FDA's Prescription Drug User Fee Act: Reform Analysis
This paper examines the Prescription Drug User Fee Act (PDUFA), which authorizes the FDA to collect fees from pharmaceutical manufacturers to fund the new drug approval process. The paper traces PDUFA's origins in the funding shortfalls of the Reagan era, reviews evidence that the law reduced average drug approval times by roughly 42%, and discusses the 2002 reauthorization. It then evaluates criticisms from the Heritage Foundation regarding growing unpredictability and rising review times, explores how increasing user fees may have reduced Congressional appropriations, and proposes a fee cap as a regulatory reform to rebalance public and industry funding of the FDA.
- Introduction to PDUFA and Its Origins: PDUFA origins, funding rationale, and legislative compromise
- Impact on Drug Approval Timelines: 42% reduction in approval time attributed to PDUFA
- Criticisms and Limitations: Heritage Foundation critique and post-2002 slowdowns
- Rising User Fees and Congressional Funding: User fees grew from 7% to 60% of FDA funding
- Proposed Regulatory Reform: A Fee Cap: Fee cap proposal to restore Congressional appropriations
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What makes this paper effective
- Balances supporting evidence with substantive critique, citing both a peer-reviewed NBER working paper and a Heritage Foundation policy report to present multiple perspectives on PDUFA's effectiveness.
- Uses specific quantitative data (42% decline in approval time, from 24.2 to 14.2 months; user fees rising from 7% to 60% of FDA funding) to ground policy arguments in concrete evidence.
- Moves logically from historical background to performance evaluation to a concrete reform proposal, giving the paper a clear problem-solution structure.
Key academic technique demonstrated
The paper demonstrates source triangulation by pairing empirical research (Berndt et al., 2004) with a think-tank policy critique (Kronquist, 2011) and then independently evaluating the limitations of each source — for instance, pointing out that Kronquist does not ask whether drug companies' poor data collection, rather than FDA inefficiency, explains low first-cycle approval rates.
Structure breakdown
The paper opens with the legislative background and rationale for PDUFA, moves to quantitative evidence of its early success, addresses critical perspectives and post-2002 performance concerns, examines the fiscal relationship between user fees and Congressional appropriations, and concludes with a targeted reform recommendation (a statutory fee cap). Each section builds on the previous one, making the final proposal feel well-supported rather than abrupt.
Introduction to PDUFA and Its Origins
The Prescription Drug User Fee Act (PDUFA) allows the FDA to collect fees from drug manufacturers to fund the new drug approval process. That process is costly for both drug companies and the FDA. The FDA is funded primarily through the federal government, so this law allowed the agency to become more self-funded. Theoretically, this would also allow the FDA to charge fees that reflected the actual costs associated with conducting new drug approvals. The legislation also contained a provision requiring the FDA to conduct its approvals within a certain timeframe.
The bill came about because there was a real risk that the FDA would become very slow in approving new drugs due to insufficient funding. The FDA was particularly concerned about the pace at which Congress was providing additional funding during the Reagan years. This was resulting in significant costs to the industry, and the bill was seen as a compromise — allowing drug companies to essentially pay for the level of service they required. The fees would be lower than the cost of delays.
Impact on Drug Approval Timelines
PDUFA was intended to speed up the new drug approval process. Industry knew it would cost more and was understandably concerned about receiving value for this new expenditure. A 2004 study noted that PDUFA was signed into law at a point when the timeframe for new drug approvals was already trending downward. The law resulted in an acceleration of that downward trend. "There was an observed decline of about 42%, from 24.2 months to 14.2 months, following the implementation of PDUFA," and "two-thirds of this decline can be attributed to PDUFA" (Berndt et al., 2004). As a result of this success, PDUFA was extended in 2002.
Criticisms and Limitations
The success of PDUFA makes it difficult to improve upon. Fees could be lower, and approval times could be reduced further, but performance improvements are not necessarily features of the law itself — they reflect how the law has worked out in practice. The Heritage Foundation, a libertarian think tank, is an outspoken critic of PDUFA. It argues that under PDUFA, "the review process has become increasingly unpredictable, uncertain and inefficient," dismissing the act as an embodiment of "overarching and unnecessary regulations" (Kronquist, 2011). The Foundation notes that after the 2002 reauthorization, review times began to increase again.
This trend, however, is arguably not the fault of PDUFA itself, but of other changes in the approvals process. For example, fewer than half of all drugs are approved during their first submission cycle. It is worth asking whether that outcome reflects FDA inefficiency or whether drug companies are doing a poor job of gathering and presenting data. Kronquist does not address this question.
References
Berndt, E., Gottschalk, A., Philipson, T., & Strobeck, M. (2004). Assessing the impact of the Prescription Drug User Fee Acts (PDUFAs) on the FDA approval process. NBER Working Paper No. 10822.
Kronquist, A. (2011). The Prescription Drug User Fee Act: History and reauthorization issues for 2012. Heritage Foundation. Retrieved March 31, 2015, from http://www.heritage.org/research/reports/2011/12/the-prescription-drug-user-fee-act-history-and-reauthorization-issues-for-2012
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