You Better Watch Out, and You Can Pout, but FDA User Fee Invoices Are Coming Out; FDA is Making a List and Checking it Twice – You Should Too!

By Kurt R. Karst –   

FDA’s recent issuance of its annual “Dear Colleague” letter, sent in anticipation of the Fiscal Year 2011 Prescription Drug User Fee Act (“PDUFA”) user fee invoices for product and establishment fees, is a good reminder for companies to review their product portfolios to determine whether or not they should be paying annual user fees for the PDUFA products they manufacture and market.  The FY 2011 user fee invoices (payable on or before October 1, 2010) will be mailed out in August 2010 once the FY 2011 user fee rates are set (which often occurs in early August).  If history is any indicator (see our previous posts here and here), the FY 2011 product and establishment user fee rates will increase from FY 2010, which were set at $79,720 (product) and $457,200 (establishment). 

As you peruse and update your product and establishment lists included in the “Dear Colleague” letter, a response to which is due to FDA by June 15, 2010, you should keep in mind several points . . . . 

Under FDC Act § 735(3), the term “prescription drug product” is defined to mean, in relevant part, “a specific strength or potency of a [prescription] drug in final dosage form” approved under FDC Act § 505 (or, for a biological product, licensed under PHS Act § 351) “which is on the list of products described in section 505(j)(7)(A) (not including the discontinued section of such list) or is on a list created and maintained by the Secretary of products approved under human drug applications under section 351 of the Public Health Service Act (not including the discontinued section of such list).”

As a result of this definition, companies are assessed a separate product fee for each approved strength of a drug product (i.e., each listed drug in the “Prescription drug Product List” section of the Orange Book).  Some older parenteral drug products may be subject to only a single product fee, even thought multiple strengths are approved and marketed, while some newer parenteral drug products may be subject to multiple product fees.  This is the result of a change made to the Orange Book a few years ago.  As explained in the current Orange Book Preface:

With the finalization of the Waxman-Hatch amendments that characterized each strength of a drug product as a listed drug it became evident that the format of the Orange Book should be changed to reflect each strength of a parenteral solution.  To this end the [Office of Generic Drugs, where the Orange Book Staff is housed,] has started to display the strength of all new approvals of parenteral solutions.  Previously we would have displayed only the concentration of an approved parenteral solution, e.g. 50mg/ml.  If this drug product had a 20 ml and 60 ml container approved the two products would be shown as 1Gm / 20ml (50mg/ml) and 3Gm / 60ml (50mg/ml).

FDA considers on a case-by-case basis whether older parenteral drug products bundled under a single concentration should be split up.  Thus, a company billed for a single product fee in one fiscal year could be billed for multiple product fees in a subsequent  fiscal year. 

The reference to “discontinued” drugs in the “prescription drug product” definition was added to the FDC Act under PDUFA IV in 2007 and codified FDA’s longstanding policy not to assess product fees for discontinued drug products.  Therefore, if a company is not currently marketing its approved drug product and does not anticipate that it will do so in the near future, FDA’s Orange Book Staff should be notified and the product should be placed in the “Discontinued Drug Product List” section of the Orange Book.

FDC Act § 736(a)(3)(B) states that “[a] prescription drug product shall not be assessed a [product fee] if such product . . . is the same product as another product approved under an application filed under section 505(b) or 505(j). . . .”  In other words, if a listed drug product is identified in the Orange Book with a therapeutic equivalence rating to another listed drug product (i.e., is listed in the Orange Book with either an “A” or “B” rating), a product fee is not assessed for that fiscal year (or in any subsequent fiscal years as long as there is a therapeutic equivalence rating).  So check your Orange Book listings to determine whether or not your products are correctly identified with a therapeutic equivalence code.  A correct Orange Book listing might not only save you a product fee, but an establishment fee as well, as FDC Act § 736(a)(2)(A) provides that if the drug product approved under the NDA is not assessed a product fee, then an establishment fee is not assessed for that fiscal year. 

Under FDC Act § 735(5), the term “prescription drug establishment” is defined to mean “a foreign or domestic place of business which is at one general physical location consisting of one or more buildings all of which are within five miles of each other and at which one or more prescription drug products are manufactured in final dosage form.”  (The definition also clarifies that “the term ‘manufactured’ does not include packaging.”)  A single establishment user fee – billed to the application holder, not the establishment –  is assessed for each establishment listed in an approved NDA as an establishment that manufactures the drug product identified in the application.  “In the event an establishment is listed in a human drug application by more than one applicant, the establishment fee for the fiscal year shall be divided equally and assessed among the applicants whose prescription drug products are manufactured by the establishment during the fiscal year and assessed product fees” (FDC Act § 736(a)(2)(A)).  In other words, the more PDUFA products manufactured at a single establishment, the less the share of the establishment fee will be in relation to the number of applicants.  

FDC Act § 736(a)(2)(A) also states that “[t]he annual establishment fee shall be assessed in each fiscal year in which the prescription drug product named in the application is assessed a fee under paragraph (3) unless the prescription drug establishment listed in the application does not engage in the manufacture of the prescription drug product during the fiscal year.” Companies who do not intend to engage in the manufacture of a PDUFA drug product during the next fiscal year (but nevertheless want to maintain an active Orange Book listing), can send a letter to FDA’s User Fee Staff informing the Agency of its plans to disconcontinue manufacturing for the next fiscal year.  If manufacturing is resumed during the fiscal year, then an establishment fee would be assessed during FDA’s “clean-up” billing cycle.  (“Clean-up” invoices are issued after the end of a fiscal year for fees not captured in FDA’s August billing cycle for that fiscal year.)