The Check is in the Mail – Please Return to Sender; PDUFA User Fee Waivers and Reductions

August 13, 2008

Now that FDA has set the Fiscal Year 2009 Prescription Drug User Fee Act (“PDUFA”) user fee rates and is preparing invoices for delivery (payable by October 1, 2008), a quick review of the options available to companies to request user fee waivers and reductions seems in order. 

Under PDUFA, FDA collects three types of user fees for a drug product that is the subject of a “human drug application” (i.e., a new drug approved under FDC Act § 505 and a biological product licensed under PHS Act § 351): (1) a one-time application fee that must be paid in order for FDA to accept an application for filing; (2) an annual establishment fee for “each prescription drug establishment listed in [an] approved human drug application as an establishment that manufactures the prescription drug product named in the application;” and (3) an annual product fee for each drug listed in FDA’s Orange Book (i.e., the active section of the Orange Book and not the Discontinued Drug Product List) that is the subject of an approved human drug application.  There are several exceptions under PDUFA that could preclude the assessment of user fees.

For those companies that are subject to user fees – and in particular annual product and establishment fees – FDC Act § 736(d) provides a few mechanisms to offer relief.  Specifically, a company can request FDA to waive or reduce user fees under: (1) the “public health” mechanism; (2) the “barrier to innovation” mechanism; and (3) the “fees-exceed-the-costs” mechanism.  In addition, a firm that qualifies as a “small business” (i.e., 500 or fewer employees, including employees of affiliates) and that does not have a drug product approved and marketed pursuant to a human drug application may request FDA to waive the application fee for its first human drug application.  Please note, however, that to qualify for consideration of a waiver or reduction of fees, an applicant must submit a written request to FDA no later than 180 days after the fee is due.

Under the public health mechanism (FDC Act § 736(d)(1)(A)), FDA can waive or reduce user fees if the Agency finds that “such waiver or reduction is necessary to protect the public health.”  FDA explained in what is now a sorely out of date July 1993 guidance document that a “public health” waiver/reduction may be appropriate when: (1) the product protects the public health; and (2) the person requesting the waiver shows that a waiver is necessary to continue an activity that protects the public health. 

Under the barrier to innovation mechanism (FDC Act § 736(d)(1)(B)), FDA can waive or reduce user fees if the Agency finds that “the assessment of the fee would present a significant barrier to innovation because of limited resources available to such person or other circumstances.”  FDA’s 1993 guidance document explains that a “barrier to innovation” waiver/reduction may be appropriate when: (1) the product for which the waiver/reduction is being requested is innovative, or the entity requesting the waiver/reduction is otherwise pursuing innovative drug products or technology; and (2) the fee would be a significant barrier to the entity’s ability to develop, manufacture, or market innovative products or technology. 

In addition to these criteria, FDA also considers other factors in determining whether either a “public health” or “barrier to innovation” waiver/reduction should be granted.  These factors include the size and annual gross revenues of a business, whether a human drug application is for a new chemical entity, or has priority review status or fast track status, and, for a barrier to innovation waiver/reduction, special circumstances subject to FDA’s discretion. FDA has interpreted the financial test to mean a company with $10 million in foreign and domestic annual gross revenues and no corporate parent or funding source with annual gross revenues of $100 million or more (in 1993 dollars).

The fees-exceed-the-costs mechanism (FDC Act § 736(d)(1)(C)) involves a complicated calculation used by FDA to determine whether the total fees paid by an applicant since the enactment of PDUFA in 1992 exceed the Agency’s total costs in reviewing all submissions to the Agency by the applicant since that time.  FDA’s fees-exceed-the-costs guidance document and accompanying standard costs chart provide additional information on this mechanism.  While this mechanism is not often used (because many applicants are continually submitting applications to FDA and the Agency’s costs usually exceed the fees paid), it has been successfully used by companies with a small number of FDA submissions approved several years ago that are still subject to annual user fees.  Thus, for such companies, FDA’s costs remain static while the total amount of fees paid by the company continues to grow, eventually leading to an overage. 

The FDA Amendments Act (“FDAAA”) introduced a new user fee exemption applicable to orphan drugs.  As we previously reported, sponsors of orphan drugs have been exempt from paying the application user fee since the enactment of PDUFA II in 1997, but have not been exempt from paying annual product and establishment fees.  With the enactment of PDUFA IV under FDAAA, however, the law was amended to add new FDC Act § 736(k) to exempt orphan drugs from annual product and establishment fees.  Specifically, an approved drug designated as an orphan drug is exempt from product and establishment fees if: (1) “[t]he drug meets the public health requirements contained in [FDC Act § 736(d)(1)(A)] as such requirements are applied to requests for waivers for product and establishment fees;” and (2) “[t]he drug is owned or licensed and is marketed by a company that had less than $50,000,000 in gross worldwide revenue during the previous year,” and provided a certification to this effect is submitted to FDA. 

By Kurt R. Karst

Categories: Drug Development