Who Funds the FDA?

The Food and Drug Administration (FDA) has moved from an entirely taxpayer-funded entity to one increasingly funded by user fees paid by manufacturers that are being regulated. Today, close to 45% of its budget comes from these user fees that companies pay when they apply for approval of a medical device or drug.

Source: https://www.fda.gov

Americans in the early 20th century were outraged when they found out that manufacturers used poor-quality methods for producing food and medication, and used unsafe, ineffective and undisclosed addictive ingredients in medications. The resulting Food, Drug and Cosmetic Act of 1938 gave the taxpayer-funded Food and Drug Administration new authority to protect the U.S. consumer.

One of the FDA’s most shining successes occurred in the late 1950s when the agency refused to approve thalidomide. By 1960, 46 countries allowed pregnant women to use thalidomide to treat morning sickness, but the FDA refused on the grounds that the studies were insufficient to demonstrate safety. Debilitating birth defects resulting from thalidomide arose in Europe and elsewhere in 1961. President John F. Kennedy heralded the FDA in 1962 for its stance. 

The FDA continued its work fully funded by U.S. taxpayers for many years until this model was upended by a new infectious disease. The first U.S. case of HIV-induced AIDS occurred in 1981. But there were long delays in approving HIV drugs.

In 1992, in response to intense pressure, Congress passed the Prescription Drug User Fee Act. It was signed into law by President George H.W. Bush.

With the act, the FDA moved from a fully taxpayer-funded entity to one funded through tax dollars and new prescription drug user fees. Manufacturers pay these fees when submitting applications to the FDA for drug review and annual user fees based on the number of approved drugs they have on the market. However, it is a complex formula with waivers, refunds and exemptions based on the category of drugs being approved and the total number of drugs in the manufacturers’ portfolio.

Over time, other user fees for generic, over-the-counter, bio-similar, animal and animal generic drugs, as well as for medical devices, were created. As time passed, the FDA’s funding has increasingly come from the industries that it regulates. Of the FDA’s total US$5.9 billion budget, 45% comes from user fees, but 65% of the funding for human drug regulatory activities are derived from user fees. These user fee programs must be reauthorized every five years by Congress, and the current agreement remains in effect through September 2022.

The FDA and the drug or device manufacturers negotiate the user fees. They also negotiate performance measures that the FDA has to meet to collect them. Performance measures include things such as how quickly the FDA responds to meeting requests, how quickly it generates correspondence, and how long it takes from submission of a new drug application until the FDA approves or refuses to approve a drug or product.

Because of the additional funding generated by user fees and performance measures that the FDA has to meet, the FDA is quicker and more willing to discuss what it wants to see in an application with manufacturers. It also offers clearer guidance for manufacturers. In 1987, it took 29 months from the time a new drug application was filed by the manufacturer for the FDA to decide whether to approve a medication in the U.S. In 2014, it only took 13 months and by 2018, it was down to 10 months.

Most recently, the COVID-19 pandemic has seen the FDA provide emergency use authorization for potential treatments in a matter of weeks, not months. The infrastructure and capacity to review the available information so rapidly is due in large part to the funding from user fees.

User fees are a viable way to shift some of the financial burden to manufacturers who stand to make money from the approval and sale of drugs in the lucrative U.S. market. Successes have occurred and provided U.S. citizens with medication more quickly than before.

However, without careful consideration of what is being negotiated, the FDA can become weak and ineffective, unable to protect its citizens from the next thalidomide. There are some signs that the pendulum may be swinging too far in the direction of the manufacturers. The FDA is insufficiently funded to protect consumers from other issues such as counterfeit drugs and dietary supplements because they cannot collect user fees to do so. 

The model whether in the U.S. or Malaysia, has to have a balance in terms of funding – private and public. Otherwise, the regulatory agency will become the mouthpiece of Big Pharma!

Reference:

Why is the FDA funded in part by the companies it regulates (https://theconversation.com)