Drugmaker Fees for FDA Review Would Be Freed in U.S. House Bill

About $1 billion in annual fees that Pfizer Inc. (PFE:US), Medtronic Inc. (MDT:US) and other drug and device companies pay the U.S. to review new products would be exempt from federal budget cuts under a bipartisan bill proposed in Congress.

Across-the-board budget cuts that began to take effect this year, known as sequestration, have kept the Food and Drug Administration from using all of the fees it collects. The bill introduced today in the House of Representatives shields that money and frees the FDA to put it toward product reviews.

“If the intent of sequestration is to limit public spending, withholding private monies is counterintuitive,” said Representative Anna Eshoo, a California Democrat and bill sponsor, in a statement. “It discourages investment in medical innovation and denies patients access to timely therapies.”

The FDA is supposed to collect $720 million for brand-name drugs, $299 million for generic medicines and $98 million from device companies this fiscal year, according to a Congressional Budget Office assessment. Some of the money currently being paid to review products is going into a “black box” the FDA can’t touch, said Todd Gillenwater, senior vice president of public policy at the California Healthcare Institute.

“Our membership in California is really incredulous that this could happen at all,” Gillenwater, whose La Jolla-based group represents drug and device companies and is backing the bill, said in an interview. “That they could agree to write these checks, bigger checks, and they’re just sitting there.”

Slower Pace

While the FDA has been able to continue reviewing applications, the industry is worried the agency may soon start to slow down if the fees remain frozen, Gillenwater said. A slower pace would affect patients’ access to new medicines.

The FDA is required to cut about $209 million from its $4.1 billion fiscal 2013 budget from March through the end of September, including about $85 million from drug and device user fees. Congress is considering further cuts for fiscal 2014.

A spokeswoman for the FDA didn’t immediately respond to a request to comment on the legislation.

Representative Leonard Lance, a Republican from New Jersey, is also sponsoring the bill, as are Representative Mike Rogers, a Republican from Michigan, and Representative Doris Matsui, a California Democrat. The bill would have to pass the Republican-controlled House and then the Democratic-led Senate before being signed into law by the president.

The bill doesn’t address user fees paid by food and tobacco companies for product reviews and inspections.

To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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