FDA will not be able to review applications covered by a priority review voucher until it receives Congressional authorization to collect a special user fee to support the program, the agency says in a draft guidance on the new incentive for pharmaceutical companies.

"Because FDA may not grant a waiver, exemption, reduction, or refund of any fees due and payable under [the FDA Amendments Act] and FDA may not collect priority review voucher fees prior to a relevant appropriation for that fiscal year, FDA cannot accept any application using a priority review voucher if the necessary appropriation has not become law for that fiscal year," the draft guidance explains.

As a practical matter, there is ample time to obtain the necessary authorities from Congress, since no vouchers have been issued and any sponsor wishing to redeem one must notify FDA 365 days in advance. In other words, FDA will not need to collect the new user fee until fiscal year 2010 at the earliest.

However, that issue was not among the topics stakeholders in the voucher program have been focusing on, and it does inject another element of uncertainty into the already difficult question of how sponsors should value the new incentive.

The priority review voucher program enacted in the FDA Amendments Act is designed to reward sponsors who develop a drug for a neglected tropical disease by granting them the right to a priority review designation on another application.

FDA has already learned the hard way that enactment of a new program in FDAAA does not guarantee that it will get off the ground - especially when new user fees are involved. Congressional appropriators forced FDA to abort a new direct-to-consumer advertising review program when they declined to authorize the fees FDA was using to fund the program (¹ Also see "Direct To Consumer User Fee Program Formally Ends" - Pink Sheet, 15 January, 2008.).

Clarity Will Help Value Vouchers

The PRV ² draft guidance is, nevertheless, an important step that is being carefully watched by industry and other stakeholders.

Biopharma companies across the board are intrigued by the potential under the PRV program to purchase a priority review for one of their products (³ Also see "Biotech Sector Considers New Funding Vehicle: FDA Priority Review Voucher" - Pink Sheet, 15 July, 2008.).

For start-up companies, the voucher program offers a potential source of funding. The voucher is transferable, so a start-up could obtain one and then sell it to a Big Pharma partner. More realistically, perhaps, a start-up company with a project that could generate a voucher may have the opportunity to attract a partner as a result.

Big Pharma companies see the voucher as an opportunity both to review internal development projects to see whether some additional investment in drugs for neglected diseases can be justified and to look at potential opportunities to obtain a voucher from a partner.

No one, however, has a firm idea of exactly how much a voucher would be worth. Estimates range from $50 million to $600 million - with almost everyone agreeing that it will depend heavily on how FDA implements the program, and especially how the first vouchers actually work in practice. (See " ⁴ Treat and Trade ," The RPM Report, July 2008.)

A Single Transfer

The guidance clarifies some key points that will be useful in determining the value of a priority review voucher. Many of the clarifications on paper serve to reduce the value of the voucher as an incentive. But by answering open questions FDA at least makes it easier for sponsors to assign a value with more confidence (⁵ Also see "FDA Priority Review Voucher Guidance Coming: Incentive Has Low Visibility" - Pink Sheet, 13 October, 2008., p. 32).

Overall, says BIO Ventures for Global Health SVP Wendy Taylor, the guidance demonstrates that "FDA is behind the program. They are committed to making it work."

BVGH is one of the key advocates for the voucher program. Though not involved in the legislative drafting of the voucher program, BVGH sees supporting the program as serving its core mission of bringing together biotech innovators and sources of funding for diseases of the developing world.

As expected, the agency says that a voucher can be sold only once, not traded repeatedly in the style of the "cap-and-trade" model often invoked to describe the incentive program.

The limitation does not appear to have been the intention of the drafters of the legislation, but the Office of the Chief Counsel has previously explained its reading of the statute to stakeholders.

The practical impact of that limitation may not be that significant, since FDA believes it will be possible to transfer rights to a voucher more often. "Although the statute's language imposes a limitation of one actual transfer of the voucher," the draft guidance states, "FDA believes that contractual arrangements such as the use of an option or transfer of the right to designate the voucher's recipient could comply with the terms of the statute."

The ability to sell options on a voucher is a "perfectly good alternative" to multiple transfers, says BVGH's Taylor. BVGH has "talked quite a bit with companies and investors about that point for the past month or so" and it is "a non-issue at this point," she says.

Another limitation on creating a fully liquid market in PRVs is in how the voucher itself is treated. The guidance clarifies that FDA will award the voucher essentially as part of the approval letter to the sponsor. To transfer the voucher, sponsors will need to document the sale with a letter of transfer that is provided as part of the application to use the voucher with the agency.

On the other hand, the law does state clearly that there is no requirement for the sponsor to market the neglected disease product in order to obtain the voucher. It is issued on approval; whether the product ends up actually in distribution in the U.S. or elsewhere is not considered by FDA.

And, the guidance stresses, the criteria for obtaining a voucher do not rule out receiving one for a product already marketed elsewhere in the world. That is the case with Novartis' pending malaria drug Coartem (artemether/lumefantrine), which may be the first product to receive a voucher under the program (⁶ Also see "Novartis Coartem Malaria NDA May Be First For Priority Review Voucher" - Pink Sheet, 22 September, 2008., p. 26).

The guidance also clarifies that all active ingredients in an application must be NMEs in the U.S. to qualify; a combination product of an NME plus an already approved ingredient would not get a voucher.

Coartem meets that standard since both active ingredients are NMEs in the U.S. Of course, that raises more regulatory issues for the agency, which may explain why an advisory committee is being convened to review the Novartis application (⁷ Also see "Novartis Malaria Combo Set For FDA Committee Review" - Pink Sheet, 10 October, 2008.).

The guidance also leaves some critical questions unresolved.

How Big A Fee?

The biggest open question is the size of the user fee that FDA will charge to cover the cost of a priority review. The guidance says only that FDA will publish the fee amount in the Federal Register, but it is expected be well in excess of $1 million.

Sponsors obviously will need to know the cost of using a voucher in order to place an appropriate market value on them.

The agency also clarifies that the notice of intent to use a voucher is a binding commitment to pay the fee - even if the sponsor ends up not pursuing the application. Since the law requires notification 365 days before redeeming a voucher, sponsors are concerned that they may find themselves paying for a priority review they no longer want (or, perhaps, belatedly realize FDA would have granted even without a voucher).

The guidance does not explicitly address what happens to a voucher if a sponsor ends up not following through on the application. The fee will have to be paid, but presumably the sponsor will at least retain the voucher itself for future use.

Last but not least, FDA does not offer much help for sponsors who want to determine whether a particular product will generate a voucher in the first place. Sponsors of drugs to treat neglected diseases would obviously prefer to know if their application will qualify for a voucher.

FDA, however, stresses that it is impossible to give any guarantees about voucher eligibility. "A product that meets the criteria at the time of submission may not meet those same criteria at the time of the approval action," the draft guidance notes. "This could occur if another application containing the same active ingredient is approved first."

However, the guidance does suggest that FDA is willing (and even eager) to work with sponsors to address their questions. It directs sponsors to contact the appropriate review division within the drug or biologics center to discuss voucher-related questions, and stresses that the agency encourages "early interactions with potential sponsors so these types of questions can be discussed. Such interactions could begin as early as the pre-IND phase."

- Michael McCaughan (m.mccaughan@elsevier.com)

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