FDA may give up some consistency in its user fee inflation formula, making it more beholden to the short-term whims of the U.S. economy.

Industry and the agency have agreed to use a shorter rolling average to compute cost increases, meaning periods like the deep recession in 2008 and 2009, when some consumer prices dropped, would play a greater role in how much companies would pay to file an NDA or other application.

The range of the average would decrease from five years to three years, according to minutes of a Feb. 10 Prescription Drug User Fee Act reauthorization Financial Sub-Group meeting.

FDA agreed to write the statutory language to make the change, but there was no indication in the minutes of a broad agreement to take the issue to the PDUFA steering group for consideration.

Annual user fee calculations are based on changes in the Consumer Price Index and cost of pay and benefits for FDA full-time equivalent employees. The formula is used to help determine the amount of user fees industry will pay each year and also indirectly helps set FDA staffing levels.

It has become an issue in PDUFA negotiations, potentially because of the effect the recession and a federal wage freeze imposed last year. Both would adversely affect how much FDA collects (Also see "User Fee Inflation Calculations May Need To Change Due To Slow Economic Recovery" - Pink Sheet, 17 January, 2011.).

Industry had requested the inflation adjuster be changed to better respond to cost factor changes, including shortening the rolling average.

Workload Adjuster To Remain Unchanged

FDA already has proposed using FDA personnel compensation and benefits to determine the proper rate for labor costs and the local CPI, which includes Washington D.C., Virginia, Maryland and West Virginia, to compute other cost increases.

In previous negotiating sessions, industry wanted to use multiple indexes to compute non-labor costs, but FDA said that could make the calculation too complex (Also see "User Fee Waivers For Small Businesses Might Get Smaller Under PDUFA V" - Pink Sheet, 14 March, 2011.).

FDA said in the Feb. 10 minutes it would compare the local CPI formula to other indexes to find “the most appropriate external metric.”

Both sides agreed that the PDUFA Workload Adjuster, which increases user fee revenue so FDA can handle the increasing volume and complexity of applications, would not change.

There had been previous discussions about potential changes because it was not increasing revenue enough to compensate for application complexity.

The minutes indicated the adjuster will be studied during PDUFA V, including whether “other workload categories” should be represented in the formula.

Mid-cycle assessments are among industry’s themes for the PDUFA reauthorization (see related story, Also see "PDUFA Needs Mid-Cycle Correction System As Part Of Reauthorization, Industry Says" - Pink Sheet, 18 April, 2011.).

Third-Party Reviews To Fight Staff Shortages?

The potential changes to the adjusters could prevent FDA from reaching its ideal staff level, but one of industry’s trade groups has suggested a previously controversial issue to help the agency battle the problem.

Jim Greenwood, president and CEO of the Biotechnology Industry Organization, said April 6 during the Food and Drug Law Institute annual meeting that allowing third-party reviews of applications would enable the agency to survive without receiving the necessary funding for additional staff.

The idea has not been part of any PDUFA V reauthorization discussions. But the agency has suggested it eventually may use third parties to conduct some facility inspections and increase its reliance on foreign regulators for some information (Also see "FDA-EMA-TGA Joint Inspection Program To Be Permanent; Other Collaborations Expand" - Pink Sheet, 21 March, 2011.).

Greenwood said the outsourcing would involve only reviews and FDA still would make the approval decision. He and others attempted to pass regulations allowing third-party reviews as part of PDUFA's first reauthorization in 1997, while Greenwood was a member of Congress, but were unsuccessful.

“I think you could construct that in a way that’s perfectly safe, perfectly ethical and very efficacious and I think would potentially be considerably more efficient,” he said.

The agency could set certification standards that universities and private entities would follow. Greenwood said they would not be hamstrung by the slow government hiring process if a specialist was needed for a portion of the review.

Greenwood said the idea could be especially useful in speeding novel applications through the process.

“When you think about the pace at which the science is advancing and the fact that you’ve got some brilliant scientists out there [creating] these products and … you’ve got to hope that you find somebody in the FDA who is up on it,” he said. “And given how long it takes to bring people into that agency and train them, you can understand why it’s hard for government to keep up with that pace of change.”

By Derrick Gingery

PDUFA Formula Could Better Incorporate Present Economic Conditions

More from Archive

More from Pink Sheet