FDA Dependence on User Fees Would Increase Under FY 2012 Budget Request

Three new fees, including generic drug user fee, would help boost collections to $1.62 billion.

Industry would pay for more than one-third of FDA's budget under President Obama's fiscal year 2012 request, as the federal government adds user fees to attempts to cut spending.

The user fee revenue increase would include introduction of new charges for medical product re-inspections, generic drug reviews and international couriers.

The budget request, released Feb. 14, plans for a $694 million increase in user fee revenue over FY 2010 levels, including $278 million more in prescription drug user fees. Total user fee revenue would jump 75% over FY 2010 levels, from $922 million to $1.62 billion, according to a budget briefing document released by the Department of Health and Human Services.

The overall requested budget for FDA is $4.36 billion, a more than 33% increase from the 2010 agency budget.

Industry and others already have questioned FDA's reliance on user fees to pay for its programs and personnel; it appears the agency would become more beholden to them under the new budget, assuming congressional approval. User fees would account for 37% of the total budget, while in FY 2010, they accounted for 28%.

Congressional approval is not assured. In fact, it seems likely House Republicans are going to push for deeper spending cuts. The House already has released its FDA spending target for the remainder of the current fiscal year, which further cuts spending ('FDA User Fees Soften Sting Of Second Round Of House Budget Cutting,' 'The Pink Sheet' DAILY, Feb. 14, 2011).

Congress approved a continuing resolution in December that maintained FY 2010 spending levels until March 4. At that time, agency officials were preparing for funding cuts and ultimately could be forced to look for alternative revenue sources. Among the possibilities was raising money from industry and other federal agencies to pay for programs ('With Federal Dollars Scarce, FDA May Fundraise For Regulatory Science Initiative,' 'The Pink Sheet,' Feb. 7, 2011).

Some Familiar Fees Proposed Again

Three new drug-related fees are expected to generate $60 million in FY 2012, according to the Obama request. The least of which is the international courier user fee, which would be charged to increase surveillance of medical product importers that use express courier hubs. It would generate $5 million annually in FY 2012 and increase to $8 million by FY 2016.

Generic drug user fees also were included in the FY 2012 budget request, just as they were in the FY 2011 request. They are projected to generate slightly more revenue, $40 million, than last year, $38 million. It was estimated to generate $51 million in FY 2016.

The figure is not much more than a guess, since GDUFA negotiations between industry and FDA are not scheduled to begin until the end of the month.

The relatively low total listed for the generic user fees is also interesting, which may indicate an assumption the program would be structured based on applications. FDA already has said facility inspections will be more important in a generic user fee program. One inspection-based proposal potentially could generate hundreds of millions in annual revenue ('Generic User Fees: FDA Reaches Out To More Trade Groups; Plan Could Mix Inspection And Application Fees,' 'The Pink Sheet,' Jan. 3, 2011).

Also recycled from the previous budget blueprint is the re-inspection fee for medical product manufacturers, which would generate $14 million in FY 2012, an increase from last year's $13.4 million annual projection. The fee is designed to force manufacturers to pay the full cost of follow-up inspections at a facility after violations were discovered. It is expected to generate $18 million by FY 2016.

Last year, proposed generic and re-inspection user fees accounted for more than half the increase in FDA's budget request ('FDA Budget Enhances Safety Programs, But Relies On Theoretical User Fees,' 'The Pink Sheet,' Feb. 8, 2010). Neither was approved.

Biosimilar Fees Not Included

Not among the proposed new user fees is one for biosimilars, although the budget request does provide for a reduction in innovator biologics exclusivity from 12 years to seven years in order to achieve some savings in Medicare and Medicaid ('CMS' 2012 Budget Looks To Biosimilars, Ban On Brand/Generic Deals To Offset Costs,' 'The Pink Sheet' DAILY, Feb. 14, 2011).

Biosimilar user fee negotiations are expected to begin later this year, but an FDA official said the negotiations could be different from the other user fee discussions (' 'Mega-UFA' Is Behind Schedule; Combined User Fee Bill Will Be Difficult, But Still Expected,' 'The Pink Sheet,' Feb. 14, 2011).

PDUFA, the largest user fee revenue source, is estimated to jump 28% in the budget request, from $667 million in FY 2011 to $856 million in FY 2012. Family Smoking Prevention and Tobacco Control Act fees are expected to more than double from $235 million to $477 million and rank as the second-highest user fee revenue source.

-Derrick Gingery ([email protected])