Congress is now considering legislation that would add two new Food and Drug Administration (FDA) user fee programs: Generic Drug User Fee Amendments of 2012 (GDUFA) and Biosimilar User Fee Act of 2012 (BSUFA). In January 2012, Secretary Kathleen Sebelius of the Department of Health and Human Services (HHS) submitted the GDUFA and BSUFA proposals to the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce. With the Prescription Drug User Fee Act (PDUFA) in 1992, Congress authorized FDA to collect user fees from the manufacturers of brand-name prescription drugs and biological products and to use the revenue for specified activities. PDUFA became possible when FDA, industry, and Congress agreed on two concepts: (1) performance goals —FDA would commit to performance goals it would negotiate with industry that set target completion times for various review processes; and (2) use of fees —the revenue from prescription drug user fees would be used only for activities to support the review of human drug applications and would supplement—rather than replace—funding that Congress appropriated to FDA. The added resources from user fees allowed FDA to increase staff to review what was then a backlog of new drug applications and to reduce median standard application review time from 27 months in FY1993 to 12 months in FY1998. For priority applications, median review time decreased from 21 months in FY1993 to 6 months in FY1998. Over the years, Congress has added similar authority regarding medical devices and animal drugs. User fees make up 35% of the FY2012 FDA budget. Their contribution to FDA's human drug program is larger at 51%. Following the precedent set by PDUFA and taken up in other FDA user fee programs, the two new programs would include both (1) legislation and (2) performance goals agreements developed with representatives of the regulated industry in consultation with representatives of patients and advocates, academic and science experts, and congressional committees. For each of the proposed user fee programs, this report will present some context for agreement among FDA, Members of Congress, industry groups, and patient groups that a user fee program to supplement appropriations provided by Congress would be beneficial; summarize the legislative language that HHS has submitted to the congressional authorizing committees; and summarize the FDA-industry agreement on performance goals and procedures, also submitted by the HHS Secretary. Because authorization for FDA to collect fees and use the fee revenue under PDUFA and the Medical Device User Fee Act (MDUFA) expires on October 1, 2012, the bipartisan leadership of both the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce have voiced the need to reauthorize those programs before then to avoid disruption of FDA drug and device application review and postmarket safety activities. The Senate Committee reported S. 2516 , the Food and Drug Administration Safety and Innovation Act, and Senator Harkin introduced S. 3187 , an amended version of S. 2516 , that is scheduled for floor consideration. The House Committee voted favorably to report H.R. 5651 , the Food and Drug Administration Reform Act of 2012. Both bills include the GDUFA and BSUFA provisions (as Titles III and IV). The GDUFA provisions in S. 3187 , H.R. 5651 , and the HHS-proposed legislative language differ in minimal technical ways and in one reporting requirement. The BSUFA provisions in S. 3187 and H.R. 5651 are essentially identical and differ from the HHS proposal in only minor technical details. GDUFA would add new FFDCA Sections 744A, 744B, and 744C, and BSUFA would add new FFDCA Sections 744G, 744H, and 744I. The FDA website describes a generic drug as "identical—or bioequivalent—to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use." In a new drug application (NDA) to FDA, the sponsor of an innovator (brand-name) drug must submit to FDA clinical data to support its claim that the drug is safe and effective for its intended use. The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L. 98-417 , known as the Hatch-Waxman Act) allows a generic drug manufacturer to submit an abbreviated NDA (ANDA). The ANDA references the detailed scientific and clinical data the innovator company had developed and which FDA has already reviewed. The generic applicant must "scientifically demonstrate that their product is bioequivalent (i.e., performs in the same manner as the innovator drug)." Without the cost of years of clinical trials, generic sponsors face much lower drug development costs than do innovators. More than 70% of prescriptions filled in the United States are dispensed as generic products. However, the generic drugs account for a much smaller percentage of spending on prescription drugs because generic retail prices are about 25% of their brand-name counterparts. Current law does not authorize FDA to collect user fees from manufacturers of generic drugs. In March 2012, median review time for generic drug applications was approximately 31 months; the backlog included over 2,500 applications. Since its FY2008 budget request to Congress, FDA under various administrations has included a proposed generic drug user fee in its annual request to the congressional appropriations committees. In January 2012, HHS submitted a formal proposal to Congress for generic user fee authority. The HHS GDUFA proposal reflects negotiations with industry groups in consultation with consumer groups. FDA held the first of five GDUFA public meetings in September 2010. It held 17 negotiation sessions with representatives of the Generic Pharmaceutical Association, the Bulk Pharmaceutical Task Force of the Society of Chemical Manufacturers and Affiliates, and the European Fine Chemicals Group between February 28, 2011, and September 9, 2011, when it announced a ratified agreement. The proposal has many conceptual similarities to PDUFA but also includes provisions that reflect components and activities of the generic drug industry and FDA's regulatory approach to generic drugs. The proposal consists of two parts: (1) the draft legislative language and (2) a goals and procedure agreement between FDA and the industry. This is the framework first established for the prescription drug user fee program. The law specifies types of fees, amount of revenue authorized to be collected, and a broad definition of activities on which FDA may use that revenue. The law also refers to the FDA-industry agreement for performance goals and procedures that the fees will support. Tables in Appendix A provide detail of the provisions in the proposed legislative language and the FDA-industry agreement. The next two sections of this report provide an overview of those documents. The proposal to Congress would authorize FDA to collect $299 million each year from FY2013 through FY2017 in fees from the generic drug industry and provides formulas for calculating inflation adjustments for the years after FY2013. For the first year of the program, $50 million of the $299 million would come from a one-time backlog fee to be paid by sponsors of currently pending applications. The fee types that would begin in the first year and continue in subsequent years and their percentage of total GDUFA collections are the drug master file (DMF) fee, 6%; abbreviated NDA (ANDA) and prior approval supplement (PAS) fee, 24%; generic drug facility fee, 56%; and active pharmaceutical ingredient (API) facility fee, 14%. Like PDUFA, the GDUFA proposal includes limitations, often referred to as triggers, designed to ensure that fees supplement rather than replace congressional appropriations. These require that budget authority (appropriations minus fees) go no lower than the FY2009 amounts, adjusted for inflation, for (1) FDA salaries and expenses overall and (2) human generic drug activities. Again similar to PDUFA, but different from the narrower MDUFA and BSUFA definitions, the GDUFA proposal defines human generic drug activities to include the review of submissions and drug master files, approval letters and complete response letters, letters regarding deficiencies, inspections, monitoring or research, postmarket safety activities, and regulatory science. Other provisions include risk-based biennial inspections, parity of domestic and foreign inspection schedules by FY2017, a $15,000–$30,000 higher inspection fee for a foreign facility than for a domestic facility to reflect cost differences, streamlined hiring authority, and required annual performance and fiscal reports. The generic drug user fee authority would cease to be effective October 1, 2017. The Agreement begins with an overview of the "overall program scope, assumptions, and aspirations." It then summarizes major program goals over the five-year authorization period to include that FDA will review and act on 90% of complete electronic ANDAs within 10 months of submission; review and act on 90% of all pending applications, amendments, and supplements by the end of FY2017; and commit to risk-adjusted inspections, efficiency enhancements, regulatory science initiatives, and metric goals. Thirteen topics are listed for a FY2013 regulatory science plan and the Agreement refers to a working group that will recommend areas in which FDA could issue draft guidances to clarify agency recommendations regarding complex product development. A biosimilar is a biological product that is highly similar to a brand-name (innovator) biological product made by a pharmaceutical or biotechnology company. A biological product, or biologic, is a preparation, such as a drug or a vaccine, that is made from living organisms. In contrast to the relatively simple structure and manufacture of chemical drugs, biosimilars, with their more complex nature and method of manufacture, will not be identical to the brand-name product, but may instead be shown to be highly similar. The biotechnology industry began developing its first biologics for use as human therapeutic agents in the late 1970s and early 1980s. The first FDA approval of a biotechnology drug for human use, human insulin, occurred in 1982. Others followed, including human growth hormone in 1985, alpha interferon in 1986, tissue plasminogen activator in 1987, and erythropoietin in 1989. Biotechnology products are expected to become a larger share of the drugs sold by the pharmaceutical industry to U.S. consumers. However, with no parallel to the generic alternatives for chemical drugs, the cost of therapeutic biologics is often prohibitively high for individual patients. For example, the costs per year (in 2009) of some commonly used biologic drugs are reported as follows: Enbrel for rheumatoid arthritis, $26,000; Herceptin for breast cancer, $37,000; Rebif for multiple sclerosis, $40,000; Humira for Crohn's disease, $51,000; and Cerezyme for Gaucher's disease, $200,000. Biological products are, in general, regulated—licensed for marketing—under the Public Health Service (PHS) Act, and chemical drugs are regulated—approved for marketing—under the Federal Food, Drug, and Cosmetic Act (FFDCA). The Drug Price Competition and Patent Term Restoration Act of 1984 ( P.L. 98-417 ), often referred to as the Hatch-Waxman Act, provided a mechanism for the approval of generic drugs under the FFDCA but not under the PHS Act. On March 23, 2010, President Obama signed into law a comprehensive health care reform bill, the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148 ). Title VII of PPACA, the Biologics Price Competition and Innovation Act of 2009 (BPCIA), established a new regulatory authority within the FDA by creating a licensure pathway for biosimilars analogous to that which allowed for the approval of generic chemical drugs via the Hatch-Waxman Act. Under the new pathway, a biosimilar may be approved by demonstrating that it is highly similar to a biological product that is already allowed on the market by FDA. The BPCIA also authorized FDA to collect associated user fees. In May 2011, FDA requested public input on the development of a biosimilars user fee program. The agency conducted a series of ten negotiation sessions with industry representatives. It also conducted two meetings with public stakeholders, composed of patient advocacy groups and societies of health professionals. Minutes of these meetings are posted on the agency's website. The recommendations for a new biosimilars user fee program, released on January 13, 2012, were modeled after the prescription drug user fee (PDUFA) program. The recommendations are composed of legislative language and the FDA-industry agreement on performance goals and procedures. Both the legislative language and the performance goals document state that the agency goals are contingent on the allocation for each fiscal year of at least $20 million (inflation adjusted value) in non-user fee funds, plus user fees, to support the review of biosimilar biological product applications. Tables in Appendix B provide detail of the provisions in the proposed legislative language and the FDA-industry agreement. The next two sections of this report provide an overview of those documents. The proposal to Congress for the biosimilars user fee program would require the collection of six types of fees from industry. Fee amounts would be based on inflation-adjusted PDUFA fee amounts for each fiscal year. There are some unique features of the biosimilars user fee proposal. Because there are currently no marketed biosimilar biological products, the proposal includes fees for products in the development phase to generate fee revenue for the new program and to enable companies to have meetings with FDA in the early development of biosimilar biological products. A company may choose to discontinue participation in the biosimilar biological product development program but must pay a reactivation fee to resume further product development with FDA. The proposed BSUFA fees are initial biosimilar biological product development fee, 10% of the PDUFA human drug application fee; annual biosimilar biological product development fee, 10% of the human drug application fee; reactivation fee, 20% of the human drug application fee; biosimilar biological product application fee, 100% of the human drug application fee minus the cumulative amount paid for product development program fees; biosimilar biological product establishment fee, 100% of the PDUFA prescription drug establishment fee; and biosimilar biological product fee, 100% of the PDUFA prescription drug product fee. The proposed legislative language would allow for the waiver of the biosimilar biological product application fee for the first such application from a small business. A "small business" is defined as an entity with fewer than 500 employees, including affiliates, that does not have a drug product that has been approved under a human drug or biosimilar biological application and introduced or delivered for introduction into commerce. The biosimilars user fee authority would cease to be effective October 1, 2017. The Agreement delineates proposed performance goals for the review of biosimilar applications by the agency. FDA is to review and act on a targeted percentage of original biosimilar biological product applications within 10 months of receipt and resubmitted applications within 6 months; in both cases, performance targets will start at 70% in FY2013 and rise to 90% in FY2017. FDA is to review and act on 90% of original supplements within 10 months, 90% of resubmitted supplements within 6 months, and 90% of manufacturing supplements within 6 months. Aside from definitions, the Agreement also covers several other topics including clinical holds, major dispute resolution, special protocol assessment, meeting management, and review of proprietary names to reduce medication errors. Appendix A. Generic Drug User Fee Proposal Appendix B. Biosimilars User Fee Proposal Appendix C. Acronyms

Summary: Congress is considering two new user fee authorities to supplement funding appropriated by Congress to FDA: the Generic Drug User Fee Amendments of 2012 (GDUFA), for activities related to human generic drug review, and the Biosimilar User Fee Act of 2012 (BSUFA), for biosimilar biological product review. A generic drug is identical to a brand-name (innovator) drug in dosage form and strength, route of administration, safety, effectiveness, and intended use. A biosimilar is a biological product that is highly similar to an innovator biological product. A biological product, or biologic, is a preparation, such as a drug or a vaccine, that is made from living organisms. In contrast to the relatively simple structure and manufacture of chemical drugs, biosimilars, with their more complex nature and method of manufacture, will not be identical to the brand-name product, but may instead be shown to be highly similar. S. 3187 and H.R. 5651 include GDUFA and BSUFA titles in legislative packages that also include the reauthorization of prescription drug (PDUFA) and medical device (MDUFA) user fee authorities, as well as other medical-product provisions. Because current PDUFA and MDUFA authorities sunset on October 1, 2012, leadership of both the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce have aimed for passage of the legislation enough before then to avoid disruption of FDA drug and device application review and postmarket safety activities. The proposed five-year authorities for GDUFA and BSUFA build on the model that has evolved since 1992 with the original PDUFA. User fees make up 36% of the overall FY2012 FDA budget, with percentages varying across the agency's programs. Each new user fee proposal consists of two parts: legislative language and an FDA-negotiated agreement with relevant industry groups. The GDUFA bill language specifies the types of fees, amount of revenue authorized to be collected, and a broad definition of activities on which FDA may use that revenue. It refers to a required FDA-industry agreement that lays out performance goals and procedures. The legislative language would authorize FDA to collect $299 million in generic drug user fees per year. For the first year of this authority, $50 million of total collections would come from fees for currently pending applications. To ensure that generic drug user fee revenue supplements, rather than replaces, congressionally appropriated funds, the bill would require that (1) each year's appropriations bill include at least the same level of non-user fee appropriations, adjusted for inflation, as in FY2009 for overall FDA salaries and expenses, and (2) the Secretary allocate at least $97 million, excluding fees and adjusted for inflation, each year for specified human generic drug activities. FDA commitments outlined in the agreement include specified timetables for the review of, and action on, the various types of submissions; risk-based inspections of foreign and domestic generic drug facilities; and regulatory science initiatives. The BSUFA proposal would require the collection of six types of fees from the regulated industry, which is composed primarily of biotechnology and pharmaceutical companies. Fee amounts would be based on inflation-adjusted PDUFA fee amounts for each fiscal year. Because there are no currently marketed biosimilar biological products, the proposal includes fees for products in the development phase to generate fee revenue for the new program and to enable companies to have meetings with FDA in the early development of biosimilar biological products. Both the legislative language and the performance goals document state that the agency goals are contingent on, in addition to user fees, the allocation for each fiscal year of at least $20 million (inflation adjusted value) in non-user fee funds to support the review of biosimilar biological product applications.