CHAPTER V - RESEARCH RESULTS

 In 1992, Congress allowed the FDA to collect user fees from the pharmaceutical manufacturers. This chapter includes secondary data with descriptive analysis used to examine the trends related to the FDA approval process. A concept map (Figure 2, also in chapter IV) was designed to graphically represent the central questions explored in this study related to the impact of the implementation of FDA user fees in 1992. As shown in the map, there are five major areas of impact that concern this study: (a) user fees significance to the FDA's new drug approval (NDA) process; (b) efficiency; (c) consumer medication costs; (d) FDA organizational changes since user fees; and (e) effectiveness (i.e., consumer safety). The overarching thesis explored in this study is that the passage in 1992 of the Prescription Drug User Fee Act (PDUFA), and the Food and Drug Administration Modernization Act of 1997 (FDAMA), the replacement and extension law for the PDUFA, have had an adverse impact on the FDA's primary mission of protecting the public health and safety of the U.S. population.

User Fees' Significance to FDA Drug Approval Process

The first of five areas of impact was the significance or impact of pharmaceutical manufacturer user fees on the FDA's New Drug Approval Division's budget in relation to taxpayer contributions. The first research question was as follows: "Are the funds (i.e., user fees) provided by the pharmaceutical manufacturers significant to the continuing operation of the FDA's new drug approval process?"

In order to examine this research question, data were gathered with regard to the amount of taxpayer and user fee revenue that had been generated since the inception of the user fee policy in 1992. The data were obtained from a GAO report and are listed in Table 7 (General Accounting Office [GAO], 2002). The first line represents user fees which began to be collected starting in 1992. As listed in the Table 7, in 1992 the taxpayers paid the FDA's NDA division's entire budget. However, pharmaceutical industry user fees have increased every year and, in 2002, user fees accounted for $170,000,000 or 51% of the budget supporting the FDA's Drug and Biologic Review Process.

Table 7
User Fees Collected by FDA and Total Budget Covering the Costs of Human Drug Approvals

 Note. *Total obligations for FDA's Drug and Biologic Review Processes—rounded to nearest million dollars. From Effect of User Fees on Drug Approvals Times, Withdrawals and Other Agency Activities, the Report to the Chairman of the Committee on Health, Education, Labor and Pensions, U.S. Senate (GAO-02-958), retrieved November 4, 2004, from http://www.gao.gov/new.items/d02958.pdf. 

Interpretation and Discussion 

Literature clearly shows that the American public demands quicker access to the newest medications (Greider, 2003). To meet this demand and achieve this goal without relying on taxpayer dollars, and in the spirit of entrepreneurial and reinventing government theories, finding alternative nontaxpayer resources to enhance the FDA review process was seen as a benefit to U.S citizens. Thus, charging the drug industry user fees enhanced the capacity of the FDA to improve its drug approval efficiency and speed up new, lifesaving FDA drug approvals with minimal additional financial burden on the U.S. taxpayer.

User fees in many government agencies were initiated and/or increased with the federal government fiscal deficit in the 1980s. In an effort to decrease the deficit, Congress enacted the Balanced Budget Act of 1985, the Budget Enforcement Act of 1990, and the Omnibus Reconciliation Act of 1993. In a lower revenue growth budget environment, user fees have enabled many public agencies to reduce recorded agency taxpayer funded expenditures and to make it possible for programs to expand without increasing taxpayer contributions (U.S. CBO, 1993).

Obtaining drug industry funds through the collection of user fees in order to limit the existing burden on taxpayers yet increase the availability of new drugs to customers was viewed as a benefit for U.S. citizens. In 1992, Congress authorized the FDA to collect the fees directly from the pharmaceutical manufacturers. Due to the 1992 user fee legislation, it can be argued that the FDA has developed a conflict of interest between the needs of the citizens it is supposed to protect and needs of the pharmaceutical manufacturers that now supply funds to get new drugs approved. The purpose of this research question was to determine if this conflict of interest put the citizens in jeopardy. As reported above, pharmaceutical manufacturer user fees make up more than 50% of the FDA's NDA division's budget. As compared to other types of user fees where a very large number of unrelated contributors pay a relatively small fee, most often less than $20, to a government agency (i.e., parking fees, library fees, park passes, etc.), the FDA receives very large sums of money (hundreds of thousands of dollars per new drug application) from a few hundred companies that are represented as a block under one umbrella lobbying organization, Pharmaceutical Research and Manufacturers of America (PhRMA). The concentration of private resources paid to the FDA by the industry as a whole and by the individual contributors therein establishes a new financial relationship between the regulated and the regulators. Based on the capture theory, such financial arrangements give the regulated leverage over their regulators to request and expect special considerations for the funds they provide (Shaw, 2004).

Lastly, allowing the continuation of the conflict of interest created by the FDA collecting funds directly from the drug companies is producing unnecessary risks for U.S. citizens. With regard to the changes in principle-agent relationships, Table 7 shows that the addition of user fees paid directly to the FDA has created a major shift in the principal-agent. According to Table 7, by 2002, due largely to the addition of user fees, the FDA's NDA division has become fiscally dependent on both the brand-name drug industry's $170,000,000 representing 51% of its budget and the taxpayers' $162,000,000 representing 49% of its budget for the continuation of its division at current levels. Since the passage of the Freedom of Information Act, and with the relative transparency of government budgets, FDA employees have access to information, which clearly indicates that drug industry money accounts for a large portion of the agency's budget. By inference, FDA employees could logically conclude that the continuation of their jobs may in some part depend on the continuation of drug industry funding. According to the capture theory (Shaw, 2004), over time, FDA employees convinced that their continued job security is dependent on drug industry money may increasingly alter their behavior away from their traditional role as consumer protection advocates and toward a new role as drug industry partners.

A key concern regarding fees paid in exchange for regulatory activity is the potential impact of the fees on the regulatory agency itself or on the propriety of its relationship with regulated entities. Government agencies dependent on user fee revenues face the risk that decreases in revenues could harm their ability to perform their regulatory function. Conversely, revenue increases have the potential to create uncontrolled expansion and unplanned agency changes. More critical is the possibility that public agencies dependent on user fee revenues may become captives of the very organizations they are supposed to regulate (Geri, 1996)

Allowing public agencies to retain the regulatory-based user fees creates potential difficulties with management control over the funds and agency accountability. Some observers of this practice have suggested that all fees should go directly to the U.S. Treasury general fund, especially when a regulatory agency is assessing the fees because added revenue from outside sources could arguably have an impact on agency decisions (Gillette & Hopkins, 1987).  

Efficiency—NDA Approvals 

The second of five areas of user fee impact in this examination looked at the FDA's new drug approval efficiency since user fees were initiated. Pre-1992 figures indicated that on average it took the FDA 2½ years to review a new drug application and sometimes up to 8 years (Hunt, 2000). Often, the cause of delay was not the difficulty of the application but merely backlog. Applications would sit unexamined for months or even years (Hunt, 2000). The FDA concluded that the process of approval would be faster if they had better equipment and more workers to review applications. Congress was unwilling to increase FDA appropriations. Thus the Prescription Drug User Fee Act (PDUFA) of 1992 was initiated for a 5-year period that required a mandatory fee of roughly $200,000 to be submitted by a pharmaceutical company along with its application.

With this new funding source, the FDA hired hundreds of new employees, and the average processing time fell by more than half (Strand, 2003). Because of this evident success with increased efficiency, the Modernization Act of 1997 renewed the practice for another 5-year period and increased the user fees. The necessity of renewing the PDUFA every 5 years has put pressure on the FDA to streamline its processes so that drug manufacturers would support renewal (Hunt, 2000).

To some observers, the collection of private industry fees may appear to be a public policy success. In 1992, Congress passed PDUFA, mandating drug companies to pay substantial fees to speed up the time it takes to get FDA new drug approval, and with the new legislation, U.S. citizens got access to new lifesaving medications quicker without significantly increasing the financial burden on taxpayers. As noted in Table 7, user fees have increased from zero dollars per year in 1992 to more than $170,000,000 dollars in 2002. The expected and realized consequence of user fees was increased new drug approval efficiency as measured by time in months. The following three research questions were designed to determine if there was a change in the FDA's new drug approval efficiency since the introduction of user fees.  

Drug Review and Approval Time 

Under FDA new drug approval efficiency, the second area of research, question two looks at the change in the FDA's new drug approval efficiency since user fees were initiated: "How did FDA drug review and approval time for new drug approvals (NDAs) change after user fees were initiated?"

In order to examine this research question, data were gathered with regard to the median time in months it takes for a new drug to receive final FDA approval. The data were obtained from a GAO report covering years 1993-2001. The data included median approval times for both standard drug classifications and priority drug classifications. A priority drug review indicates that the drug represents a significant improvement compared to existing marketed products in the treatment diagnosis or prevention of a disease. A standard drug review indicates that the drug appears to have therapeutic qualities similar to those of one or more already available drugs. The first line of Table 8 reflects the median approval times in months for standard medications. Line two of Table 8 reflects the median approval times in months for priority medications.

Interpretation and Discussion 

As intended by the enabling legislation, Table 8 indicates that the brand name pharmaceutical manufacturer user fees have given the FDA the needed resources to expedite new drug approvals without further burden on the taxpayers. According to Table 8, standard medication approvals decreased from 27 months in 1993 to 14 months in 2001. This drop represents a 49% decrease in time to get a standard medication approved by the FDA. Priority medication approvals' efficiency was even more dramatic. The time to get FDA approval dropped from 20 months to 6 months. This drop represents a 70% decrease in time to get a priority medication approved by the FDA. According to Table 8, there was a dramatic drop in drug approval times for both standard and priority reviews, but the increased FDA efficiency, according to these data, was only in the first 5 years from 1992-1997.  

Table 8
Median New Drug Approval Times in Months

 \Note. From Effect of User Fees on Drug Approvals Times, Withdrawals and Other Agency Activities, the Report to the Chairman of the Committee on Health, Education, Labor and Pensions, U.S. Senate (GAO-02-958), retrieved November 4, 2004, from http://www.gao.gov/ new.items/d02958.pdf.

Comparing User Fees to Efficiency 

On its face, collecting funds from the pharmaceutical manufacturers to expedite the new drug approval process seems only logical. If user fees help get needed lifesaving medications to consumers quicker, then a cost-benefit analysis could objectively decide the public administration benefit to continuing this practice. However, according to Table 9, despite dramatically increasing user fees, the FDA new drug approval efficiency as measured by median time in months remained static after 1998. As can be explained by the capture theory (Shaw, 2004), it can be argued that the significantly higher user fees gives private industry increasing financial leverage over the FDA to secure other benefits in addition to improving new drug approval efficiencies. In other words, as more private industry money is paid to the FDA, the FDA develops yearly budgets that include this new revenue source. Without a financial replacement, the loss of this income would be devastating to the FDA as a whole and especially destructive to the NDA division. Thus, increasing dependency on drug industry funds would, according to the capture theory (Shaw, 2004), contribute to a change of focus within the FDA away from protecting citizens and toward serving the needs of the brand-name pharmaceutical industry.

To further elaborate on the point above, according to Table 7, the FDA collected $208 million in user fees from the pharmaceutical manufacturers in the first 5 years under PDUFA, the initial 5-year legislation. During the first 5 years with $208 million in user fees, according to Table 8, new drug approval times decreased dramatically: 49% decrease in standard medication approvals and a 70% decrease for priority medication approvals. Under FDAMA, the 1997 5-year reauthorization of user fees, according to Table 7, the FDA collected $608 million in user fees with no change in new drug-approval efficiencies.  

Table 9
Median New Drug Approval Times in Months Compared to User Fee Collections
 

 Note. From Effect of User Fees on Drug Approvals Times, Withdrawals and Other Agency Activities, the Report to the Chairman of the Committee on Health, Education, Labor and Pensions, U.S. Senate (GAO-02-958), retrieved November 4, 2004, from http://www.gao.gov/ new.items/d02958.pdf.

As the FDA becomes increasingly dependent on nontaxpayer funds, according to the capture theory (Shaw, 2004), in pursuit of self-preservation, the agency will shift its priorities away from strictly protecting and safeguarding U.S. citizens to protecting the drug companies that are responsible for paying an increasing percentage of the agency's budget. From a citizen's standpoint, with no new drug approval efficiencies after year 5 and with exponentially increasing drug industry funding, the drug industry's financial leverage over the FDA makes the FDA's actions and motives arguably more ambiguous and more suspect.

As discussed later, the risks to citizens of this form of funding may outweigh the benefits. User fees altered the FDA's principal-agent relationship and created the potential for an agency shift away from citizen protection and toward drug industry safeguarding.  Due to the potential agency shift, the FDA's motives are suspect and, as such, the shift may raise the question as to whether U.S. citizens can continue to trust the FDA to protect them in terms of safety of drugs that are approved by that agency. As a public agency, the FDA's trustworthiness, legitimacy, accountability, and responsibility to U.S. citizens can be questioned as long as user fees continue.

In a 2005 Los Angeles Times interview, Jerome Avorn, Professor of Medicine at Harvard Medical School and author of Powerful Medicines: The Benefits, Risks and Costs of Prescription Drugs said, "When you have a situation where the industry you are regulating is paying the bills for your regulatory activities, it changes the sense of who you're accountable to, and who's paying your salary" (as cited in Peterson, 2005, p. 1).

Percentage of New Drug Approvals

 Under FDA new drug approval efficiency, the second area of research, question three, looks at the percentage of change in new drug approvals before user fees were initiated and then in two 4-year increments after user fees. Research question three is as follows: "How did the percentage of approved new drug applications (NDA) change after user fees were initiated?"

In order to examine this research question, data were gathered from an internal FDA-generated document that compared the three 4-year end points as listed in Table 10.

 Table 10

 PDUFA Minimum Spending Requirements

Note. From Food and Drug Administration, FY 2000 performance report to Congress, 2002; retrieved June 14, 2004, from http://www.fda.gov/ope/pdufa/report2000

 Interpretation and Discussion

According to Table 10, the FDA approved 66% of all new drugs prior to user fee legislation. After user fees were initiated, the FDA approved a higher percentage of new medications: 90% in 1996 and 80% in 2000. As intended by user fee legislation, more new drugs were available for U.S. citizens. In the spirit of reinventing government and entrepreneurial public administration theories and methodologies, a higher percentage of new drug application approvals show a closer working relationship between government and private industry. It can, however, be argued by the capture theory (Shaw, 2004) that establishing a closer working relationship between the pharmaceutical industry and the FDA can negatively impact the FDA's primary mission of protecting and safeguarding citizens.

In a Friday, December 17, 2004, Washington Post newspaper article, news writer Marc Kaufman, reported that almost one fifth of Food and Drug Administration scientists surveyed 2 years ago as part of an official review said they had been pressured to recommend approval of a new drug despite reservations about its safety, effectiveness, or quality (Kaufman, 2004). The survey of almost 400 scientists also found that a majority had significant doubts about the adequacy of federal programs to monitor prescription drugs once they are on the market, and that more than a third were not particularly confident of the agency's ability to assess the safety of a drug. According to Kaufman, the results of the survey, conducted by the Health and Human Services Department's Inspector General appear to support some portions of the controversial Senate testimony last month by FDA safety officer David Graham, M.D. The 20-year agency veteran told senators that the FDA was unable to keep some unsafe drugs off the market, and scientists who dissented about drug safety and effectiveness were sometimes pressured and intimidated (Kaufman, 2004).

According to Table 10, the percentage of new drug approvals increased after user fees were initiated. This could be viewed from two perspectives. On one side, since user fees were initiated, a higher percentage of new drugs have become available for U.S. citizens. However, the results of an internal agency survey showed that almost one fifth of FDA scientists said they had been pressured to recommend approval of a new drug despite reservations about its safety, quality, or effectiveness. Thus, it can be argued that giving consumers access to more medications is contrary to the FDA's primary mission of protecting and safeguarding citizens if, as was reported in the internal survey, the new drugs were released to the public under pressure from agency superiors and against the better judgment of those in charge of medication evaluation.

A March 2003 report from the U.S. Department of Health and Human Services' Inspector General confirms that the federal government's current drug review process does not adequately protect consumers from harmful prescription drugs. The centerpiece of the Inspector General's report is a survey of 401 new drug reviewers in the FDA's Center for Drug Evaluation and Research. Fifty-eight percent said that the 6 months allotted for review of priority new drug applications was inadequate; 25% felt similarly about the target of 10 months provided for review of most standard applications. A priority drug is a breakthrough drug or one designed to treat an unusual condition; a minority of drugs fall into this category. Eighteen percent of these physicians and scientists felt pressure to recommend that drugs be approved for sale despite their reservations about the drug's safety, efficacy, or quality (Public Citizen, 2003).

With regard to principle-agents relationships, the higher percentage of new drug application approvals post user fees can be in part explained by the development of a closer working relationship between the FDA and the brand-name drug industry .FDA scientist, Dr. David Graham's November 2004 congressional testimony heightened criticism that the FDA is too eager to license new drugs and then fails to adequately monitor them for problems once they are released. Supporters of the current system argue that newly approved drugs are approved only after the highest evaluation standards are followed. Detractors argue that the FDA's financial dependence on the pharmaceutical industry has changed the agency's policies to a point where new medications are released in spite of safety concerns (Peterson, 2005). For consumers, the lack of drug safety consensus creates one more confusing message about the drugs they take. The public's heightened awareness of drug safety issues as reflected by high-profile drug safety recalls (i.e., Baycol, Vioxx, etc.) and with the FDA collecting ever higher sums of money from the drug manufacturers (i.e., $208 million in the first 5 years and $618 million during the second 5 years), it can be argued that consumers would become increasingly suspicious of the FDA's motives, and consumer suspicions could lead to the erosion of the FDA's legitimacy as a trustworthy consumer protection agency.  

New Drugs Introduced in U.S. First 

Under FDA new drug approval efficiency, the second area of research, question four, looks at the percentage of new drugs introduced in the United States first. Research question 4 is as follows: "Was there a significant increase in the percentage of new drugs introduced in the U.S. first after user fees were initiated?" In order to examine this research question, data were gathered from a 1999 Tufts University Impact Report with four, 3-year end points as listed in Table 11. The first line represents new drugs that were introduced in the U.S. first. The second line represents new drugs introduced outside the U.S. first. 

Table 11 

Newly Approved Drugs Released In/Outside U.S. First

Note. Tufts CSDD Impact Report Volume 1, June, 1999. From "Drug Tests: Too Speedy – or Safe Enough? By Gregory Lamb, The Christian Science Monitor, retrieved January 15, 2005, from http://www.csmonitor.com/2005/0106/p14s01-ussc.html

Interpretation and Discussion

User fee legislation gave the FDA the necessary resources to expedite its new drug approval process. As noted in Table 11, Americans are increasingly getting first in the world access to lifesaving medications. With a new medicine, only a few thousand people are tested prior to receiving FDA approval. Therefore, the present clinical review process is not sufficient to certify that a new medication is either safe or effective when used in mass (Strand, 2003). Safety and effectiveness of a new medication can only be determined after hundreds of thousands and more likely, millions of people have taken the new medicine for an extended period of time (Sasich & Wolfe, 2002). Thus, as more new medications are released in the U.S. first, Americans will be the first to find out if the new medications cause any unsafe and/or unintended side effects. Shifting the first release of new medications to the United States exposes American consumers first to whatever intended or unintended effects the new pill may produce.

In a 2005 Chicago Daily Herald interview, Kenneth Kaitin, director of the Tufts Center for the Study of Drug Development, a nonprofit research group affiliated with Tufts University in Boston, said, "It's a common misperception that the FDA approves drugs that are safe and effective. The FDA actually approves drugs where the expected benefits outweigh the expected risks of that drug. It's always a risk-benefit analysis" (as cited in Lamb, 2005, p. 1).

In the 1970s and 1980s, the FDA had an "overly cautious approach to drug approval," in the view of Kaitin. Research by his center at Tufts showed that the United States trailed behind other countries in developing new drugs, a so-called "drug lag."Due to historical FDA inefficiencies in approving new medications, the United States never approved the new medication, thalidomide. Thalidomide had terrible side effects that caused tens of thousands of thalidomide babies, babies with flipper like limbs (Klein & Tabarrok, 2003). Prior to user fees, it took years to get new drugs through the FDA; the FDA's inefficiency spared Americans from the thalidomide tragedy. Given the experience with thalidomide, substantially increasing new drug approval efficiency that shifts the release of new medications to the United States is contrary to the FDA's primary mission of protecting the public. Thus, it can be argued that given the experience with thalidomide, increasing new drug approval efficiency due to the collection and continuation of user fees puts Americans at greater risk for unintended, adverse consequences associated with new medications. Among the 13 dangerous drugs withdrawn from the U.S. market from 1992-2002, not one filled an otherwise unmet medical need (Sigelman, 2002).

Overall, 51% of approved drugs have serious adverse effects not detected prior to approval. Merely discovering adverse drug reactions is not by itself sufficient to protect the public. Each year prescription drugs injure 1.5 million people so severely they require hospitalization. At a time when user fees have made more new drugs available faster, it is important to reexamine the adequacy of the existing system to monitor and enhance the safety of approved medications (Moore et al., 2002).

The FDA's collaboration with drug manufacturers that increases the numbers of new medications released in the U.S. first is further evidence of a shift in the principal-agent relationship. As shown in Table 11, as time passed, the numbers of new medications first released in U.S. also increased, which may suggest further evidence that the capture theory is in play. A potential compromise to both increase American access to breakthrough, lifesaving medications, and decrease the risks of "first in the world" testing of a new medication would be for the FDA to only give fast-tracking status to medications with a priority classification. Critics can argue that the FDA's willingness to put Americans at risk by fast tracking new versions of medications already available (i.e., standard classification), is evidence that the FDA has shifted away from safeguarding citizens and toward enhancing the profits of the brand-name drug industry.

Despite the early success of fast-track drug approvals, the expedited approval process has started to look like a two-edged sword. While some treatments clearly merit special handling, critics say the push to bring new products to market has compromised the integrity of the agency's drug approval apparatus (Davis, 2005).

In a 2005 TheStreet.com article, Michael Weinstein, president of the AIDS Healthcare Foundation, said, "Without the fast-track drug approval process, we would not have the cocktail that is famous for treating AIDS and saving countless lives. However, the drug industry drove a Mack truck through the exception created for life-threatening illnesses. Basically, everything became fast-track" (Davis, 2005, p. 1).

In the article, Weinstein calls Vioxx a "me-too drug for arthritis pain" that should never have merited a priority FDA review. He claims that Merck "hijacked" the fast-track approval process, which allows drugs to hit the market after just 6 months of study by the government and unnecessarily placed the public at risk as a result (Davis, 2005).

 Medication Costs

 The third of five areas of examination looks at the percentage price change of brand-name prescription drugs as compared to the percentage price change of hospitals and physicians since user fees were initiated. The results of research questions 2 through 4 showed that new medications are being released much faster. With increased FDA new drug approval (NDA) efficiencies, brand-name pharmaceutical manufacturers have more time for a new medication to be marketed under patent protection. The longer a new medication is marketed to the public under patent protection (i.e., monopoly), theoretically, the more profits a drug company would earn.

During the 1970s, drug companies averaged 8.9% profit as a percentage of revenue compared to 4.4% for all Fortune 500 industries. In the 1980s, drug companies increased their margin by earning 11.1% compared to 4.4% for all Fortune 500 companies. During the 1990s, the gap grew to 15.1% compared to 4.1% (Schondelmeyer, 2002). Since user fees were implemented, compared to all Fortune 500 industries, there has been a significant increase in net profits of the largest U.S. pharmaceutical manufacturers listed in the Fortune 500. Table 12 shows a comparison of profit among Fortune 500 companies in 1990, 1995, and 2000.

With added drug industry profits, due in part to the increase in FDA new drug approval efficiency, pharmaceutical companies could conceivably lower medication costs for consumers. More affordable medications would be a positive unintended consequence of user fees and their associated increased FDA efficiency.

Table 12
Profit Comparison Fortune 500 Industries 

 Note. Median profit as a percentage of revenue. From Briefing book on the Rx drug debate, Public Citizen; retrieved January 5, 2004, from http://www.citizen.org/rxfacts.

This section on medication costs represents the third area of research. Research question 5 is as follows: "Since user fees were initiated in 1992, how has the cost of medications changed in comparison to the costs for hospital and physician services?" In order to examine this research question, data were gathered from the Office of the Actuary 2002 report that included the years 1991-2001. In Table 13, the first line represents the years. The second line is the percentage increase in the costs of medications. Line three is the percentage increase in hospital costs, and line four is the percentage increase in the costs of physicians.

 Table 13

 Growth Rate of National Health Expenditure Components Yearly Percentage Increase (Rounded to Nearest Number)

 Note. CMS, Office of the Actuary National Health Statistics Group.

Interpretation and Discussion

According to Table 13, the increase in the cost of medications was close to the increase in the costs of other major healthcare expenditures (i.e., hospitals and physicians) in 1991, 1992, 1993, and 1994. After user fees were established and the number of months to approve new medications had decreased substantially, starting in 1995, the drug companies would have theoretically made more profits due to a longer patent life created by increased FDA new drug approval efficiencies. According to Table 13, after user fees were initiated, the costs of medications more than doubled in comparison to the costs of hospitals and physicians and, thus, it is shown that since user fees have been initiated, the costs of medications have not decreased and, in fact, the costs have increased at nearly double the rate as compared to other major U.S. healthcare expenses. 

FDA Organizational Changes Since User Fees 

The fourth of five areas of examination looks at FDA's organizational changes since user fees were initiated. According to Table 7, from 1992 to 2002, the FDA received $995,000,000 in user fees from the pharmaceutical manufacturers. It is anticipated that the addition of nearly a billion dollars from private industry would produce perceptible agency organizational changes. This area of examination has four research questions that look at different pre and post FDA organizational issues.

FDA Function and Priority Shift 

Under FDA organizational changes since user fees, the fourth area of research, research question 6 looks at the change in FDA functions and priorities after user fees were initiated. Research question 6 is as follows: "After user fees were introduced in 1992, was there a significant change in FDA functions and priorities as evidenced by budget and employee (FTE) allocations?" In order to examine this research question, data were gathered from a GAO report to Congress that compared the FDA's FTE and budget allocations in 1992 and 2000. What makes these yearly data points an especially good pre and post user fee comparison is the fact that in 1992 the FDA had 9,013 full time equivalent employees (FTE's) and in 2000 the FDA had 8,917 full time equivalent employees representing a .01% change in FTE's (GAO, 2002). In order to examine this research question, data were gathered from a GAO report with 2 years of comparison (i.e., 1992 and 2000). The first line in Table 14 represents the years.  

Table 14 

FDA Budget and FTE Allocations, 1992 and 2000

 Note. From Effect of User Fees on Drug Approvals Times, Withdrawals and Other Agency Activities, the Report to the Chairman, Committee on Health, Education, Labor and Pensions, U.S. Senate (GAO-02-958), retrieved November 4, 2004, from http://www.gao.gov/new.items/d02958.pdf.

Figure 3. Graphic representation of Table 14 (not to scale) 

interpretation and Discussion

Table 14 and its associated graphic visualization Figure 3 show what the FDA looked like in 1992, before user fees, and then how the agency changed after 8 years of collecting user fees. Figure 3 represents a visualization of the figures from Table 14. The process of speedier reviews uses a greater percentage of the financial, personnel, and other resources within the FDA. Because of the shifting priorities, less funding, staffing, and other resources are available for other areas and departments (Sasich & Wolfe, 2002).

This is a dramatic visual and numeric representation of what happened to the FDA, a public regulatory and consumer protection agency, as a result of collecting fees from the companies they regulate. In 1992, few leaders could have predicted that the new user fee legislation would so dramatically distort the distribution of labor at the FDA. By shifting its focus and resources to fast-tracking new drug approvals, the FDA short-changed other vital functions that protected the public (Greider, 2003).

From 1992-2000, the Drug and Biologic Review Division of the FDA experienced a budget increase of 17% to 29% representing a 70% increase in the division's budget. During the same time, the FDA's total budget increased from $785 million to $1,097 billion, representing a 40% increase, but the number of full-time equivalent (FTE) employees remained constant at approximately 9,000. With approximately 9,000 FTEs in both 1992 and 2000, the number of FTEs for drug and biologic review increased from 1,277 (14%) to 2,346 (26%), representing an 86% FTE increase in the NDA division. The FTEs covering all other FDA consumer protection services decreased from 8,723 (86%) to 7,654 (74%), representing a 12% FTE agency decrease in consumer protection areas outside the NDA division.

Table 14 shows that from 1992 to 2000, the FDA shifted its focus, priorities and mission to expedite new drug approvals (86% increase in FTE's for drug approvals). Table 14 also shows that from 1992-2000, the FDA reduced the total FTEs for other consumer protection and safeguarding functions by 12%. With regard to principle-agent relationships, until user fees were introduced, new drug approval represented a relatively small portion of the FDA's consumer protection mandate. The FDA is the consumer protection agency for food, drugs, cosmetics, medical supplies, medical products, and much more. In fact, one out of every four dollars (i.e., over a trillion dollars) spent by U.S. citizens is spent on products and services covered within the FDA's consumer protection mission (FDA, 2004). By following the change in FDA resources pre and post user fees related to budget allocation and full-time equivalent employees, it is evident that the FDA has shifted a large portion of its resources into expediting new drug approvals and reduced other consumer protection programs. 

According to FDA officials, the agency reduced staffing levels in other centers to cover the costs of unfunded pay raises. From fiscal years 1994 through 2001, the FDA paid about $250 million to cover mandatory federal pay raises for which it did not receive increases in its appropriations. FDA officials reported that this situation reduced the agency's ability to support activities not funded by PDUFA. FDA reduced the staffing levels for non-PDUFA activities each year, leaving the agency fewer resources to perform other agency responsibilities (GAO, 2002).

One of the benefits of a quicker review and sanction process by the FDA is that the pharmaceutical manufacturer can get its drugs to market in a shorter time. Cutting 2 or 3 years off the FDA review process translates into millions of dollars in additional profits for the pharmaceutical company (Hunt, 2000). Critics may conclude that this change in FDA priorities is further evidence of the shift in principal-agent, and that Table 14 substantiates the argument that the FDA has taken on a new role of increasing resources to expedite new drug approvals while reducing resources that safeguard citizens in other areas.

With user fees, the FDA was able to hire nearly 600 people to expedite new drug applications, increasing existing staff by 60%, but in exchange, the drug industry insisted that the FDA hasten new drug approvals to meet deadlines that would become more stringent each year (Sigelman, 2002).  

Table 15 

PDUFA Minimum Spending Requirements<