Conducting a clinical trial is a notoriously expensive endeavor that is necessary not only for ultimate drug approval, but even to progress to the next phase of drug investigation and development. An unfortunate consequence is that investigational drugs with the potential to improve patient outcomes often run out of funding and die on the vine before they are adequately evaluated. Drug developers are faced with balancing significant clinical trial costs that could drain resources before reaching approval with the need to complete clinical trials to obtain approval in order to meet patient needs and become profitable.

One method to mitigate clinical trial expense is through investigational drug cost recovery, a regulatory-financial mechanism overseen by the U.S. Food and Drug Administration (FDA). Under 21 CFR 312.8, the FDA may authorize drug sponsors to recover direct costs of making their investigational drugs available in a clinical trial or for an expanded access use. The regulation provides general criteria for authorizing charging for an investigational drug, charging for an investigational drug in a clinical trial or for an expanded access use, and for determining what costs can be recovered when charging for an investigational drug. To qualify for cost recovery, sponsors must demonstrate to the FDA that the clinical trial could not be conducted without charging because the cost of the drug is extraordinary to the sponsor. Further, if authorized by the FDA, a sponsor may only recover direct costs of making its investigational drug available and not indirect costs.

• Direct costs: costs incurred by a sponsor that can be specifically and exclusively attributed to providing the drug for the investigational use for which the FDA has authorized cost recovery. Direct costs include costs per unit to manufacture the drug (e.g., raw materials, labor, and nonreusable supplies and equipment used to manufacture the quantity of drug needed for the use for which charging is authorized) or costs to acquire the drug from another manufacturing source, and direct costs to ship and handle (e.g., store) the drug.
• Indirect costs: costs incurred primarily to produce the drug for commercial sale (e.g., costs for facilities and equipment used to manufacture the supply of investigational drugs, but that are primarily intended to produce large quantities of drug for eventual commercial sale) and research and development, administrative, labor, or other costs that would be incurred even if the clinical trial or treatment use for which charging is authorized did not occur.

As explained in further detail in the August 2022 Draft Guidance, Charging for Investigational Drugs Under an IND Questions and Answers, to receive authorization from the FDA to charge for an investigational drug, the sponsor must do all the following:

1. Provide evidence to the FDA that the drug has a potential clinical benefit that, if demonstrated in clinical investigations, would provide a significant advantage over available products in the diagnosis, treatment, mitigation, or prevention of a disease or condition.
2. Demonstrate that the data to be obtained from the clinical trial would be essential to establishing that the drug is effective or safe for the purpose of obtaining initial approval, or that it would support a significant change in the labeling of an approved drug (e.g., a new indication, inclusion of comparative safety information).
3. Demonstrate that the clinical trial could not be conducted without charging because the cost of the drug is extraordinary to the sponsor, meaning that the sponsor could not conduct the clinical trial without charging for the investigational drug. The cost of a drug may be considered extraordinary to a sponsor because of manufacturing complexity, scarcity of a natural resource, the large quantity of the drug needed (e.g., based on the size or duration of the trial), or some combination of these or other extraordinary circumstances (e.g., resources available to a sponsor).
4. Provide documentation to support its calculation for cost recovery, to the extent applicable, to show that the calculation is consistent with the requirements of § 312.8(d)(1). The documentation must be accompanied by a statement that an independent certified public accountant has reviewed and approved the calculation. The certified public accountant should be a qualified to make the required determinations for charging and not an employee of the company or institution seeking to charge for an investigational drug.

The FDA intends to respond to charging requests within 30 days of receipt when possible. With respect to expanded access, the guidance states that the sponsor must do all the following to receive authorization from the FDA to charge for an investigational drug, among other things:

1. Provide reasonable assurance to the FDA that charging will not interfere with drug development. Documentation to provide such reasonable assurance must include evidence of sufficient enrollment in any ongoing clinical trials needed for marketing approval to reasonably assure the FDA that the trial or trials will be successfully completed as planned; evidence of adequate progress in the development of the drug for marketing approval; and information submitted under the general investigational plan specifying the drug development milestones the sponsor plans to meet in the next year.
2. Provide documentation in its charging request submission to show that its calculation of the amount to be charged is consistent with the requirements in § 312.8(d), to the extent applicable. This documentation must be accompanied by a statement that an independent certified public accountant has reviewed and approved the calculation.

When charging for an investigational drug used in an intermediate-size patient population expanded access Investigational New Drug (IND) or protocol (not individual patient expanded access), a sponsor may recover the costs of monitoring the expanded access IND or protocol, complying with IND reporting requirements, and other administrative costs directly associated with the expanded access IND in addition to direct costs. A sponsor of an expanded access IND or protocol may also recover the cost of fees paid to a third party for administering an intermediate-size patient population or treatment IND or protocol, including any profit for the third party that may be included in the fees.

One of the most significant new aspects of the FDA's policy for charging for investigational drugs relates to distributing potentially higher direct costs over the duration of the IND or protocol, rather than in the first year of the treatment. The FDA recognizes in the Draft Guidance that the costs associated with monitoring the program for an intermediate or treatment IND and other administrative start-up cost as well as the costs for manufacturing the drug of an expanded access IND or protocol can be higher in the first year compared to subsequent years. To account for this, the FDA allows sponsors to amortize the cost across the expected term of charging for the drug so that patients receiving the drug in the first year are not disproportionately charged more than patients in later years. This policy is expected to reduce barriers to patient treatment, particularly in the early stages of clinical trials.

Other notable policies in the Draft Guidance include:

• When the sponsor of an IND is a person or entity other than the manufacturer of the investigational drug (e.g., a physician), the IND sponsor, and not the drug manufacturer, must obtain the FDA's prior written authorization to charge patients for the investigational drug under that IND.
• The FDA anticipates that the sponsor would ordinarily charge a patient directly or would charge a third-party payor if reimbursement is available.
• FDA authorization is not needed to recover costs incurred at a clinical trial site (e.g., a hospital or clinic), including pharmacy costs (e.g., the cost to reconstitute a drug for infusion), nursing costs (e.g., costs associated with administering a drug and monitoring study subjects), equipment costs (e.g., intravenous administration sets, infusion pumps), and costs for study-related procedures (e.g., chemistry labs, radiographic procedures).
• Charging for an investigational drug in a clinical trial may have the potential to compromise the blinding of study participants to which therapy they have received (e.g., in a situation in which participants who are in the treatment arm of the study are charged, and participants who are in the control arm are not charged). When these situations arise, the sponsor may seek advice from the appropriate review division in the Office of New Drugs in the Center for Drug Evaluation and Research or from the appropriate review office in the Center for Biologics Evaluation and Research on how to preserve the blind.

Although charging for an investigational drug can help to defray the cost of clinical trials, sponsors should carefully consider potential unintended consequences such as recruitment rate or creating barriers to access that can worsen disparities in clinical trial participants. If the cost is passed to patients, it could exclude certain patient populations including patients in lower socioeconomic status.

Readers are encouraged to submit comments to the Draft Guidance by October 24, 2022, to ensure they are considered by the FDA prior to guidance finalization.