DTC User Fees Shot Down; Advertisers Face More Perilous Future

Let’s hear it for the United States Congress. They aren’t too proud to change their minds—at least, not when it comes to tackling the question of how best to respond to those pesky TV commercials for prescription drugs.

In September, Congress enacted a new user fee program to fund pre-reviews of direct-to-consumer television ads, on the premise that both industry and society would benefit by ensuring that the Food & Drug Administration could offer constructive feedback on ads before they air.

The program, part of the FDA Amendments Act, set some tight timelines for FDA and industry to get the system up and running. Together, they got their acts together, crossed all the Ts and dotted the Is, and got the program up and running. FDA even began doing pre-reviews pursuant to the guidelines.

All for naught. In December, Congress changed its mind. In the omnibus appropriations bill signed the day after Christmas, Congress did not fund the new user fee program, and instead gave the agency $4 million in additional money from the Treasury to cover the cost of pre-reviews.

Since FDAAA sets a hard stop to the user fee program—FDA must collect the first round of fees before the end of January—there is now essentially no chance that the Pay TV program (as we liked to call it) will happen.

You have to feel bad for the industry and FDA negotiators who had to herd all the cats to hammer out the new user fee agreement.

Still, on paper at least, this turn of events is great news for advertisers. Rather than paying a fee of over $80,000 per commercial to get FDA’s feedback, they can get it for free. And, in theory at least, FDA can hire just as many new reviewers, but at the taxpayer’s cost—not industry’s. So the agency should be able to provide timeline and predictable responses as planned under Pay TV.

What’s not to like?

Quite a lot in fact. First, there is the thorny question of what happens next year and beyond. Unlike the user fee program, which was intended to run for five years and would have built a reserve fund to ensure stable funding for the ad review group, there is no guarantee that Congress will continue to provide additional funding to support the pre-review program.

That in turn may make it hard for FDA to follow through on its hiring plans. The agency doesn’t want to hire new reviewers this year only to have to lay them off in September when the current fiscal year ends. And even if FDA decides to take that chance, will they agency be able to recruit enough people willing to take a job that could turn out to be short term?

The agency has not decided yet how it will proceed, but promises it will explain its plans soon. (Our guess: FDA will wait until the FDAAA deadline to collect the fees—January 28—and then make the announcement as part of a formal withdrawal of the notices creating the new fees.)

Bear in mind that while pre-reviews are technically voluntary, we think advertisers would be very wise to use that process rather than risk facing the new enforcement actions Congress gave FDA under FDAAA.

Consider the dilemma advertisers will be in if FDA cannot or simply does not provide timely responses. Run an ad and risk a hefty fine? Or wait for an answer—and in effect surrender the right to advertiser that industry fought so hard to protect during the FDAAA debate.

The collapse of the user fee program doesn’t change two important facts for advertisers. First, FDA now has a much stronger hand in shaping TV ads—both in determining if products are advertised as well as what ads look like. (Subscribers to The RPM Report can read more here. Not a subscriber? Sign up for a free trial.)

More importantly, no matter what FDA does in 2008, you can bet that this issue is coming back in 2009. President Obama (didn’t I read yesterday that he had won?) or whomever takes over the White House will select a new FDA commissioner and you can bet DTC will remain a hot button issue.

The Energy & Commerce Committee offered a timely reminder of that fact by opening an investigation into Pfizer’s Lipitor commercials. Those commercials have been held up as examples of the new, more responsible approach industry is taking to DTC. (You have to ask yourself: has the committee seen Pfizer’s new “Viva Viagra” ad?)