FDA Proposes Incentives for Domestic Drug Development in PDUFA Negotiations

In recent months, pharmaceutical industry stakeholders and the U.S. Food and Drug Administration (FDA) began formal negotiations on fee levels and performance goals to recommend for the eighth iteration of the Prescription Drug User Fee Amendments (PDUFA). Early discussions signaled a shift from the agency toward using user fee policy to incentivize domestic drug development. If adopted, the changes discussed could have meaningful strategic and financial implications for domestic and non-U.S. drug developers as they plan early clinical development and corporate structuring.

Fee Incentives for Early Stage Domestic Trials

In an early meeting with the PDUFA Industry Steering Committee (“the industry”), the FDA proposed new fee incentives tied to sponsors conducting early stage clinical trials in the United States. Under the proposal, which the FDA has dubbed as an “America First” fee incentive, the FDA would reduce the PDUFA application fee for sponsors that conduct Phase 1 trials domestically while also charging a new fee to development programs that conduct Phase 1 trials outside the U.S. Notably, the new fee for development programs conducting Phase 1 trials outside the United States would be charged annually after the trial sponsor submits an Investigational New Drug (IND) application to the FDA. This would mark a new starting point for fees under the PDUFA framework, as sponsors do not currently pay a fee until submitting a marketing application.

The FDA’s interest in this area has followed reports that drug sponsors are increasingly pursuing early clinical development in other countries, including China. Early studies conducted in China may require virtually no government oversight and may not be conducted with product manufactured in compliance with full good manufacturing practices. As a result, these trials may be less expensive and quicker, allowing faster proof of concept for developers.

Meeting minutes released by the agency show that the industry raised significant concerns with this proposal, even while it expressed alignment with the FDA’s goal of strengthening domestic drug development. The industry pushed back on using user fees as a lever for driving early stage studies to the United States, noting that 90% of drug trials fail before reaching a marketing application and PDUFA fee, reducing the potential upside of a reduced fee for developing products domestically, especially for small biotechnology companies. The industry also argued that a new user fee for early development programs may be difficult to administer. Industry stakeholders pressed the FDA to focus on the underlying factors that are driving Phase 1 trials outside the United States, namely, time, cost and regulatory complexity. Instead of the new fee for development programs outside the United States, the industry proposed alternative incentives like shortening Phase 1 review times and reducing clinical trial administrative burdens.

After receiving pushback from the industry, the FDA agreed to revisit the fee incentives proposal at a later meeting.

Limitation on the Small Business Waiver to U.S.-Based Applicants

The FDA also presented a proposal that would amend the criteria for small businesses to receive a waiver from PDUFA fees. Under the current PDUFA framework, a sponsor may qualify for a waiver of the application fee if it is a business that employs fewer than 500 employees, is submitting its first human drug application and does not have an FDA-approved product that has been introduced into interstate commerce. The FDA’s proposal would add additional criteria that the applicant must be “based in the United States,” a definition the agency said would need to be discussed at future meetings.

Industry raised concerns about how the proposal would affect submissions for unmet medical needs but agreed to consider the proposal in future PDUFA meetings.

Next Steps

Either of these proposals would represent a meaningful departure from the current PDUFA fee framework, which is largely agnostic as to where early development activities occur and where those receiving a small business waiver may be based. At this stage, these proposals remain part of an ongoing negotiation and may evolve significantly before a final PDUFA VIII framework is agreed to by the industry and the FDA.

Under federal law, recommendations for a PDUFA VIII user fee framework must be presented by the FDA to Congress no later than Jan. 15, 2027. These recommendations will include recommended fee levels and performance goals agreed to by the FDA and the industry. After that point, the ball is in Congress’s court—user fees face expiration unless Congress reauthorizes them before Sept. 30, 2027. While Congress often defers to FDA and the industry on their agreed-upon user fee recommendations, it occasionally inserts itself to create new policy. For example, in the Food and Drug Omnibus Reform Act of 2022 (FDORA), Congress created a new waiver from medical device fees for certain small businesses. This waiver was not previously included in the recommendations provided by the medical device industry and the FDA.

As the early meetings indicate, PDUFA negotiations are in full swing, and we expect members of Congress to begin drafting legislation in 2026 that may ride along with a user fee reauthorization in 2027. Industry stakeholders and researchers involved in early stage clinical research may want to consider how potential changes in PDUFA fee structures could affect development timelines, costs and long-term regulatory strategy.

We will continue to monitor user fee negotiations and provide updates as additional proposals become clearer.

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