drugs that otherwise would have required further investigation by sponsors or prolonged deliberation by regulatory reviewers. Delays that now occur as a consequence of cautious concern generally involve only drugs with serious safety risks. The withdrawal provision also should act synergistically with the other post-market control features of the bill to enhance initial approval rates.

Section 128 authorizes the imposition of restrictions on the use of an approved 'breakthrough" drug, including, but not limited to, dispensing only upon prescription of a practitioner and automatic expiration of approval after three years. In addition, the sponsor of such a drug may be required to monitor the use of and experience with the drug, continue studies to establish susbtantial effectiveness, and submit periodic reports. The breakthrough has both cost and revenue producing features, which are likely to have a favorable net effect, because the drug sponsor can elect either the traditional drug approval process or the breakthrough route of approval. Sponsors of breakthrough drugs may incur surveillance costs (discussed in section D). Although required postmarketing studies bear costs, these costs merely are transferred from the pre- to the post-marketing phase. Because the breakthrough drugs will be available commercially, the drug sponsor will derive revenues to offset the additional monitoring costs. Moreover, the sponsor will have the opportunity to establish market position as the pioneer product (earlier than otherwise, thus preserving valuable patent life), which may enhance the total revenues of the product for the duration of its commercial period.

Section 129 provides express authority to condition the approval of any prescription drug on any or all of the following: distribution, dispensing, and administration requirements; surveillance of the use of and experience with the drug; further investigations of safety and effectiveness (for which guidelines will be available); and batch certification. The above conditions cannot be imposed unless first submitted to and considered by an advisory committee.

The limited distribution feature permits certain drugs to be marketed and sales to be made, which otherwise would not occur. However, it also imposes a recordkeeping burden (discussed in Part D), which may partially offset or outweigh the advantages of early approval to the pharmaceutical sponsor.

It is anticipated that, under the post-marketing surveillance authority, surveillance costs in excess of those which are now incurred will be imposed. Since the imposition of a surveillance requirement and the scope of surveillance depend on the particular drug in question, it is not possible to quantify the additional costs which will result from post-marketing surveillance. In any particular case these costs will be reduced by, and may be outweighed by, the health and economic benefits that result from earlier approval.

The post-approval scientific studies will generally not approach the scope, cost, or duration of the initial studies. Again, because the decision to require a study and the nature of any individual study depend on the particular drug in question, it is not possible to quantify further the cost of studies. The cost of studies of adverse reactions must be weighed against the lowering of the cost of treatment of adverse reactions. The cost of studies involving unapproved indications must be

weighed against the health and economic benefits that will result when, in some situations, the indications receive approval.

Antibiotics and insulin are the only drugs that now require batch certification after marketing. Batch certification costs are subject to high variability, because they are dependent on the extent and complexity of the specific standard under study. The batch certification requirement, however, will be applied selectively to products that have critical ranges of one or more of the quality standards (i.e., where an excess potency poses a safety problem and subpotency poses a safety and effectiveness problem). The requirement also will be removed at such time as it has been determined that the required standards are met consistently. Estimates of the number of drug products that will require batch certification are not available at this time.

The public generally can expect economic benefits from the postmarketing control features of the bill. The withdrawal of approval feature heightens FDA's ability to act quickly to remove problem products from the market. Thus, it is expected that serious adverse impacts, whose probability is somewhat elevated if earlier-than-otherwise approval is granted, will be mitigated. Economic benefits also arise from the expanded availability of therapeutic drugs which generally represent less costly forms of therapy than alternatives (e.g., surgery or use of a chronic care facility.

4. Information on drugs

Section 111 requires that the names of both the manufacturer and distributor be included on the label of a prescription drug. This provision may curtail the practice of drug manufacture by contract if it results in reduced sales which pharmaceutical firms perceive to outweigh the economic benefits of the contract manufacture practice. If pharmaceutical firms experience a decline in profits due to the competitive aspects involved or through a loss of economies related to contract drug manufacture, there could be price effects on the public. This effect is unclear, however, since contract manufacture may simply be a convenience to larger firms as opposed to a true cost saving.

Section 117 adds a new section 504 to the FD&C Act that includes express authority for patient and practitioner labeling, price posting, and promotional restrictions. Expected impacts assume that FDA's proposal patient labeling regulations will be implemented.

The patient information labeling feature has an economic impact on retail pharmacies (approximately 54,000), hospitals, the pharmaceutical industry (200-250 firms), and the public.

Pharmaceutical firms will have to prepare, print, and distribute patient labeling texts for all prescription and over-the-counter (OTC) drug products. Since OTC products now include patient labeling, only the prescription drug labeling requirement will have an incremental impact. The estimated impact on the drug industry (200-250 firms), based on the assumption that virtually all prescription products eventually will be patient labeled, is approximately $13 million. Most of this cost is attributable to printing approximately 1.2 billion labeling pieces.

Estimated costs to pharmacies (54,000), to store and dispense patient information labels, is $75 million per year, assuming most prescrip

tions will be accompanied by a labeling piece. Filing and dispensing costs account for over 90 percent of total costs. In addition, the requirement that each pharmacy maintain an up-to-date, comprehensive volume of patient labeling for reference by the consumer would cost an estimated $50 per pharmacy initially.

Hospitals will not be required to give patient labeling pieces to individual patients, but will be required to have information available to patients for reference. It is estimated that about 45,000 reference binders, one per nurse's station, at a unit cost of $50 will be required.

The impact on the public of the patient labeling feature is estimated at six cents per prescription. Cost savings could accrue as a result of improved compliance with therapeutic regimens and avoidance of adverse reactions. The savings (not estimable due to their dependence on complex consumer behavior), if any, would appear in the form of reduced prescription drug use, fewer revisits to physicians, fewer hospital admissions, and reduced number of disability days.

The bill's feature restricting the detailing practices of the pharmaceutical industry by confining gifts and samples to a $10 limit should save the industry an undetermined portion of its estimated $90 million promotional expenditures. Resources previously channeled into the area of gifts and free samples may instead be devoted to increased distribution of objective educational materials, channeled into research and development, or be retained as increased profits. Benefits to the public therefore could be forthcoming in the form of improved prescribing practices and/or increased innovation.

5. Miscellaneous

Section 130 authorizes appointment of Advisory Committees to assist FDA in its determinations regarding investigational use of drugs, approvals or denials of applications, and post-marketing controls. The Advisory Committee feature imposes no direct cost impacts on the regulated industry. Their use, intended to provide additional input to controversial FDA determinations, will require time for deliberation. In some cases, the Advisory Committee's recommendations may effect FDA reversal of an adverse decision, thus offsetting the time delay. In other cases, FDA determinations may be sustained. Section 133 allows for the export of drugs not approved for use in humans in this country following development of a "Drug Export Policy Plan" by an interagency Task Force. The export feature of the bill will have a favorable economic impact (if any) on the pharmaceutical industry, because such export is now proscribed by the FD&C Act.

Section 134 prohibits state preemption of federal requirements. The preemption feature could eliminate the present unfavorable impact of differing federal and state. standards regarding, for example, drug labeling. However, section 134 also provides for exemption from preemption, so that uniform standards may not fully be achieved.

C. PRIVACY

In general, the bill does not adversely affect protection of the privacy of individuals in the pharmaceutical industry, the bioresearch community, or on pharmacists. It provides many safeguards to the

privacy of individuals who participate in drug investigations; for example, strict confidentiality of records of human subjects. Restrictions on the conduct of prescription surveys also provide additional safeguards for the privacy of patients and prescribing practitioners.

D. PAPERWORK AND RECORDKEEPING IMPACT

1. Investigational phase

The bill requires drug sponsors (140) to obtain a signed form from clinical investigators (approximately 2000) who supervise drug research and other clinical investigations and to establish and maintain records sufficient for FDA to determine the safety and effectiveness of drugs under investigation. In practice these procedures are now followed by most sponsors. No estimate of financial costs of recordkeeping for sponsors who do not now maintain such records is available, but it is believed to be small.

Regulations governing IRBs would require the establishment and maintenance of records necessary to document the extent of review of proposed drug investigations. If the use of IRBS increases, there will be an increase in the maintenance of records.

2. NDA submission and review

Section 119 permits sponsors of drugs to submit a comprehensive summary of the evidence of the drug's safety and effectiveness (S&E) in lieu of "full reports." In addition, sponsors must submit a releasable summary of prior scientific investigations on safety and effectiveness which we estimate will be 30-50 pages in length and will require 75– 100 person-hours of time to prepare. Routine initial submission of the case reports of investigations on which evidence of safety and effectiveness was based will not be required. The bill, however, does not preclude their submission in whole or in part at a later date. Case reports in present NDA submissions consume up to 50 volumes (200 pages each), and comprise up to 80 percent of the entire submission. Abbreviated application procedures for generics of pioneer drugs introduced after 1962 (approximately 350) will reduce paperwork requirements, because reports of safety and effectiveness investigations will not be required. Bioequivalence and stability data submissions do not impose an incremental impact because existing regulations cover these requirements.

3. Post-marketing controls

Surveillance requirements and distribution controls placed on breakthrough and other conditionally approved drugs will cause recordkeeping burdens. Surveillance costs are highly sensitive to the type of feedback system adopted and cannot be determined at this time. Costs of recordkeeping of limited distribution also were not available. 4. Information on drugs

Price posting has a paperwork component, that of preparing an upto-date table of comparison prices of approximately 50 drug products, branded and generic, in a variety of dosage forms. We estimate that 90 person-hours per pharmacy (54,000) per year are required to prepare the list, under the assumption that there will be a monthly update.

5. Miscellaneous

The export provision, when operational, should generate some new paperwork (application for approval to export) and recordkeeping (volume and destination of sales), which cannot be estimated in advance of the Task Force recommended plan.

VII. SECTION-BY-SECTION ANALYSIS OF S. 10751

Section 1 of this bill provides that the Act may be cited as the "Drug Regulation Reform Act of 1979" and that references in the Act expressed in terms of an amendment to a section or other provision shall be considered to be made to a section or other provision of the Federal Food, Drug, and Cosmetic Act.

Section 102 (a) of the bill broadens the definition of "person" to include an agency of government. This previous ommission prevented a governmental agency, whether local, State, or Federal, from participating in a number of proceedings under the Federal Food, Drug, and Cosmetic Act.

Section 102(b) broadens the definition of "counterfeit drug" to include prescription drugs in tablet, capsule, or other finished from which (1) do not clearly identify the trademark of the manufacturer or distributor, (2) meet the same standards of identity, strength, quality, purity and stability as a drug previously introduced lawfully in interstate commerce, (3) are identical in color, size, and shape to the other drug.

Section 103 repeals section 201 (p) of the FD&C Act. Section 201 (p) categorizes drugs as "grandfathered," old, and new, each of which is subject to separate statutory requirements. The repeal of this section eliminates the distinctions between drugs and brings all drugs in the United States under a single regulatory system.

Section 104 amends section 301 (e) by prohibiting the transmission of false, misleading or incomplete information. (While current law prohibits drug companies from denying FDA access to those records which relate to the agency's enforcement responsibilities, and also prohibits companies from failing to maintain records or make reports required of them under the FD&C Act, there is no explicit prohibition against the making or submitting of information or reports in a false, misleading, or incomplete manner.)

Section 105(1) amends section 301 (r) by adding the words "drug or" before the word "device." The effect is to prohibit the movement of an embargoed drug in violation of an embargo order under section 304(g).

Section 105 (2) states that violations of several new sections of law created by this bill, i.e. sections 504, 506, and 801 (d) (3), would be prohibited acts subject to criminal sanctions.

Section 106 amends section 303 (a) and (b) by adding the word "negligently" before the word "violates." Under current law, as interpreted by the Park decision, a person who commits a prohibited act is subject to criminal penalties regardless of the person's knowledge or

1 This section-by-section analysis was prepared with the assistance of Blanchard Randall IV. Science Policy Research Division. Congressional Research Service.

2 United States v. Park, 421 U.S. 658 (1975).