRVs provide incentives for developing drugs to meet unmet needs. GAO analyzed FDA data on awarded and redeemed PRVs for fiscal years 2009 through 2019 and other publicly available information on their transfers and sales. GAO conducted a literature review of peer-reviewed articles published from January 2009 through May 2019 that examined the PRV programs and interviewed FDA officials. GAO also interviewed seven stakeholder groups, seven academic researchers, and seven drug sponsors selected based on factors such as familiarity with PRV programs or drug development. HHS provided technical comments on a draft of this report, which were incorporated as appropriate. The Food and Drug Administration (FDA) awards priority review vouchers (PRV) to drug sponsors that develop drugs for tropical diseases or rare pediatric diseases or to use as medical countermeasures. The PRV—which can be sold to another drug sponsor—may be redeemed later to receive priority review from FDA with a targeted review time of 6 months, rather than the 10-month standard review, for a drug application of the PRV holder's choice. The potential for additional revenue from either marketing a drug about 4 months sooner or from selling the PRV could provide an incentive for drug sponsors to develop drugs for these diseases or conditions. From fiscal year 2009, when the first PRV was awarded, through fiscal year 2019, FDA awarded 31 PRVs, mostly for drugs to treat rare pediatric diseases. Of the 31 PRVs awarded by FDA,17 were sold to another drug sponsor for prices ranging from about $67 million to $350 million, according to available data. As of September 30, 2019, available data show that drug sponsors had redeemed 16 of the 31 PRVs to obtain a shorter FDA review time for drugs to treat conditions and diseases such as human immunodeficiency virus (HIV), type 2 diabetes, and different forms of arthritis. These drug applications may not otherwise qualify for priority review. GAO found few studies that examined the PRV programs, and those that did found the programs had little or no effect on drug development. However, all seven drug sponsors GAO spoke with stated that PRVs were a factor in drug development decisions—six sponsors said they were one of a number of factors, while one sponsor said they were pivotal in its development of a drug. Some academic researchers and stakeholders expressed concerns about the PRVs as incentives for drug development, including the potential for the expected revenue from the sale of a PRV to decline as more are awarded and available for sale.