PDUFA Could Unravel Because of Budget Gridlock

PDUFA Could Unravel Because of Budget Gridlock

September 12th, 2012 // 5:19 pm @ jmpickett

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Three months after the latest version of the Prescription Drug and User Fee Act went into effect, the all-important legislation may come undone thanks to wrangling among lawmakers over budget cutbacks, Bloomberg Newsreports. And so, a large appropriation is at risk that may cause drug reviews to slow or come to a stop in January if the FDA does not receive scheduled funding from Congress, an agency spokeswoman tells the news service.

Why? Lawmakers are arguging over whether to follow through on $1.2 trillion of government-wide budget cuts through 2021. The stalemate “could result in the loss of whole user fee programs, programs that have become essential to public health and medical product innovation,” the agency spokeswoman says. Similarly, the National Institutes of Health may also lose $2.4 billion and have to cancel as many as 2,400 grants, a spokesman tells Bloomberg.

Drugmakers are scheduled to pay almost $2 million for each new drug application to the FDA beginning Octoer 1, as well as a $527,000 establishment fee and $98,000 product charge. But the White House Office of Management and Budget missed a September 6 deadline to submit a plan to Congress for the first $109 billion in mandated spending reductions, which is known as sequestration, the news service write.

The FDA may lose 8 percent of appropriated funds, or a reduction of $200 million for fiscal 2013, the Alliance for a Stronger FDA estimates. The key element of the user fee program is known as the trigger, which sets a baseline of taxpayer funds to ensure that industry payments supplement congressional appropriations, Alan Goldhammer, an industry consultant, tells Bloomberg.

For fiscal 2013, the Obama administration has requested about $2.5 billion in taxpayer funds for the FDA. An additional $2 billion in industry fees are supposed to be collected as well; including $720 million for brand-name drugs, $299 million for generics, and $98 million from device makers, according to a Congressional Budget Office. The FDA spokeswoman declined to discuss trigger levels with Bloomberg.

While the initial “$200 million will be devastating,” this should not trigger the trigger, Steven Grossman of the Alliance for a Stronger FDA, tells Bloomberg, adding that the Obama administration may still subject user fees to sequestration to meet broader spending-reduction goals. He calculates about $68 million in user fees and $40 million in tobacco-company payments would be diverted to a US Treasury Department account, Bloomberg writes.

While such fees would not go directly toward the deficit, the FDA’s inability to use the money would “reduce government because it would reduce what they can do,” Grossman continues. “The user fee part of it adds to the problem of there not being enough money to get the job done.” Adds Goldhammer, who once worked for PhRMA: as much as 90 percent of user fees go toward personnel costs so the budget cuts would likely result in layoffs at the FDA.

Based on the five-year PDUFA agreement set to start next month, drug reviews would be funded 60 percent by industry fees, which works out to about $4.1 billion over that timeframe, Bloomberg writes. Generic drugmakers, which had been exempt from user fees, will pay $1.58 billion. The fees were increased and expanded to help the FDA speed reviews, Bloomberg adds.