Staffing changes and a lack of operational knowledge caused mistakes calculating the fiscal year 2023 and 2024 prescription drug user fees, which likely saved sponsors hundreds of thousands of dollars per submission and robbed the US Food and Drug Administration of needed funding.
Key Takeaways
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Sponsors would have paid hundreds of thousands of dollars more per application filed if the FDA had used updated FAE figures.
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The error occurred because of employee turnover and a lack of process documentation, the agency said.
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Continued submission volatility could spark proposals to change the fee system.
PDUFA application fees are calculated using an average number of fee-paying full application equivalents (FAEs) from previous years.
The FAE count is supposed to include applications with clinical data (1 FAE), without clinical data (0.5 FAE), and those withdrawn before filing or refused to be filed (0.25 FAE if the full fee was paid and 0.125 FAE if half the application fee was paid). Prior year FAE totals also usually are updated annually to reflect refunds and waivers processed after the fiscal year ends.
The agency admitted in the Federal Register notice announcing the FY 2025 prescription drug user fees that the rates for the previous two years were calculated using FAE counts that did not account for refunds. That omission made the total fee-paying full application equivalents higher, which meant the application fees were lower. (See sidebar below.)
The FDA told the Pink Sheet that “the error occurred due to staff turnover in the organizations involved in the process and lack of process documentation.”
“The process is now sufficiently documented to ensure the error will not occur again,” the agency added.
US FDA Corrects Errors, Limits PDUFA Application Fee Increase
Turnover is not an unusual problem for the FDA. Staff regularly depart for jobs in industry, academia or other federal agencies. (Also see "CDER, CBER Not Seeing Hiring Slowdown Despite US FDA Warnings" - Pink Sheet, 18 April, 2024.)
FDA staff discovered the error after the publication of the FY 2024 PDUFA user fee rates, the agency said.
Updated FAE counts were included in the FY 2025 user fee notice, which was released on 30 July.
If the updated figures were used in the fee calculations, the FY 2023 PDUFA fee for applications requiring clinical data would have been $404,079 higher and set at about $3.65m instead of $3.24m. The FY 2024 fee would have been $671,983 higher with the updated figures, reaching $4.72m instead of the set rate of $4.05m. (See chart below.)
The updated FY 2024 rate also would have been higher than the FY 2025 rate, $4.31m.
The story continues after the chart…
Switching To 10-Year Average Lowers Fees
FDA officials also decided to use a 10-year average of FAE counts in determining the FY 2025 PDUFA application fees, a change from previous years, to address FAE volatility, as well as “the trend for FY 2024 collections,” the agency told the Pink Sheet.
Future calculations also could employ the 10-year average, the agency said.
“FDA prefers to keep fee-setting methodologies consistent year-over-year, but may change based on historical trends if needed to provide the most accurate projection,” the agency added.
The 10-year period used for the calculation, FY 2014-FY 2023, resulted in an FAE average of 68.62, which helped blunt the impact of falling submission volume more recently.
If the agency had used the traditional average of the three most recent years with complete FAE data, FY 2021-FY 2023, the average would have been 58.33, which would have resulted in a fee for applications requiring clinical data of $5.07m.
The FDA said the formula was not changed to better control the fee increase.
“It was changed to provide the best possible FAE estimate for FY 2025,” the agency said.
The fee using a three-year average would have been a 25% increase from the FY 2024 fee, the second consecutive year with an increase nearly that high. (Also see "PDUFA Fees Push Higher In FY 2024, While Biosimilar Fees Race Downward" - Pink Sheet, 27 July, 2023.)
At the same time, had the agency employed a 10-year average in FY 2023 and FY 2024, even with the updated figures, the fees those years would have been substantially lower.
The FY 2023 fee for an application requiring clinical data would have been $3.2m, nearly $44,000 less than the actual fee. The FY 2024 fee would have been $3.82m, which is nearly $230,000 less than the posted amount.
Are Volatility-Inspired Changes Needed?
The ultimate goal of the calculations is to increase the certainty and predictability of user fee revenue, a task that remains difficult.
Despite the FAE bobble, the agency recently raised its estimate for fee collections in FY 2024, suggesting it is seeing a higher number of submissions than initially estimated. (Also see "US FDA User Fee Conundrum: Collections Increase After 25% PDUFA Rate Hike" - Pink Sheet, 14 June, 2024.)
The higher than projected revenue may not address all of FDA's revenue needs, though. Application supplements, which do not warrant a fee, are expected to continue increasing, along with formal meetings and other activities. (Also see "New Workload Categories Add To FDA Staff Needs, Help Increase User Fees" - Pink Sheet, 21 August, 2023.)
The agency or industry could include system tweaks on their list of potential changes for PDUFA VIII. With PDUFA VII expiring in 2027, renewal negotiations will begin in earnest in 2025.
Some in industry already have raised questions about fee increases and the ongoing return on investment. (Also see "PDUFA VIII: Continuous Fee Increases May Be Wearing On Sponsors" - Pink Sheet, 18 June, 2024.)
