Wednesday, July 17, 2013

Will the New FDA Act Stimulate Innovation?

On the surface, the new “FDA Safety and Innovation Act,” which was recently passed by President Obama, sounds exciting and progressive. We can probably all agree that innovation is healthy. However, we shouldn’t be fooled by the title, as this new law isn’t as progressive as it might sound. 
To be fair, there are aspects of this new Act that could work: Faster access to new pharmaceutical therapies for patients with rare diseases, promoting views of the patients and soliciting the views of representatives who have minimal financial interests in the products, are some of the promising highlights. Only time will tell if they live up to the promises. 

One of the more troublesome aspects of the Act is the new cost-recovery provisions for the FDA. In contrast to the intention, this provision will stifle innovation and consumer access to new products.  

A Brief History Lesson on the Cost Recovery Methods of the FDA 

In the recent past, the FDA introduced a fast-tracking method for new products - mostly pharmaceutical. Manufacturers could pay the FDA a million dollar fee to expedite their application. Obviously, these fees can only be paid by wealthy multi-national companies - namely big Pharma. Smaller companies simply do not have the same capital available to them to fast track their applications. 

The New Cost Recovery Methods Proposed by the New Law 

Obama’s new Act further expands the FDA’s cost recovery ability. The most obvious change will be an increase in fees and the introduction of new fees for companies who are trying to bring a new product to market. The FDA does have reduced rates for what it calls ‘small’ companies – those with gross receipts or sales below 100 million dollars. In this instance, the fee would be $62,000. For those with less than 30 million in gross receipts or sales the first-time application fee is waived. The application fee is just the first fee. In addition to the application fee, there are many other fees involved with submitting a product for FDA approval. None of these fees are waived. The FDA’s process and this new Act virtually make it impossible for a small business to navigate the FDA application process. While the FDA’s definition of ‘small’ companies are those with 100 million dollars or less in sales – a true small company may do one million dollars or less in sales.  

Does the Act help small business bring their products to market? 

Giving a first-time application fee exemption to a small company does nothing to help the company, as it is highly unlikely any product would pass upon the first application. Secondly, most of us would disagree on the FDA’s definition of a small business as a 100 million dollars in sales. Many small device manufacturers would be happy to do a million dollars in sales never mind a hundred million. I’ve worked with many, very good and honorable small companies and none of them could afford the FDA’s ongoing fee schedule. This gives further proof to the existing and growing bias against new technologies developed by small non-pharma businesses that are in the health field. Even if a company was able to meet the ongoing regulatory fees, there is a whole realm of other challenges put in place by the FDA outside this one Act. 

Does the Act help consumers have better access? 

The Act may help consumers have better access to drugs manufactured by big Pharma. It does not give consumers better access to new technologies developed by small businesses. In fact the Act suppresses consumers’ access by making the process to costly for small businesses to gain approval. Even if the company manages to meet the financial burden of going through the regulatory process, they will need to recoup the costs of approval. In most cases, this means the products are too expensive for many consumers which again limits consumer’s access to new products.  

Does the Act promote innovation? 

The fee structure outlined in the Act makes it clear how tragically impossible "innovation" will be. A company that may have an innovative product will also need the type of research funding that is usually only found through universities. Universities tend to accept only research projects that are mainstream and the “right” kind of research. Small companies cannot afford all the costs involved. This is tragic for society, because so many simple technologies out there are already inherently safe and affordable and cannot be brought to market due to the biases of the FDA and other professional bodies. 

In Summary 

While the new Safety and Innovation Act claims greater access to innovation, in practice it excludes innovation from any source except for those who have the money. These are the very entities that manipulate the regulations, regulators, and the market to eliminate competition. This Act ensures the system will continue to be about money and power - not innovation, access, or greater health. The status quo continues.

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