PDUFA stands for the Prescription Drug User Fee Act, a law that requires pharmaceutical companies to pay fees to the FDA when they submit a new drug for approval. Enacted in 1992, it was designed to speed up the drug review process by giving the FDA a dedicated funding stream beyond what Congress provides through taxpayer dollars. Today, user fees account for roughly 77% of the FDA’s budget for reviewing new drugs.
Why PDUFA Was Created
By the early 1990s, the FDA was under intense criticism for how long it took to approve new medications. Review times for new drug applications were getting steadily longer, and U.S. approvals lagged behind those in other countries. The agency simply didn’t have enough staff or resources to keep up with the volume of applications coming in from drug manufacturers.
PDUFA offered a straightforward deal: pharmaceutical companies would pay fees, and in return, the FDA would commit to reviewing applications within specific timeframes. Priority applications, covering drugs that represent a significant improvement in treating, diagnosing, or preventing a disease, would be reviewed within six months. Standard applications would get a 12-month timeline. The FDA also agreed to clear its existing backlog of pending applications.
The impact has been dramatic. In 1983, FDA drug reviews took more than three years on average. By 2017, that number had dropped to under one year.
How the Fee System Works
Drug companies pay fees at several points. The largest is the application fee, charged when a company submits a new drug for approval. For fiscal year 2024, that fee is approximately $4.05 million if the application includes clinical trial data, or about $2.02 million if it doesn’t. Companies with approved products on the market also pay an annual program fee of roughly $416,000 per product.
These fees add up quickly. The FDA collected an annual average of $820 million in user fees during the 2013 to 2017 period. That money funds the hiring of reviewers, scientists, and support staff who evaluate whether new drugs are safe and effective.
Not every company pays the full amount. Small businesses submitting their first drug application can qualify for a fee waiver if they have fewer than 500 employees and have never had a drug approved before. Drugs designated for rare diseases (orphan drugs) are exempt from application fees entirely. Companies with orphan drug products can also skip the annual program fee if their global revenue is under $50 million. Supplemental applications, which cover changes to already-approved drugs, are not subject to user fees either.
PDUFA Goal Dates and Drug Reviews
When people in the pharmaceutical industry talk about a “PDUFA date,” they’re referring to the deadline the FDA has set for making a decision on a specific drug application. These dates move markets: biotech stock prices often swing on whether the FDA meets, misses, or acts early on a PDUFA date.
The current review targets give the FDA 10 months to act on a standard new drug application and 6 months for a priority review. Priority review is reserved for drugs that could offer meaningful advantages over existing treatments. The clock starts when the FDA formally accepts the application for review, not when the company first submits it.
Meeting these deadlines isn’t legally required, but the FDA treats them seriously. The goal dates are performance commitments negotiated between the FDA and the pharmaceutical industry each time PDUFA is reauthorized, and the agency’s track record on hitting them is publicly reported.
Reauthorization Every Five Years
PDUFA isn’t permanent. Congress must reauthorize it every five years, and each renewal becomes an opportunity to update the FDA’s priorities and performance targets. Before each reauthorization, the FDA and industry representatives negotiate new commitments covering everything from review timelines to how the agency will use technology and data.
The law is currently in its seventh iteration, known as PDUFA VII, covering fiscal years 2023 through 2027. President Biden signed it into law in September 2022. This version emphasizes stable, consistent funding and includes goals around information technology and bioinformatics to modernize the review process.
Each reauthorization cycle has expanded the scope of what PDUFA covers. The original 1992 law focused narrowly on clearing the review backlog and setting time limits. Later versions added requirements for post-market safety surveillance, patient engagement, and communication improvements. The five-year renewal cycle gives Congress leverage to push the FDA toward new priorities without overhauling the entire system.
The Funding Trade-Off
The fact that drug companies fund 77% of the FDA’s drug review operations raises an obvious question about independence. Critics have long argued that relying so heavily on industry fees creates pressure to approve drugs faster, potentially at the expense of safety. The data supports at least part of that concern: as review times have shortened, the amount of clinical evidence required for approval has also declined.
Supporters counter that PDUFA has been one of the most successful regulatory reforms in FDA history, getting effective treatments to patients years sooner than the old system allowed. The fee structure funds additional reviewers rather than replacing existing oversight, and the FDA retains full authority to reject applications regardless of fees paid. Congressional appropriations, which make up the remaining 23% of the drug review budget, provide a baseline of public funding that exists independent of industry payments.