What are User Fees and How Does the FDA Use Them?

The United States Food and Drug Administration (FDA) plays a crucial role in the regulatory landscape by reviewing and approving products for consumption, including foods, drugs, medical devices, vaccines, and animal products. To accomplish this, the FDA requires a sizable staff to review applications, provide guidance, and meet with manufacturers.

One of the ways it receives funding for these resources is through user fees. User fees are paid to the FDA by companies seeking to manufacture and advertise products that need FDA approval, and amounts are based on product type. However, this money can only be used for certain activities, such as hiring staff, and is overseen by the Office of Management and Budget to ensure funds are used properly. User fees are a significant part of the FDA’s budget, making up 46% of the agency’s $6.2 billion budget in FY 2022. Looking closer, they accounted for 66% of the human drugs program, 43% of the biologics program, and 35% of the medical device program budget. 

It may seem counterintuitive, but many players in the industry were happy to pay these fees when they were first introduced in legislation in 1992. Prior to 1992, the FDA had considerably slower approval times, limited availability for meetings, and few guidance documents for industry to follow. Every delay and change in the process costs companies significant amounts of money and time in adapting to the new regulations. 

The creation of user fees produced a noticeable benefit. A study found that user fees shortened new drug application review times by 3.3 months for every 100 additional staff employed due to money provided by user fees. Additionally, user fees, along with other congressional action, increased the annual number of FDA approvals, promoted the expedited review programs, increased opportunities for industry meetings with the FDA about clinical trial design, and encouraged market entry of new generic drugs. All of this combined meant increased patient access to new technologies and breakthroughs in drug development and medical devices in a shorter time frame.

User fees are renewed and updated every 5 years to ensure the fees are meeting the needs of the FDA and industry and not placing an undue burden on any one actor. Over time, there has been an expansion of covered entities and increased transparency measures added. Updating the legislation is a lengthy process, and the most important fees must be renewed by September 2027. To meet that goal, Congress will begin meeting with industry and advocates to negotiate a new tranche of fees and update the legislation that enacted them this year. 

Currently, there is a push by the Administration and Congressional leaders, such as Sen. Cassidy (R-LA), to use the negotiations to push the industry towards more domestic manufacturing by promising lower fees to companies that manufacture onshore. Secretary Kennedy and Sen. Sanders (I-VT) have expressed their opposition to the fees as they believe the fees give the industry too much leverage. Additionally, President Trump is being pressured by some industry individuals to remove user fees to attract more companies to manufacture and develop drugs in the United States. These positions may make the normally smooth bipartisan process more contentious and drawn out.

User fees are crucial to the success of the United States pharmaceutical industry on a global scale, as the FDA is a massive part of an efficient regulatory ecosystem that enables a relatively quick and safe approval process. If the user fees are not renewed, the FDA will either lose a significant amount of their funding and resources to continue to review and approve drugs at their current rate, or Congress must give them the money out of an already tight budget. If there are concerns about industry influence from this administration, user fees can be accompanied by rigorous conflict-of-interest policies, public accountability, and even more robust scientific standards.