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FY 2001 PDUFA Financial Report: Management Challenges for FY 2002

Table of Contents

Previous Section: Total Costs of the Process for the Review of Human Drug Applications

Since 1990 FDA has cut in half the time it takes to evaluate new drugs, while still maintaining its traditional rigorous standards for drug safety and effectiveness. This improvement, coupled with other attractive features of the US market, has led to an increase in the number of new drugs launched first in the US before they are available in other countries, making new therapies available first to Americans. This is a dramatic shift from the previous 20 years in which most new drugs were available in America years after they were available in other countries. Without the funds derived from PDUFA fees, the substantial progress FDA has achieved in improving and expediting the review of human drug applications would not have been possible.

Notwithstanding these successes, the agency is encountering challenges in trying to meet the PDUFA II goals.

The most significant tactical challenge facing FDA in FY 2002 is the shortfall in fee revenue available. In FY 2001 FDA collected $17 million less in application fees than projected in the Federal Register fee announcement in December 2000. Revenues fell due to both a drop in the number of applications received and an increase in the percent that were exempt from fees or received waivers. Total applications (measured in full application equivalents) fell about 15% from the previous year's level. That drop was exacerbated by the increase in the percent of applications that were exempt from fees or received fee waivers. This percent jumped to 35% in FY 2001, from 19% in FY 1999 and 22% in FY 2000.

The $17 million shortfall in FY 2001 is further exacerbated by the impact it has on fee revenue in FY 2002. The workload adjuster mechanism in PDUFA will cause fee revenue projected in FY 2002 to decline and thus lower the revenue targets for both establishment fees and product fees. Product and establishment fees are set each year so that fee revenues form each category equal the application fee revenue estimate. The result is that we now expect to collect about $22 million less in FY 2002 than projected in April of FY 2001. The shortfalls in FY 2001 and FY 2002 together total $39 million. At the end of FY 2002 FDA will have virtually no carry over balances available to fund any part of FY 2003 needs.

The combination of reduced income and the absence of carryover balances makes it important that PDUFA be reauthorized before the end of FY 2002, to prevent disruption of the drug review program. Without further legislative action PDUFA, and the revenues it provides, will expire at the end of FY 2002. Reauthorization is supported in the President's FY 2003 budget, and FDA will have a draft bill ready in the spring.

Another challenge FDA has faced in PDUFA II is that the agency underestimated the resources it would need to meet the demanding PDUFA II goals. The set of goals associated with meeting management have been much more resource intensive than FDA anticipated. The goals require scheduling meetings within two weeks of a request, holding the meeting within 30 to 75 days, depending on the type of meeting, and completing written minutes within 30 days. There have been more of these meeting requests than expected, they often involve a large number of FDA staff representing several professional specialties, and the meetings may result in significant commitments. Focus on these numerous short-term goals has been very time consuming, and their completion requires most of the same staff trying to meet application review goals. Also, reducing the review times at the margin has been much more costly than originally anticipated. The agency will require either substantial additional resources to meet these goals in the future, or the goals will have to be scaled back to levels sustainable within the available resource levels. Workload under PDUFA II continued to rise. Many of the activities covered by PDUFA II performance goals do not, themselves, generate fees, yet the workload in these areas has been substantial. For example, the numbers of commercial IND's and manufacturing supplements have increased, and the number of meetings, responses to clinical holds and special protocol assessments, all of which have specific PDUFA II performance goals, have been higher than anticipated. The new pediatric and fast track provisions of FDAMA, which were not supported by additional funding, have also contributed significantly to this increased workload. FDA does not foresee any performance gains in the absence of resources to meet the increased workload.

Workload under PDUFA II continued to rise. Many of the activities covered by PDUFA II performance goals do not, themselves, generate fees, yet the workload in these areas has been substantial. For example, the numbers of commercial IND's and manufacturing supplements have increased, and the number of meetings, responses to clinical holds and special protocol assessments, all of which have specific PDUFA II performance goals, have been higher than anticipated. The new pediatric and fast track provisions of FDAMA, which were not supported by additional funding, have also contributed significantly to this increased workload. FDA does not foresee any performance gains in the absence of resources to meet the increased workload.

FDA efforts to meet the new PDUFA II goals with less resources than the goals require has led to an unintended consequence regarding approval times of standard new drug applications and biologic license applications. Approval times have begun to increase as a result of the fact that more applications are taking multiple review cycles to reach approval. The causes are multi-factorial. In a number of cases, FDA believes the delays may be due to the fact that reviewers, pressed to meet the new PDUFA II goals for drug development (e.g., meetings, special protocol assessments, and responses to clinical holds), have had less time to devote to resolving problems with these standard applications in time to meet the action goal date. As a result, the application must undergo an additional review cycle with its attendant timeframes and goals. Our statistics on this trend are preliminary and we must watch it closely. However, we must make sure that if our user fee program is to continue, it must be on a sound financial footing and based on reliable estimates of workload and resources.

Assuring that enough appropriated funds are spent on the process for the review of human drug applications to meet requirements of PDUFA, and at the same time spending our resources in a way that best protects the health and safety of the American people has been difficult. Each year, PDUFA triggers require the amount that FDA must spend on the drug review process to be increased by an inflation factor, whether or not FDA's appropriation has been increased to cover the cost of mandatory Federal pay raises. Spending enough from appropriations on the drug review process to meet the PDUFA triggers challenges FDA in managing the resources available in a way that best protects the public health and merits public confidence.

In FY 2002 FDA will continue working toward the goal of receiving applications electronically by the end of the fiscal year. This major change in how FDA does business should provide significant savings to industry. Setting standards and sequencing the development and implementation of the necessary infrastructure to achieve this goal demands careful planning, vigilance with respect to newly emerging technologies, and constant monitoring.

Finally, in FY 2002 FDA will continue to be challenged by the need hire, train, and retain qualified reviewers. FDA's experienced reviewers are in demand and have excellent employment opportunities available to them. The Agency continued to experience review staff attrition of about 10 percent in FY 2001. FDA implemented a number of initiatives to reduce this attrition, including both retention bonuses for reviewer mathematicians and statisticians and efforts to facilitate review work from alternative work sites. Retaining review staff and recruiting and training new review staff is a constant challenge. Yet the agency's ability to attract and retain the best and the brightest in medicine and science is critical to maintaining the agency's recognized gold standard in new product safety.

Next Section: Appendix A: Conditions for Assessment and Use of Fees