Making the House FDA Reform Act of 2012 PAYGO Compliant – Are Expedited 505(q) Citizen Petition Responses the Answer?

By Kurt R. Karst –      

We’re not economists, but we’re interested in the topic insofar as it concerns Congress’ consideration of FDA-related legislation, such as H.R. 5651, the FDA Reform Act of 2012, which is on tap for consideration by the U.S. House of Representatives later this week.  Like its counterpart in the U.S. Senate, S. 3187, the FDA Safety and Innovation Act, which passed out of that chamber last week (see our previous post here), H.R. 5651 would reauthorize old (PDUFA and MDUFA) and establish new (GDUFA and BsUFA) user fee statutes, and create several new provisions of law.  (There are several differences between the bills we won’t get into here.)  On the same day the Senate passed S. 3187, the Congressional Budget Office (“CBO”) released a cost estimate of H.R. 5651.  That’s where things got interesting for us on the economics front. 

Under current law – the Statutory Pay-As-You-Go Act of 2010 – there are enforcement procedures governing federal budgeting that are intended to ensure that most new spending is offset by spending cuts or added revenue elsewhere.  This is known as the pay-as-you-go, or “PAYGO,” requirement.  The CBO analyzes bills Congress is considering, evaluates the net changes in outlays and revenues that are subject to PAYGO procedures, and issues costs estimates.

Accordingto the CBO’s cost estimate of the FDA Reform Act of 2012, “enacting H.R. 5651 would reduce budget deficits by approximately $72 million over the 2013-2017 period and increase them by $247 million over the 2013-2022 period.”  That estimate would have been worse if it weren’t for Section 863 of the introduced version of H.R. 5651 the CBO reviewed when putting together the estimate. 

As we previously reported, Section 863 would amend FDC Act § 505(q) to shorten the timeframe FDA has to respond to certain citizen petitions.  By way of background, FDC Act § 505(q) was added to the law as part of the FDA amendments Act of 2007 and is intended to prevent the citizen petition process from being used to delay approval of ANDAs and 505(b)(2) applications.  FDC Act § 505(q) provides that FDA shall not delay approval of a pending ANDA or 505(b)(2) application as a result of a citizen petition submitted to the Agency pursuant to 21 C.F.R. § 10.30 (citizen petition) or § 10.35 (petition for stay of action), unless FDA “determines, upon reviewing the petition, that a delay is necessary to protect the public health.”  Under current FDC Act § 505(q), “[FDA] shall take final agency action on a petition not later than 180 days after the date on which the petition is submitted.”  FDA may not extend the 180-day period “for any reason,” including consent of the petitioner, and may summarily deny a petition submitted with the primary purpose of delaying ANDA or 505(b)(2) application approval.  The original version of H.R. 5651 would give the statutory 180-day FDA response timeframe a haircut, reducing the period by 30 days (to 150 days). 

According to CBO’s May 24th cost estimate of H.R. 5651:

CBO expects that other provisions of H.R. 5651 would reduce the average price charged for drugs in the market.  We estimate that the provision with the greatest effect on market entry by lower-priced generic drugs is section 863.  It would reduce by 30 days the statutory timeframe for final agency action relating to certain citizen petitions that ask for a stay of FDA approval on a pending generic drug application.  (Under the bill, the limitation on the determination period would be 150 days.) . . . .

CBO estimates that implementing section 863 and other provisions that shorten administrative timeframes for review of certain petitions would reduce direct spending for mandatory health programs by $168 million over the 2013-2022 period.

Although we suspected that the citizen petition provisions in H.R. 5651 might be intended as an offset for other provisions in the bill, the CBO’s statements surprised us.  After all, FDA’s response to a 505(q) citizen petition does not dictate ANDA or 505(b)(2) application approval (though that is believed to be the case for pre-505(q) petitions).  Moreover, between Fiscal Years 2008 and 2010, FDA delayed less than a handful of pending applications (e.g., one ANDA by 9 days in FY 2010) due to a 505(q) citizen petition, according to the Agency’s most recent annual report (see our previous post here).  So it is unclear where all of the savings are coming from. 

Given this, you can imagine our surprise when the so-called “suspension” version of H.R. 5651 came out last Friday.  According to a summary of the bill, “[t]he Suspension Document contains technical changes and the addition of language in Section 863 that the Committee believes will result in the bill reducing mandatory spending by roughly $350 million over ten years.  With the addition of this languager [sic], H.R. 5651 is pay-go compliant.”

The tweaked version of Section 863 in the suspension version of H.R. 5651 maintains the 150-day FDA response timeframe in the introduced version of the bill, but would amend FDC Act § 505(q) to include citizen petitions concerning biosimilar applications submitted under PHS Act § 351(k).  Specifically, Section 863 states:

SEC. 863. FINAL AGENCY ACTION RELATING TO PETITIONS AND CIVIL ACTIONS.

Section 505(q) (21 U.S.C. 355(q)) is amended—

(1) in paragraph (1)—

(A) in subparagraph (A), by striking “subsection (b)(2) or (j)” inserting “subsection (b)(2) or (j) of the Act or 351(k) of the Public Health Service Act”; and

(B) in subparagraph (F), by striking “180 days” and inserting “150 days”;

(2) in paragraph (2)(A)—

(A) in the subparagraph heading, by striking “180” and inserting “150”; and

(B) in clause (i), by striking ‘‘180-day’’ and inserting ‘‘150-day’’; and

(3) in paragraph (5), by striking “subsection (b)(2) or (j)” inserting “subsection (b)(2) or (j) of the Act or 351(k) of the Public Health Service Act”.

To our knowledge, FDA has received only a single citizen petition concerning PHS Act § 351(k) biosimilar applications – Abbott’s April 2, 2012 petition concerning HUMIRA (adalimumab) (see our previous post here) – which, of course, did not include a FDC Act § 505(q) certification.  Although there will certainly be more citizen petition concerning biolsimilars, it is unclear where all of the CBO’s projected savings will come from.  It seems more likely that FDA, with a 150-day response timeframe, will issue more non-response petition denials. 

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