FDA User Fee Legislation: Lowering Consumer Costs by Increasing the Availability of Generic Drugs on the Market

September 20, 2012

On May 30, 2012, the U.S. House of Representatives passed H.R. 5651 in a 387-5 vote, following Senate approval of corresponding legislation in the process of reauthorizing the FDA Prescription Drug User Fee Act (PDUA).  With the current Act expiring at the end of September, the two versions will now be worked into a final bill for approval and signature by the President.  The PDUA requires drug manufacturers to pay user fees to the FDA as part of an agreement that the FDA meet certain performance goals related to the review of new drug applications.[1] These user fees significantly fund work of the FDA; they account for approximately 60% of the FDA’s budget for reviewing new drugs, and this legislation will increase the fees with the expectation of collecting $6.4 billion over a five year period. This increase in user fees is designed to create faster review of new drug applications and new drug approval.

In addition to reauthorizing user fees, this legislation adds new user fees for generic drug manufacturers.[2] For the first time, generic drug manufacturers, who were previously exempt from paying user fees to the FDA, will be paying in an attempt to expedite the review time of their drug applications.  Currently, generic drugs have a median review time of about 31 months, three times as long as brandname drug manufacturers, and there is also a significant backlog of their applications.   It is anticipated that as a result of the new user fees this time lag will be remedied and backlog will be eliminated, and therefore there will be much faster review of generic drug applications overall, getting more generic drugs on the market faster.  Generic drugs are significantly less expensive for consumers than their brandname counterparts. For example, in 2010, the average co-payment of a generic drug was $6.06 compared to $23.65 for preferred brandname drugs. This legislation is therefore highly beneficial to consumers because it means greater availability of needed medications at a much lower cost.

In addition to adding user fees for generic manufacturers, the legislation also includes a variety of other provisions aimed at improving the drug industry.  An important focus of the legislation is on drug shortage problems, including the requirement of early warnings for reporting potential drug shortages, the consideration of drug shortages in agency action, and the expedited review for drugs treating serious or life-threatening conditions.  Another emphasis is on the safety of medical drugs supplied outside the United States, with provisions increasing the focus on inspections of foreign facilities where drugs are produced.[3]

Though this arrangement is agreed upon by the industry and the FDA, there are criticisms that do exist regarding the use of user fees to fund the FDA review process as a whole.  Some believe that it is problematic to have an industry so heavily involved in its own regulation.   After all, the FDA ultimately needs to regulate the companies that provide a large portion of its funding, and this could possibly impact its decisions.  Regardless, it is important to understand the benefits to patients that this legislation provides.  The addition of user fees for generic manufacturers will allow many more generic drugs to reach the market faster and minimize the impact of drug shortages, which will not only reduce healthcare costs overall, but will ultimately provide significant savings for consumers.

[1] Prescription Drug User Fee Act (PDUFA), Congressional Research Services Report RL33914, by Susan Thaul, Congressional Research Services, 13 March 2007.

[2] Food and Drug Administration Reform Act, H.R. 5651, 112th Cong. (2012).

[3] Food and Drug Administration Reform Act, H.R. 5651, 112th Cong. (2012).

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