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FDA’s Imperiled Funding Threatens Drug Approval Revamp, Staffing

July 20, 2022, 9:25 AM

An impasse among congressional leaders on industry fees to the FDA could force the agency to let go of thousands of employees and lose out on changes to its fast-track drug pathway, former officials and policy watchers warn.

Legislation reauthorizing the user fees that help fund the Food and Drug Administration came into question last week when Sen. Richard Burr (R-N.C.), ranking member of the Senate health committee, seemingly walked away from months of negotiations. The deadline to reauthorize the fees is Sept. 30.

Burr introduced his own, stripped-down legislation that omits several additions from the version (S. 4348) that the Health, Education, Labor, and Pensions Committee advanced in June, particularly a proposed revamp to the accelerated approval pathway that gained renewed scrutiny after Biogen Inc.‘s Alzheimer’s drug approval.

Manufacturers of prescription drugs, medical devices, generic drugs, and biosimilar products pay user fees to the FDA to help speed up product reviews. In exchange, the agency agrees to meet specific performance goals, including adding staff and releasing guidance to help companies develop more complete applications. For fiscal 2021, the total FDA budget was $6.1 billion, with 46%, or $2.8 billion, paid for by industry user fees.

House and Senate leaders previously said they wanted to have an agreement done by August, but Burr’s break from his fellow negotiators has made reaching that goal unlikely. But former top agency officials, industry groups, and policy analysts say a compromise is still doable, especially since no deal would have profound implications on the agency’s ability to carry out long-term changes and meet its timeline for product approvals.

The FDA will need to “start making decisions about what work they have the funding to continue to do,” said Stacy Cline Amin, former chief counsel at the FDA who also previously served in various staff roles for the Senate health panel.

It “would be very devastating if it went past September 30” when the current user fee agreement expires, she said. Nearly half of the FDA’s budget for the drug and device industries comes from user fees, with much of it going to employee salaries.

A Republican aide familiar with the discussions told Bloomberg Law that congressional staff are looking for areas of agreement and discussing a path forward, but noted that no major changes have been agreed upont. Burr also said he is in ongoing talks with other congressional leaders.

House Energy and Commerce Committee Chair Frank Pallone, Jr. (D-N.J.) and ranking member Cathy McMorris Rodgers (R-Wash.) said they want the Senate to vote on the version the House passed (H.R. 7667) in June, arguing that it offers “the strongest and best path forward to ensure this reaches the president’s desk.”

Pallone told Bloomberg Law Tuesday that “we’re working with” the Senate “to see if we can get something done.”

Agency Change

FDA Commissioner Robert M. Califf warned recently that the agency wouldn’t be able to function properly if user fees aren’t reauthorized on time. Massive layoffs, as well as delays to approvals of new innovative drugs and devices, are certain to occur if user fees aren’t passed by the deadline, Califf said in a webinar with the Alliance for a Stronger FDA.

“We’ll review products as quickly as we can, but the timelines go away and the commitment to the timelines goes away” without user fees, Califf said.

User fees, which are reauthorized every five years, are considered must-pass legislation and a vehicle for broader agency reform that it now risks losing with Burr’s stripped-down proposal.

“While we appreciate Senator Burr’s thoughts as always, what we really need to do is move the user fees forward,” Julie Reed, executive director of the Biosimilars Forum, said in an interview.

The House voted 392-28 under suspension of the rules to pass its own user fee package June 8. Language added to the House package aims to encourage pediatric cancer research and boost diversity among clinical trials.

The package advanced by the Senate committee doesn’t have these two provisions, but includes several measures not in the House version to improve how the FDA regulates diagnostic tests and to boost infant formula oversight after a recall at an Abbott facility propelled a nationwide shortage.

‘Ripple Effects’

Delayed reauthorization of FDA user fees will affect agency productivity, which former officials and policy watchers say will ultimately harm the industry and patient access to new treatments.

The “chaos it would cause within FDA would have tremendous ripple effects,” said Howard Sklamberg, a former FDA deputy commissioner.

“A large chunk of FDA salaries are based on user fees, so if there were no user fee reauthorization, FDA would have to issue pink slips and terminate folks,” added Sklamberg, who now works as a partner at Arnold & Porter.

Steven Grossman, executive director at the Alliance for a Stronger FDA, said in an email that the agency will need to start preparing for potential layoffs well before Sept 30. He noted that on Aug. 1, several thousand FDA employees will get notices. If no deal is reached by Oct. 1, “there is the possibility that those individuals would no longer have jobs and there would be a nearly $2 billion hole in the agency’s budget,” Grossman said.

Drugmakers awaiting approval decisions by the FDA could see themselves “in limbo” without user fee reauthorization, as there would be less staff to keep up with application review timelines, Sklamberg said.

Reed noted, though, that the biosimilars industry has a reserve of user fee funds from the previous agreement that hasn’t been spent.

“We would encourage the FDA to use those reserve funds to keep staff in place and working, reviewing and doing work in the biosimilars area,” Reed said.

Sticking Points

Burr, who voted against advancing the committee package last month, said last week that the “policies added to this bill endanger the development of drugs for rare diseases, imperil intellectual property rights,” and “threaten Americans’ access to breakthrough treatments and cures.”

One of the amendments Burr opposed seeks to undo a 2021 federal appeals court decision that forced the FDA to rescind a rare disease drug approval because a previous drug with the same active ingredient was previously granted market exclusivity.

The FDA has said this would have a chilling effect on other rare disease treatments if a company uses a small indication to receive exclusivity for an entire disease.

Burr argued the amendment, which the committee added to the package, would limit the incentive drugmakers have to devote research to the development of new rare disease treatments.

Compromise Possible

Amin says she sees a couple possibilities for compromise.

One option is agreeing to move forward with Burr’s proposal to ensure the user fees get authorized in time. The House package could also serve as a negotiation point, as it doesn’t include the Senate additions Burr voted against, said Amin, who now leads the FDA regulatory and compliance practice at Morrison & Foerster LLP.

Califf said during the webinar that another possibility is Congress reauthorizing user fees through a continuing resolution. But he said that this would limit FDA’s ability to adapt and develop new tools to address “predictable surprises,” like future public health emergencies or product shortages.

Sklamberg said the FDA timeline for reviewing new product applications is too long and complicated to be funded through short-term extensions.

The other top user fee negotiators may ultimately not need Burr on board to get the House-passed version or the one advanced by the HELP committee approved in the full Senate, Sklamberg said.

“Burr isn’t the only member,” he said. “The calculation of the Senate side is to have enough votes to get to 60—with or without Burr.”

To contact the reporters on this story: Celine Castronuovo at ccastronuovo@bloombergindustry.com; Alex Ruoff in Washington at aruoff@bgov.com

To contact the editor responsible for this story: Alexis Kramer at akramer@bloomberglaw.com