Should FDA’s User Fees Be on the Chopping Block?
One of the many exciting things that RFK Jr brings to the table is his promise to root out corruption and agency capture. The biggest cause of capture is the revolving door between government and the drug companies. People work for the government and then go back to industry and influence their former subordinates and co-workers, sometimes via the lobby crowd. This has been discussed for decades and there are rules in place. RFK Jr. will strengthen and tighten these rules, and that will be a good thing.
The other part of the problem is thought to be user fees. Here are the some of the numbers:
The FDA has a total budget of $7.2 billion for Fiscal Year (FY) 2024. This budget comprises $3.96 billion in direct appropriations from Congress and $3.3 billion generated through user fees collected from industries regulated by the FDA. So almost half of its budget comes from the industry it regulates.
In terms of individual drug products, in F2023, the FDA collected approximately $1.223 billion in prescription drug user fees. How does this break down? A New Drug Application fee requiring clinical data is $4,048,695, while an NDA not requiring such data is $2,024,348. There is no charge for submitting an Investigational New Drug Application. There are also annual “program fees” for approved prescription drug products. For FY 2024, the annual prescription drug program fee is $416,429 per product.
How did this whole user fee thing get started?
That’s easy: In 1992, Congress passed the Prescription Drug User Fee Act. Here is the text of the law.
Every five years it get reauthorized, the last time being in 2022.
It is a complicated law, with all kinds of twists and turns, like performance reviews, waivers and the like.
Here is a good article explaining it all:
Although around 45% of the FDA’s total budget comes from user fees, according to the Michael White 2021 article referred to above, 65% of the FDA’s review of prescription drugs comes from user fees.
So that raises the question in terms of corporate capture: should the percentage be zero?
Perhaps, but that’s over three billion you’d be adding to the federal deficit. And you know what they say, “Three billion here and three billion there, pretty soon you’re talking about real money.” So, before my friends in the new government do it, it surely behooves them to be damn sure it will have a meaningful impact. Initially, and without some convincing arguments and data, call me skeptical but open minded.
In fact, to play devil’s advocate, I suggest the opposite:
Why shouldn’t pharma, device manufacturers and other uses pay 100% of the FDA’s budget? From the get go, that would reduce the deficit by 4 billion bucks, and that’s not Trump change, even for the government. These companies make so much money based on government licenses, why shouldn’t they pay all the costs of approval/clearance and licensure?
Would that make the agency even more beholden to industry? Like I said, let’s see the argument with specifics and data. Imagine that there was no revolving door, and you only had a bunch of skeptical people (i.e., Bobby’s allies) making the decisions. I don’t think they’d care one iota that the companies are paying the application fees which pays their salaries, especially since they might not be all that happy with Pharma. So the argument would be that if you have the right people, it wouldn’t matter that the agency is completely funded by the applicants and users. Anyway, it’s just something that the new crew should think about.
Of course industry is going to want something in return.
The obvious thing is to fix the drug approval process to make it much more efficient and substantially less expensive. The costs numbers are all over the place, depending on how much or little is included in the costs, but a conservative direct costs number I see on the internet is $879.3 million while the total costs which includes broader considerations such as higher failure rates of drug candidates and more comprehensive capital costs is around 3 billion. That’s insane!
I couldn’t find a apples-to-apples comparison to drug development costs in other first world countries, but would venture a guess that it is a fraction U.S. costs. Sure, you can go back and forth about why our system is better, but it is surely time for a top-down and comprehensive and comparative analysis of how drugs are approved in this country, compared to other industrial countries, and whether we are maximizing efficiency or just doing what we have been doing for decades because that’s the way it has always been done.
One specific methodological change I’d like to see is an much greater reliance of drug trial data from first world countries like Japan. There is a story to be told about decade-long runaround the manufacturer of Vascepa (prescription fish oil) got from the FDA despite very persuasive evidence of efficacy and life extension effects collected in the Japanese clinical trials. And by the way, I think on almost any health metric, Japan ranks way above the U.S.
And let me say something which my friends might not like. I think Pharma should be invited to input on how it thinks the drug approval process can be streamlined and made more cost effective. RFK Jr’s people don’t have to take Pharma’s advice, but they should definitely get their suggestions on how to make the process less time consuming and much, much less expensive.
But here is my main methodological policy point.
The U.S. health care agencies need to (and will certainly under RFK Jr’s leadership) look to other countries and do comparative outcome health care analyses. We spend far more than any other country, but our health care outcomes are mediocre at best. See my article on this exact problem and solutions. https://rickjaffeesq.com/2016/09/24/whats-wrong-u-s-healthcare-system-take-fix/
If this were a business, there would be a complete management shake-up just on the basis of an outcome analysis. I suspect that is going to happen. And it’s about time, and really decades overdue.
FDA user fees is just one of many issues which RFK Jr and his team will look at. There will be push back down this long road. But we now live in hopeful and exciting times for many, and chicken little/five alarm fire times for others. It is my hope and expectation that the common desire to improve health outcomes and avoid some of the public health and policy mistakes made during the pandemic will breach the divide.
Rick Jaffe, Esq.
One thought on “Should FDA’s User Fees Be on the Chopping Block?”
Yes, chop❤