Thoughts on FDA's New Commissioner's Priority Review Voucher Program
We need better ways to promote the development of new drugs. Will this help?
As most who read this blog know, developing new drugs is a long and hard road with uncertain rewards. Yet a safe, effective drug can have enormous benefits to the public. Yes, drug companies may earn billions off of their most successful products, but many drugs serve important social goals as well: preventing infectious diseases, saving lives in developing nations, reducing health care costs, even improving national security. It’s with these benefits in mind that health officials have developed various programs to spur and incentivize drug development.
One of my favorite drug development programs is the priority review voucher. The concept behind the voucher is simple but brilliant: the economist David Ridley and his colleagues noticed that FDA offered a 6-month “priority review” timeline to drugs with significant benefits, but that other drugs received a “standard review” with a 10-month timeline (and it turns out that standard review drugs take even longer than 10 months on average, likely due to rejections and resubmissions). They also realized that it must be possible for FDA to review drugs faster; the ten-month review timeline was the result of FDA resource constraints, not any inherent inability for the agency to review drugs more quickly. Since new drugs can earn hundreds of millions in revenue each year, the difference between a priority and a standard review represents a loss of welfare to society1: a pile of $100 million dollar bills sitting on the sidewalk, waiting to be picked up.
Ridley and his colleagues managed to find a way to pick up those $100 million bills and use them to incentivize the development of socially beneficial drugs. To do so, they proposed the creation of the “priority review voucher”. The priority review voucher program affects two drugs. First, there’s the drug we want to incentivize: its manufacturer receives a priority review voucher as a reward for FDA approval. In their initial proposal, Ridley and his colleagues proposed awarding these vouchers to companies that developed drugs that treat neglected tropical diseases that primarily affect low- and middle-income countries. Then, the priority review voucher can be redeemed to speed up the review of a second drug. Critically, the priority review voucher is transferable: it can be sold to the company that values at most, which guarantees it will be valuable to the company that earned it. The priority review voucher program became law in 2007, and since then the typical voucher has sold for over $100m.
The priority review voucher turns out to not just be smart economics, but smart politics too. In a world ruled by Abundance-pilled technocrats, the priority voucher might not need to exist. Instead, the FDA might receive enough resources to review all drugs promptly and funding for drugs to treat tropical diseases might come from other revenue sources – perhaps a tax on carbon emissions or some other non-distortionary and efficient tax. But, for better or worse, the priority review voucher was designed for the world we live in, where funding for public health is hard to obtain and sustain, and anything that has a fiscal cost is a target for budget cuts. From the point of view of Congress and the public, the priority voucher costs nothing; it’s funded entirely by the drug companies that are willing to pay for it.
Sadly, like all good things, priority review vouchers are under threat. On one side, there is Congressional neglect; the rare disease pediatric voucher program expired last year, despite bipartisan calls for renewal, and its fate is uncertain. At the same time, there have been calls to expand priority review voucher program to incentivize the development of other types of drugs. A few more vouchers could be a good thing, but too many could undermine the entire program: as the number of vouchers grows, their value will diminish, a concern David Ridley and his colleagues have shared in the past. There are also review costs to consider. The cost of reviewing additional drugs grows exponentially as portion of drugs receiving priority review approaches 100%, so a large increase in the number of vouchers could put real strain on FDA’s resources.
The Commissioners’ National Priority Voucher: Is it going to work?
Having examined the benefits of priority review vouchers, and having established that more vouchers may do more harm than good, we can now turn to a brand new voucher program just announced by the FDA: the Commissioners’ National Priority Voucher (CNPV). According to the FDA, this is a new voucher program that shares “elements and themes” with FDA’s existing priority review voucher program. Yet despite the issuance of a press release and an FAQ, the parameters of the program are not yet clear and I - along with everyone else - have lots of questions.
The first question is, is this really a voucher program at all? The existing priority review voucher programs involve two drugs per voucher: First, a voucher is granted to the company that produces a drug that meets a well-defined public health need. Then, the voucher is redeemed to speed up review of a second, different drug – usually one with high revenue potential. The wording of FDA’s recent announcement seems to conflate the granted and redeemed concepts in a way that makes me suspect that the program will work differently (and may not have been figured out yet). Consider the following sentence from FDA’s FAQ:
…the voucher can be applied to a product at any stage in development. If granted during the investigational new drug phase of a drug, the company will receive the CNPV’s enhanced communication benefits.
This statement implies that a voucher can be granted during the investigational new drug phase – that would be odd, since in existing voucher programs the voucher is only awarded upon successful approval of a product. Do they intend to reward vouchers earlier, or did they mean to propose that the voucher could be redeemed earlier? Or is this not a voucher program at all? I suspect the details of the program operations are still in development, and that it may be some time before we get answers.
If FDA is indeed considering giving out vouchers as an incentive to get companies to address national priorities, they need to think carefully about what behavior they want to incentivize. First off, are they trying to incentivize the development of new drugs? That would make sense, since that’s what existing voucher programs do, and making new drugs is the main business of the companies affected by this announcement. Yet there are other possibilities; perhaps companies might be asked to make commitments to make drugs in the US or improve their availability to Americans? It seems farfetched that FDA would use its review program in this way, but a lot of strange things have happened at FDA lately.
Let’s assume for the moment that this is a program designed to incentivize the development of new drugs. Then additional questions arise. Will the vouchers go to companies that successfully get their drugs approved, or will they be given out earlier in the development process, as FDA’s press release implies? If they’re given out earlier, it’s worth considering the risk that the drug development program does not work out or is abandoned, resulting in a voucher being awarded for no reason. That’s why existing voucher programs only award drug companies when their drugs are approved.2
If the vouchers are given to drugs upon approval, on the other hand, then the sustainability of the voucher program becomes a bigger consideration. Any drug approved in 2025 is likely to have been under development for some time, so the reward will not spur meaningful new drug development for quite a while. In fact, given the length of drug development timelines (10+ years is common), the voucher is only likely to incentivize new drug development if FDA can promise that the same voucher will be available for the same purpose five to ten years into the future. Since this is a commissioner’s priority program, and the commissioner and their priorities change fairly frequently, this may not be a promise that FDA can keep.
All of these questions are fraught, and will be challenging for FDA to address: developing a real voucher program is challenging, and requires lots of careful calibration to make sure the rewards go to those who deserve them. In the worst case, we could wind up with a voucher program that fails to incentivize genuinely new, innovative drugs, but instead depletes the limited pool of resources and revenue available to other priority review programs and voucher programs.3 Perhaps, then, the best case scenario is that this isn’t a voucher program at all. Instead, this might be more accurately thought of as another “special designation”, not too different from breakthrough therapy designation; a way of prioritizing drugs for a faster review using a mix of old and novel approaches.
We need better ways to incentivize and speed up drug development
I can barely keep track of the FDA programs designed to speed up drug development. In fact, with so many programs in place, FDA has had to issue multiple explainers to alleviate the confusion. Trying to understand the various special designations and ostensibly faster review programs is now a cottage industry among academics and consultants. Now, atop those special designations, we might be able to add the new commissioner’s priority review voucher program to the mix.
I’m not concerned about the number of programs. While I’m all for making government programs simpler and more legible, I expect companies will figure out which of the many programs makes sense for them. What concerns me is what this all points to: a paucity of good new ideas on how to accelerate and incentivize drug development. In the past, special designations like this have typically come with additional resources for FDA to handle the workload. Now, with a shrinking staff, the new priority voucher program may just shift resources around, rather than improving the overall drug development picture. Frankly, it’s hard to imagine yet another special designation helping that much in any case. Would we need so many special programs and special designations if we were satisfied with how the review program and drug development process were going? Perhaps it’s time for some fresh ideas.
Technically it’s not all welfare loss, because some of the forgone revenue just goes to other drug manufacturers instead. David Ridley and his colleagues discuss this further in their paper.
In fact, there has been interest in making voucher award conditional not only on approval, but on companies actually marketing the drug, since some of the drugs whose development we wish to incentive may not be very profitable and may not be marketed. David Ridley, Beth Boyer and I discussed this and related considerations in our paper on Exclusivity Vouchers, which you can read here.
While the commissioner’s voucher is not transferable, the companies can (and likely will) work around that limitation through corporate acquisitions, so we can expect the market for these commissioner’s priority vouchers to directly impact the broader voucher market and lower the price of priority review vouchers for other conditions.