There’s an old adage: If you owe the bank a small amount of money, you have a problem. But if you owe the bank of a substantial amount of money, the bank has a problem. And if a lot of people owe the bank a lot of money, the bank has a big problem.
I recount this adage this morning because the FDA is owed a substantial amount of money, and it has a problem. Specifically, 496 over-the-counter drug companies owe it a combined $9.9 million in unpaid user fees – money it is counting on to be able to use to hire staff to review nonprescription drugs. AgencyIQ’s Lily Rosenfield has the details on this strange development in the newsletter below.
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As FDA works to get its OTC user fee program up and running, it faces a major problem: More than 40% of expected facilities haven’t paid
The top line: Almost 500 nonprescription drug facilities have yet to pay facility fees established as part of the new Over-the-Counter Monograph User Fee Program, or about 40% of facilities expected to register by the FDA. The failures to pay could cause major compliance issues for companies, but may also hinder the FDA’s own efforts to implement plans to hire new staff as well.
Background on Over-the-Counter (OTC) drug reform
- On March 27, 2020 Congress passed into law a new user fee program for OTC drugs under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The provisions of the bill related to OTC user fees, commonly referred to as the OTC Monograph Drug User Fee Program (OMUFA), had long been stalled in Congress and were an unexpected addition to the legislation. Among other things, the law established that FDA had the right to collect fees from registered facilities.
- On March 25, 2021 FDA published the final fee rates for OMUFA in FY2021. OTC monograph drug facilities were assessed a fee of $20,322 in FY2021, and contract manufacturing facilities would owe $13,584. User fees are set by taking the program’s target revenue (which is a combination of the base fee revenue amount in addition to other adjustments for inflation, additional costs and operating reserves) and dividing that number by the total facilities (also factoring in types of facilities) that will be assessed a payment.
- These fees were published late due to confusion over their applicability to hand sanitizer manufacturers. FDA originally announced the FY2021 user fee rates for OTC monograph drug facilities in December 2020. Under this original announcement, distillers and other businesses making hand sanitizer in response to the public health emergency would have been required to pay the fee, resulting in controversy for the FDA . While an enforcement policy from March 2020 had exempted those making hand sanitizer from regulatory enforcement to avoid shortages, they had not been exempted from user fees. That was for two specific reasons: The user fees didn’t exist yet, and the fee calculations are set by statute, rather than FDA’s discretion.
- The agency ultimately amended the fee and excluded distillers from needing to pay the fee in the March 2021 version.
- OTC manufacturers were required to pay their fees to the FDA by May 10, 2021 (45 days after the publication of the user fee notice in the Federal Register).
Despite the delay, many companies have still not paid their required user fee to the FDA.
- On Friday, September 10 the FDA published an “OMUFA Facility Arrears List” indicating that 496 facilities are past due on payments. Section 502(ff) of the Federal Food, Drug, and Cosmetics Act states that “drugs manufactured, prepared, propagated, compounded, or processed in facilities for which fees have not been paid,” such as these, are considered misbranded. Additionally, FDA will not be accepting any OTC Monograph Order Requests or other meeting requests from these groups or their affiliates. The number of companies in arrears was first noted by Lachman Consultants’ Bob Pollack.
- The number of facilities that have not paid is exceptionally high. According to the FDA’s Federal Register announcement of the user fee rates, the agency expected there to be 1,184 fee-paying units, of which 1,066 would be Monograph Drug Facilities and 79 would be Contracting Manufacturing Organizations.
- These late payments are likely to have a ripple effect. The FDA has developed a plan for the first five years of the OMUFA program in which it discussed hiring 105 additional full-time staffers for the program, of which 30 would be hired in the first year (FY2021). As the end of FY2021 nears, the agency is still having trouble collecting fees, meaning funds for this hiring effort are likely unavailable and will be for some time.
- According to our math, the FDA is owed $9.9 million: $9.5 million from MDF facilities and $380,000 from CMOs.
- Acting Commissioner Janet Woodcock spoke to these issues last week . During the Consumer Healthcare Product Association’s (CHPA) Regulatory, Scientific and Quality conference, Woodcock stated that reaching the goals of the OMUFA program “is dependent in part upon adequate resources provided by the OMUFA user fees.” She went on to note that the pandemic also shifted the focus of OTC staff and delayed collections, which in turn slowed the hiring processes. Woodcock promised that industry “will see a gradual improvement in these things over time” and stated that “no one could have imagined we would be implementing monograph reform in the middle of the pandemic.”
- Woodcock’s remarks highlighted next steps, including several set to occur this month: “Moving forward we have some important goals we’re aiming to achieve by the first of October, including a managed growth hiring assessment, the posting of the first annual monograph forecast and posting some of the final administrative orders deemed by the statute.” As AgencyIQ has previously noted, one final administrative order that we expect relatively soon is for sunscreen ingredients.
What we're watching and reading
- …this excellent piece by our former POLITICO colleague Dan Diamond, who is now at the Washington Post, and Laurie McGinley looking at the extraordinary pressure that CBER Director Peter Marks is under with respect to the review of vaccines.
- …tomorrow’s meeting of the FDA’s Vaccines and Related Biologics Products Advisory Committee, which is set to review the case for booster shots. You can find the FDA’s documents for the meeting posted here.
- …this reporting by our POLITICO colleagues explaining how Democrats’ plan to reform drug pricing has been unraveled by a trio of centrists.
- …the FDA’s announcement that it has revised a product-specific guidance document used to support the development of generic versions of Velphoro and Venofer, two iron drugs used in patients with chronic kidney disease.
- …this emerging fight being waged in the federal docket system about the marketing exclusivity period for the gene therapy Zolgensma.
- …this analysis of how the structure of multi-level marketing companies makes it especially difficult for the FDA and FTC to police false claims made about products’ intended use.
- …this look at how Tony Fauci and the NIH for ahead of the FDA and CDC in backing boosters.
- …this analysis published in the British Medical Journal looking at the FDA’s use of surrogate endpoints to approve new drugs.
- …this reminder that we’re at the end of the Federal fiscal year and the FDA is starting to spend money very, very quickly. They’ve committed to contracts worth tens of millions of dollars in the last week alone.
- …this new positions that the FDA is trying to hire for: A Deputy Director of the FDA’s India Office, and Digital Health Specialists.
Analysis available exclusively to AgencyIQ subscribers:
Today the FDA, along with the European Medicines Agency, announced a pilot program which will allow both agencies to review scientific questions posed by sponsors of complex generics or hybrid medicines in order to improve harmonization and help sponsors avoid duplication.
On September 15 the FDA announced that it will be reorganizing the agency’s IT, data management and internal cybersecurity functions into a new office – the Office of Digital Transformation (ODT) – that will report directly to the Commissioner. The internal reorganization comes after recent work by the agency to update its legacy IT and data systems.
The FDA updated its immediately-in-effect emergency guidance today for face masks and respirators, offering regulatory flexibility for face masks and face filtering respirators (FFRs) following recent changes.
The FDA is seeking help to collect and analyze natural history data on the BK virus and complications related to renal transplants. Depending on the outcomes, the agency is looking to support validation of surrogate endpoints for transplant-related complications, clearing a path to market for new antiviral therapies.
FDA representatives spearheading the agency’s new Accreditation Scheme for Conformity Assessment (ASCA) pilot program today outlined their expectations for the program, as well as specific best practices for sponsors.
Speaking at the RAPS Convergence conference today, CBER Director Peter Marks offered a passionate defense of his division’s vaccine review processes and approach, speaking about the “wartime” pressure he feels to review products to help stem the tide of Covid casualties in the U.S. and the cumulative toll that the pandemic is having on agency staff. Marks also provided his take on CBER’s top priorities for 2022.
In a letter sent last week to the US Patent and Trademark Office, Acting FDA Commissioner Janet Woodcock offered up four areas of potential collaboration that the two agencies could engage in to possibly limit the effects of patent “evergreening” and enhance the quality of granted patents. While the ideas are preliminary, the effort – connected to and ordered by the President’s recent Executive Order on drug pricing – could lay the groundwork for future regulatory or legislative actions.
