Avalere Health
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Insights

Aug 15, 2016

FDA Has Received $7.67 Billion from Manufactures to Fund Drug Review

Since 1992, the Food and Drug Administration (FDA) has collected $7.67 billion in user fees from pharmaceutical manufacturers to fund drug reviews based on an Avalere analysis of FDA data.

The fees have increased dramatically each year, as shown in the graph below, driven primarily by higher application fees that manufacturers submit when they apply for new drug approvals.

Created as an additional revenue source to speed FDA approvals, user fees are paid by manufacturers. There are three kinds of manufacturer prescription drug user fees—product fees that are paid for each product being sold on the market; establishment fees that are paid by all manufacturers annually; and application review fees that are paid for every product application that is submitted. For instance, in 2016, any prescription drug application that included clinical data required paying an application fee of more than $2.3 million to the FDA. Notably, FDA reduced collections in 2017 because there are significant leftover collections from prior four years.

“While new drug approvals increased recently, they have not kept up with the number of innovative ideas entering clinical trials, and we need to consider where the road blocks are to more efficient development. FDA review timing is a critical element,” said Gillian Woollett, senior vice president at Avalere.  

On September 30, 2017, all four FDA user fee programs will expire, including: Prescription Drug User Fee Act (PDUFA), Generic Drug User Fee Act (GDUFA), Medical Device Drug User Fee Act (MDUFA), and Biosimilar User Fee Act (BsUFA). Negotiations are already underway to reauthorize the user fee programs, which are considered “must pass” legislation because they have become so  critical to FDA operations. Avalere experts note that how FDA accounts for the user fees it receives, and whether industry and patients are getting access to medicines in a timely manner are important for stakeholders to consider.

User fees are increasingly central to the funding of the drug, biologic and device review programs, and in some cases these fees account for a larger proportion of the FDA budget than congressionally appropriated monies. For example, user fees account for 68 percent of the FDA’s review budget for prescription drugs, while 58 percent of the review budget for generic drugs comes from user fees. Additionally, both user fee programs for prescription and generic drugs have large carryover balances of unspent user fees close to $300 million. For more details on the user fee programs, see Avalere’s UFA side-by-side.

“The significant unspent funds left over from user fee programs suggest that FDA could do more to accelerate product reviews,” said Jay Jackson, manager at Avalere. “Particularly with public concern around drug prices, speeding approval of the second-to-market products can increase competition that may result in lower net prices.”

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