FDA Asking $22m in User Fees

By Diedra Henderson, The Boston Globe

Feb. 20–WASHINGTON — A few lines in the Food and Drug Administration’s new $1.95 billion budget could cost certain drug and medical device companies millions in new fees.

The FDA has asked Congress to approve $22 million in new user fees to be paid by companies whose plants require reinspection to ensure that problems pointed out by the agency are corrected.

Daniel Troy, a former FDA chief counsel who represents drug company clients in private practice, says the impact of the new fees could be significant, especially if the FDA has to send multiple inspectors to a site for an extended period. The fees assessed would be equal to the costs the FDA incurs.

“If the reinspection involves FDA being in the plant for a fair amount of time . . . then the cost could be relatively substantial,” said Troy, now a partner at Sidley Austin.

The reinspection fee would bring to $424 million the user fees expected to be paid by the drug and device industry in fiscal 2007.

Some analysts think the new assessment could have an upside: It could spur companies to clear up problems more quickly and may prompt faster FDA response.

“If you could get your quality control cleaned up and organized to the FDA’s satisfaction in one month, rather than six, then a user fee works,” said Thom Gunderson, a Piper Jaffray & Co. senior research analyst for cardiology and medical devices. “If a user fee is just another name for a punitive fee — in other words, ‘Clean it up, or you’re going to have to pay for cleaning it up’ — then that would clearly be viewed as a negative on Wall Street.”

The FDA spent $22 million to cover staff time, laboratory analyses, and other expenses for the 1,270 reinspections it conducted in 2005, the most recent full-year data available.

Because the fees would be based on the FDA’s actual expenses, a facility’s location and the extent of its problems would dictate the size of the user fee it pays, officials said. Overseas trips, such as the reinspections that confirmed Chiron Corp. had corrected quality-control problems at its manufacturing facility in Liverpool so that it could supply flu vaccine to Americans, would cost more than minor reinspections at domestic labs.

“We feel that it shouldn’t be on the back of taxpayers to be paying for these reinspections, when it’s under the control of the companies,” said Kathleen Heuer, the FDA’s chief financial officer.

Boston Scientific Corp. is one company whose recent history of conflicts with the FDA indicate it could face significant charges if the fee were put in place. The FDA sent the company a warning letter Jan. 26 about its failure to correct quality-control problems. Company officials told analysts this month that they expect to resolve FDA concerns about how Boston Scientific handles device complaints within months.

“The message there was that we weren’t moving fast enough,” James R. Tobin, Boston Scientific’s chief executive, said of the FDA’s warning letter. “They were wondering if we really ‘got it,’ in terms of how fundamental a change they wanted to see in the way we manage quality at the company.”

Tobin said the company expected to be able to invite the FDA back to reinspect in May or June. He predicted that the FDA would reinspect five or six of the roughly 20 facilities covered by the warning letter. Those inspections will probably be completed before Congress acts on the FDA’s request for fiscal 2007, which begins in October. But the company isn’t opposed to the idea of the new reinspection fee.

“Boston Scientific has long supported user fees as a means of providing the FDA the resources it needs to do its job,” said Paul Donovan, company spokesman.

Piper Jaffray’s Gunderson said it’s too soon to say how Congress will react to the request. “As anyone with a 202 area code knows, government doesn’t make changes like this quickly,” he said. “By the time any new user fees came on line, I would imagine Boston Scientific would have brought their myriad manufacturing plants into compliance.”

The Pharmaceutical Research and Manufacturers of America, the drug industry’s lobbying arm in Washington, is polling its members to gauge the impact of the proposed fee.

Troy, the former FDA chief counsel, says resistance is more likely to come more from smaller companies than from larger firms.

For large device companies like Boston Scientific and Guidant, the bigger worry is what the FDA will say after the reinspection, whether they will be subjected to restrictions on how they conduct business if they fail to pass muster.

“In the scheme of the exposure that these companies have, this money is fairly inconsequential,” Troy said. “If you are in that kind of situation with the FDA, the cost of the reinspection is really the least of your problems.”

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