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REP. DINGELL's REGISTRATION FEE APPROACH WITH "REASONABLE DOLLAR LIMITS" WOULD NOT "UNDULY BURDEN" BIOTECH INDUSTRY, IBA TELLS HOUSE APPROPRIATIONS

Executive Summary

The FDA registration fee proposal under development by Rep. Dingell (D-Mich.), if combined with "reasonable dollar limits, would not unduly burden the U.S. biotechnology industry, as would the Administration's user fee proposal," the Industrial Biotechnology Association advised the House Appropriations/Agriculture Subcommittee May 16. IBA President Richard Godown suggested that an annual fee in the area of $ 1,000 per facility would be reasonable. Rep. Dingell's current plan includes an upper limit on annual fees of $ 5,000 per facility. Sen. Kennedy's (D-Mass.) 1989 registration fee plan contained fees of about $ 1,000-$ 2,000 per facility. While not giving an "endorsement of an FDA facilities fee," IBA's prepared testimony states that Dingell's proposal "addresses several of our objections" to the Administration [new product review fee] approach. . . Since all biotechnology companies are developing new products, our industry would bear a disproportionate burden under the Administration's proposal, while little or no burden would be placed on relatively non-innovative companies that are nevertheless regulated by FDA and utilize FDA resources. A facilities registration fee addresses this objection by spreading the burden to all FDA-regulated companies," IBA said. Another reason for a registration fee approach, IBA said, is that "product review user fees could be imposed for items that never reach the commercial market, while currently marketed products avoid the fee even though FDA resources are increasingly expended for post-marketing surveillance, plant inspections, and advertising review," and similar post-approval activities. IBA recommends that "facilities" be defined to include only facilities inspected by FDA and not administrative offices or research labs used primarily for R&D rather than manufacturing. Godown also stressed that a facility's fee should help fund the center that regulates it; registration fees should supplement FDA appropriations, not replace them; and enforcement-related activities should not be subject to user fees. The Dingell plan would plow fee revenues back into either individual programs or FDA generally and would require a minimum appropriations level before fees could be assessed ("The Pink Sheet" May 13, T&G-5). At a May 14 Association of Biotechnology Companies-sponsored forum on user fees, House Energy & Commerce Committee staff member Lesley Russell told ABC that committee chairman Dingell's fee proposal may exempt start-up firms still in the research phase. Russell noted that the bill is being drafted as an extension of Sec. 510 of the FD&C Act, which requires annual drug and medical device facility registration with FDA, and that Sec. 510 includes an exemption for research organizations. "The way I have looked at throwing the net of registration fees is [that] if you are potentially subject to regulation, if FDA can show up on your doorstep and inspect you, then you should be registered and you should pay a user fee. But there is an exemption for research and development" in the statute, she continued. "We have discussed the idea, not currently in the legislation, of saying anyone with annual sales of less than . . . something like $ 1 mil. [to] $ 5 mil., doesn't have to pay a registration fee." She added, though, that Dingell wants to avoid a "complicated" approach of multiple- fee levels. Sec. 510 requires establishments engaged in the "manufacture, preparation, propagation, compounding or processing" of a drug or medical device to register periodically with FDA all places of business. Exceptions include persons who manufacture or process drugs or devices "solely for use in" research and teaching, or pharmacies operated in compliance with state and local laws. Under Dingell's current thinking, the section would be expanded to encompass all FDA-regulated industries. Pharmaceutical Manufacturers Association President Gerald Mossinghoff told the House panel that PMA "strongly opposes" user fees as a "tax on innovation." The Bush Administration's fiscal 1992 budget plan proposes $ 770 mil. for FDA -- $ 573 mil. from appropriations and $ 197 mil. from user fees. In comparison, FDA's FY 1991 budget is $ 690 mil., with funding provided solely from congressional appropriations. Mossinghoff's written testimony comments that the Administration "would have you believe that drug companies would reap the benefit of dollars paid into FDA through expedited processing of NDAs, vaccine review enhancement and so forth. In point of fact, 77% of total fee receipts would be used simply to maintain current FDA operations. . . Our member companies would be expected to pay as much as $ 764,000 in fees for each new NDA but in return, NDA staffing would increase by less than 3%." Nonprescription Drug Manufacturers Association Senior VP & General Counsel Daniel O'Keefe similarly opposed user fees and, in particular, suggesting that fees on NDAs could pose a "barrier" to Rx-to-OTC switches via the NDA route. At the ABC forum, Senate Labor & Human Resources Committee Republican staffer Nancy Taylor advised that "no one" in Congress is advocating product review fees. Taylor said, however, that her personal prediction is that eventually Dingell "will succeed" in enacting a facility registration fee proposal because he "has learned that you must dedicate it to FDA." Labor Committee Chairman Kennedy's earlier proposal for registration fees, she commented, had "one fatal flaw and that was he dedicated it to the federal budget" rather than to enhancing FDA. She remarked that there is also an increasing sense of "urgency" in Congress that more funds need to be invested in FDA. Taylor said that the Senate committee will "wait for" Dingell's proposal before taking up the user/registration fee issue. Senate Appropriations/Agriculture Subcommittee staff member Rocky Kuhn responded that fees thus are "unlikely for 1992" particularly since the Bush Administration has yet not put forth specific authorizing legislation of its own nor indicated how it would respond to congressional proposals. Commenting on the just-released Edwards Committee report, Taylor remarked that perhaps the most "astounding" finding is that FDA could improve efficiency by 25%, apparently referring to a Booz Allen analysis that NDA and PLA review times can be shortened by 25% with existing resources. Nevertheless, responding to a suggestion that FDA should demonstrate better efficiency before receiving a funding boost, Taylor stated: "Sometimes you need additional funds in order to make the management work better."
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