PDUFA Cost Offset In House Focuses On FDA Petition Review, Not REMS

Faced with a CBO estimate that H.R. 5651 will increase federal spending in fiscal years 2013 through 2022, the House Energy and Commerce Committee applies a section that speeds FDA decisions on some petitions to biosimilars. This contrasts with the Senate bill, which allows FDA to require brand companies to sell products covered by limited distribution systems to generic firms.

The House Energy and Commerce Committee revised its FDA Reform Act (H.R. 5651) May 25 to provide for earlier market entry of biosimilars subject to some citizen petitions in an effort to reverse an unfavorable spending projection for the bill – a change that creates dueling visions for cost savings once the legislation reaches conference committee.

The new version of H.R. 5651 will go to the House floor May 30 as a substitute for the bill reported out of committee (Also see "PDUFA Scrubbing: How The House User Fee Bill Got So Agreeably Clean" - Pink Sheet, 14 May, 2012.). The House will vote on it under a suspension of rules that allows an up or down vote without providing for any other amendments.

Taking the bill to the House floor without an opportunity for amendment ensures the House/Senate conference committee convened to resolve differences in the bills will be looking at two different ways to offset higher federal expenditures caused by some provisions.

The House bill would speed market entry through faster FDA response to some petitions, while the Senate bill would allow FDA to direct brand companies to sell products covered by REMS limited distribution systems to generic firms (Also see "Generics: Capitol Hill’s Super “Pay For”" - Pink Sheet, 10 May, 2012.).

Pay-as-you-go procedures in Congress require that legislation be deficit-neutral for the federal government, containing either revenue-enhancing or spending-reduction provisions to offset any spending increases caused by a bill.

Exclusivity Additions Outweigh Review Speed Enhancements In The House

The change to H.R. 5651 was prompted by a May 24 cost estimate from the Congressional Budget Office that while the bill would lower federal budget deficits by a cumulative $72 million during its life (fiscal years 2013 through 2017), it would increase deficits by $247 million during the 10-year period of fiscal years 2013 through 2022.

Part of the increase is due to higher FDA spending for activities that are not paid for by user fees and part to increased federal health program outlays for pharmaceuticals.

In the administrative arena, enhanced efforts to address drug shortages, approve breakthrough drugs and implement other new drug programs authorized by Sections VIII and IX of the House bill would increase FDA’s costs by about $313 million over the FY 2013-2017 period, CBO says.

Implementing the Best Pharmaceutical for Children Act and the Pediatric Research Equity Act portions of H.R. 5651 would cost $266 million during the 10-year period, according to the budget office, while administrative reforms in Title VI, including regulatory science reports, will cost $31 million.

In addition to permanently extending the pediatric exclusivity incentive, the bill creates a new one for antibiotics. The CBO’s estimate does not specify how much these exclusivities will cost the federal government, but it does say that all provisions delaying entry of generic or biosimilar products would cost federal government programs $412 million in direct payments and subsidies over the 10-year period.

Senate Bill Spends Less, Saves More

The Senate’s FDA Safety and Innovation Act received a positive cost estimate from CBO using provisions to modify the Risk Evaluation and Mitigation program to reduce barriers to market entry by generic drugs and biosimilars.

S. 3187, CBO says, will produce a $71 million five-year reduction in the deficit and a 10-year $363 million reduction in the deficit over the 10-year timeframe (Also see "CBO Says Senate User Fee Package Will Decrease Direct Spending" - Pink Sheet, 14 May, 2012.). The Senate passed the bill 96-1 May 24 (see related story, (Also see "PDUFA Reaches Approval Altitude; Can House Maintain Senate Speed?" - Pink Sheet, 28 May, 2012.)).

CBO estimates that provisions in the Senate bill to encourage development of antimicrobials, innovative single enantiomer drugs and pediatric indications and formulations would increase federal program outlays for pharmaceuticals by $395 million during the FY 2013-2022 period. The Senate language is slightly narrower than the House in terms of which antibiotics would be eligible for extra exclusivity, another difference that will have to be resolved in conference committee.

Not only does the Senate version produce less spending on pharmaceuticals, its pay-fors are more potent. S. 3187 would allow firms to ask FDA for access to drugs and biosimilars subject to a REMS with Elements To Assure Safe Use, and for FDA to direct the brand company to provide such access (Also see "CBO Says Senate User Fee Package Will Decrease Direct Spending" - Pink Sheet, 14 May, 2012.). The generic industry has complained that some companies refuse to sell drugs subject to limited distribution programs to generic firms.

CBO says this provision, plus others in the Senate bill designed to reduce barriers to generic market entry, would reduce health care program spending by $753 million during FY 2013-2022.

More Products Covered By Speedy Petition Reviews

Overall under the House bill, federal pharmaceutical expenditures would decline by $72 million during FY 2013-2017, but increase by $244 million over the entire FY 2013-2022 period, CBO says. This is achieved by changes in petition provisions.

The House bill had made offsetting changes in Section 863, which would reduce by 30 days the statutory time-frame for a final FDA decision on certain citizen petitions that request a stay of approval on pending generic drug applications. Currently, FDA has 180 days to make such a decision, a deadline set in the 2007 legislation that renewed the user fee legislation.

Another provision to shorten administrative timeframes for certain petitions and allow faster generic drug entry to the market is Section 864. This would require FDA to review within 270 days those petitions seeking to determine that safety or effectiveness are not the reasons for a brand drug’s withdrawal from the market.

CBO estimated the federal government’s drug spending would decrease by $168 million during the 10-year period due to the new petition time-frames, with Section 863 having “the greatest effect on market entry by lower-priced generic drugs,” CBO said.

Given that CBO found inadequate savings from the provisions, leaders of the House panel chose to expand the scope of Section 863 to biosimilars. With the modifications, the bill now is in congressional budgetary terms “pay-go compliant,” a committee spokesperson said. CBO has not yet given an estimate on the new version.

The Generic Pharmaceuticals Association had no comment on the revised House petitions provision. But GPhA has been a strong advocate for the Senate language, which the group says “would prohibit branded companies from distributing their products through a REMS program as a strategy to avoid generic competition. At a time of great budgetary challenges for consumers and for the federal government, it is especially important that barriers to fair and timely generic drug and biosimilar competition are addressed, and that safe, effective and affordable pharmaceuticals are made available to consumers.”

The impact of either bill’s pay-for with regard to savings from faster biosimilar market entry remains to be seen. FDA predicts in a May 24 Federal Register notice that it expects to receive only two biosimilar applications in any given year (see related story, (Also see "Biosimilars, Year One: FDA Estimates 2 Applications, 1,720 Hours Of Work" - Pink Sheet, 28 May, 2012.)).

Working against more applications are Medicare Part B reimbursement provisions that inhibit a manufacturer’s ability to set its own price and uncertainty about up-take in the Medicare market (Also see "Biosimilar Payments Under Medicare: On Closer Look, Is It Worth It?" - Pink Sheet, 11 Jun, 2010.).The pathway for patent challenges also is daunting (Also see "Follow-On Biologics' Bumpy Pathway: Was The CBO Savings Score Too High?" - Pink Sheet, 17 May, 2010.).