Special FDA Drug Approval Pathways and Review Channels 

Priority Review: Reduces FDA’s goal to take action on an application from 10 months to 6 months. This designation is decided by the FDA; however, an applicant may request Priority Review. Significant improvement from standard of care must be shown in the safety or efficacy of the product.32 

Accelerated Approval: Designation based on the effect of a drug for serious conditions that fill an unmet need via effect on a surrogate or intermediate clinical endpoint. These surrogate endpoints must be validated and must be “reasonably likely” to predict the clinical benefit of the drug. The use of these surrogate endpoints enables the FDA to approve drugs more quickly.32  

Fast Track: Designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill an unmet need. Fast-track drugs must be developed to treat a condition with no current therapy or show superior effectiveness or safety when compared to available therapies. This designation must be requested by the drug company. The Fast Track designation allows for more frequent meetings and communications with the FDA, eligibility for accelerated approval and priority review, and rolling review (the NDA or BLA may be submitted in sections).32 

Breakthrough Therapy: A designation given to products that demonstrate substantial improvement over available therapies on clinically significant endpoints. This designation must be requested by the drug company, but often, the FDA may suggest that a manufacturer submit a request. If a Breakthrough Therapy designation is received, the manufacturer receives all the benefits of Fast Track, along with intensive guidance on an efficient drug development program and an organization commitment at the senior manager level from the FDA.

Regenerative Medicine Advanced Therapy Designation (RMAT): A designation given to products that are considered regenerative medicine therapies that are intended to treat, modify, reverse, or cure a serious condition and have the potential to address unmet medical needs for such diseases or conditions. This designation follows the same application process as a breakthrough therapy designation and is entitled to the same benefits. In addition, RMAT designations also include support for potential ways to support accelerated approval and satisfy post approval requirements.33 

Qualified Infectious Disease Product (QDIP): In order to incentivize antibiotic drug development, the FDA started the QDIP program in 2012. Through this designation, the FDA may offer Fast Track designation, priority review, and a possible 5-year extension of any patent exclusivity that the application qualifies for upon approval.34

Rare Pediatric Disease Voucher Program: In 2016, the FDA defined “rare pediatric disease” to include any serious or life-threatening disease that primarily affects individuals less than 18 years of age. If a drug sponsor submits a successful application and requests designation as a “rare pediatric disease,” they will receive a voucher that can be redeemed to receive priority review of a subsequent marketing application for a different product.35 

Orphan Drug: A manufacturer may apply for orphan drug designation when their product is for a population of less than 200,000 individuals in the United States, or greater than 200,000 but it is unreasonable to expect drug development costs to be offset by sales. With this designation, the manufacturer receives development incentives including tax credits for qualified clinical testing and a PDUFA fee waiver.36 

Reimbursement and Pricing Approval Process 

After an Approval Letter is received from the FDA, the product can be marketed in the United States. Once on the market, the product is reviewed by different healthcare bodies that will determine the market access for individuals based on coverage and reimbursement decisions before reaching the patient. 

Drug Pricing Rules and Regulations 

The most common pricing metric used in the United States is wholesale acquisition cost (WAC). The WAC, though, is not the price paid by the end user, or even the insurance company. Large rebates are usually added into contracts with payers in exchange for preferred formulary placement, leading to an inflated list price. 

Generally speaking, payers in the United States (both CMS and private insurance companies) do not explicitly regulate the price of a pharmaceutical product. However, there are pricing policies that manufacturers must use when contracting with CMS that determine a drug’s price based on private contracts negotiated in the free market: 

Public Health Service 340B Price: A hospital that provides healthcare to a large number of uninsured patients may qualify as a 340B Public Health Service Hospital. With this qualification, the highest price paid for a drug is equal to the price that the state Medicaid agency would pay, absent any supplemental discount or rebate. However, this price is usually lower than Medicaid pricing because 340B providers can usually negotiate sub-ceiling prices. Brand-name drugs reported pricing at 51% of average wholesale price (AWP) on average.27 Three requirements are necessary to receive 340B pricing: government ownership (or nonprofit with government contracts), a Medicare disproportionate share hospital-adjustment percentage of at least 11.75% for the most recent quarter, and a signed statement saying they will not use a group purchasing organization for drug acquisition.37 

Medicare Part B: Drugs administered in the outpatient setting and reimbursed through Medicare Part B are reimbursed at average sales price (ASP) +6%.38 

Medicare Part D: Since Medicare Part D drug plans are managed through PBMs and commercial health plans, each Part D Plan (PDP) sets its own terms of payment.38 

Medicaid: The Medicaid best price agreement is the strategy used to guarantee Medicaid programs the lowest available drug prices. It requires a minimum of 23.1% off of the average manufacturer price (AMP) or the “best price” that is given to any other private or public purchaser (besides the VHA, Department of Defense, and private Medicare PDPs). Additionally, it requires an adjustment if the drug price increases faster than inflation.39 

Veterans Health Administration: The VHA utilizes its power as the sole purchaser of drugs to limit prices and formulary. For a drug to be covered on the formulary, the manufacturers must list their drugs on the Federal Supply Schedule (FSS). Like Medicaid, the price must be a minimum of 24% off of AMP or the “best price” given to another private purchaser. Discounts are also given if the price increases faster than inflation. The VHA’s discounts are mandated by law and manufacturers must comply in order to have access to the Medicaid market.40 

Military Health Service: In a manner almost identical to other government funded entities, MHS also negotiates for a national formulary. Similarly, the 24% off of AMP or “best price” is applied. The MHS also accounts for additional discounts if prices from manufacturers increase faster than inflation. MHS and the VHA often negotiate together in order to increase their bargaining power.40 

Your browser is out-of-date

ISPOR recommends that you update your browser for more security, speed and the best experience on ispor.org. Update my browser now