HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Monday, February 14, 2011

Margaret Gilhooley: "Drug User Fees, Health Priorities, Politics, the Deficit and Reform Directions"

Margaret Gilhooley, Professor Emeritus at Seton Hall Law School, posted "Drug User Fees, Health Priorities, Politics, the Deficit and Reform Directions" on SSRN:

Margaret Gilhooley The Food and Drug Administration now depends on user fees paid by drug companies to support more than half the salaries of the medical reviewers who advise the agency on the appropriateness of approving a drug. The funding creates a substantial risk of "capture" of the agency by the industry. Under the program, which started in 1992, drug companies pay a fee that permits the agency to hire additional reviewers to make more timely reviews on whether a drug can be approved. Under the law, the agency seeks to meet performance goals for the timing of reviews, giving the program the appearance of having a fee-for-service basis.

The legislative authorization for the fees expires every five years, and the agency and the industry negotiate behind closed doors on the renewal and the performance goals for the reviews. The need for renewal creates an opportunity for the passage of laws that might not have been enacted separately. Some believe the Administration may accept measures of debatable merit to avoid having to layoff needed reviewers. Limiting the user fee support to half the Government appropriation for the program, and making the program permanent can alleviate the capture and linkage problems.

This paper maintains that reforms and changes in the policy rationale for the program are needed before locking-in a permanent funding commitment at a time of debate about growing budget shortfalls. Instead of a fee-for-service rationale, the program should be based on a health review rationale. A study is needed to identify better priority rankings and goals for drug reviews, rather than the simple categories and negotiations that now exist. To avoid the risk of capture, the revenues from the fees should not exceed the Government funding for the program. Making the fee program permanent would address the linkage problem but providing permanent funding can undercut Congress' responsibility to determine important budget allocations in a time of concern about deficits. If the program is made permanent, the law should make clear that Congress can reduce the funding level for the fees to deal equitably with funding cutbacks in other programs made in light deficit considerations. Congress should also have to approve any major increases in the fee levels. The significance of the user fee program and the reforms needed, before it is made permanent, warrant wide attention.

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