The Food and Drug Administration is bargaining with the pharmaceutical industry for an increase in fees, giving the industry a greater role in shaping the priorities of its regulator.

Such negotiations between the industry and the FDA date to the introduction of "user fees" in the early 1990s. But steadily rising payments by drug makers -- $232 million in fiscal 2004 -- now fund more than half the agency's critical drug-review process, enhancing the importance of the talks.

Exact details of the deal they strike likely will take shape in the next few weeks, and will be subject to congressional approval. But people with knowledge of the matter say the agency is likely to win some concessions, including new funding for drug safety, partly because of pressure on drug companies from Congress. The companies have balked at other FDA suggestions that would, among other things, route user-fee money toward fighting drug counterfeiting. And companies are divided over FDA's bid for substantially more staff to review drug advertising.

Regulators usually don't negotiate their budgets with the industries they oversee. Other agencies such as the Federal Communications Commission and the Securities and Exchange Commission rely on user fees for at least some funding, but don't generally haggle over the fees. Instead, they typically impose changes through formal rule-making or by implementing formulas set by Congress.

For most of its history, the FDA was funded entirely by Congress. But in the early 1990s, companies unhappy with the pace of drug approvals agreed to pay the FDA millions of dollars in annual fees to help speed its performance. Because the industry and the agency renegotiate every five years over the size of fees -- and what they can be used for -- drug makers can have considerable input into which programs receive funding.

Each time the arrangement has been renewed, the FDA has gained new funding. In return, industry has wrung concessions. In the 1997 deal, the review time for a standard application dropped from 12 months to 10 months. In 2002, the FDA agreed to a number of changes, including a new deadline for how fast the agency would respond to companies' requests for meetings about their drug applications.

In the latest talks with the FDA, industry representatives -- several of them former FDA officials -- have been sitting across the table from current government officials at the agency's offices in suburban Washington in closed-door meetings that have been going on for months. (FDA rules don't let the industry pay for refreshments, though insiders said agency officials did eat chocolate truffles brought by one industry official after assurances they were home-made.)

Some former FDA officials, including David Kessler, who launched the user-fee initiative when he was FDA commissioner -- and the payments were much smaller -- say the negotiations raise troubling questions.

"There is no doubt that user fees give the industry leverage on setting the agency's priorities, because of the negotiating process," says Dr. Kessler, now dean of the medical school at the University of California, San Francisco. "There are significant risks, especially when a growing percentage of the budget comes from user fees," he says, adding he doesn't think the FDA has been compromised so far.

FDA officials defend the current system. "During the negotiations, FDA and industry discuss various enhancements and their value to industry, and we would never agree to anything that compromises our integrity or standards," says Janet Woodcock, deputy FDA commissioner. "But aspects of the review program that are of less interest to industry are not likely to be funded out of user fees," she adds.

The FDA and the trade associations involved in the talks -- the Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization -- declined to comment on details of the talks. Officials for all three say the user-fee program provides the FDA valuable resources without lowering the regulatory bar.

They point out that the agency also gets input from consumer groups and the public and that the user fees require legislation to take effect. Lawmakers typically haven't made major changes to the complex arrangements.

The practice of negotiating stems from the original pact the agency cut with drug companies: If the companies agreed to user fees, the FDA would aim to review drugs in 12 months or less. Congress ratified it in the 1992 Prescription Drug User Fee Act, or PDUFA.

Companies pay fees when they file drug applications. They also pay fees based on how many drug-manufacturing facilities they have and the number of medicines they sell in the U.S.

In fiscal 1993, the industry's $8.9 million in user-fee money accounted for just 7% of the FDA's drug-review budget. The deal has since been renewed twice, with fees increased both times. The $232 million in fiscal 2004 represented 53% of the total drug-review budget.

For the next five-year agreement, which would begin Oct. 1, 2007, the agency initially laid out a list of proposals that would have cost the industry more than $100 million a year in new fees, along with a steeper year-by-year rate of increase. The proposals, ranging from costs related to the FDA's move to new offices to upgraded technology, were laid out a la carte-style, not a take-it-or-leave-it package, people close to the talks say.

If the agency were to get all it seeks -- which is unlikely -- fees could cover 66% or more of the drug-review budget if congressional appropriations remain flat -- which is likely, in the current budget squeeze -- according to one industry estimate.

FDA officials have said that federal appropriations for its budget haven't kept pace with new mandates and rising personnel costs. At the same time, the FDA faces pressure from Congress and consumer groups to bolster safety monitoring and regulation of advertising. "The agency is overextended," says the FDA's Dr. Woodcock. "If we are going to provide additional services, we have to pay for them somehow."

Industry officials generally focus on routing money toward programs directly related to reviews of their drugs, and they say supporting the broad functions of the agency would make the fees, which are supposed to be tied to a service, more like a special tax. "That was never the intention, for PDUFA fees to completely subsume federal appropriations," says Jim Greenwood, a former congressman who heads BIO, the biotech industry group. BIO plans to push Congress and the Bush administration to give the agency more money.

The FDA says it needs more money for its drug-review process, to meet growing costs and to fund services sought by companies. The current fee deal hasn't, for instance, kept pace with the rapidly-growing number of meetings in which agency officials give the industry feedback about study plans and results, the agency has said. Drug-company negotiators have questioned the agency's cost estimates and projections, and argue the agency could work more efficiently. The FDA has countered that the agency is increasingly efficient.

The companies' most significant goal was to get the FDA to give them a set amount of time -- one early proposal was 30 days -- to review and discuss the agency's proposals on new drug labels and other conditions on approval, such as further studies, according to people with knowledge of the talks. Drug executives complain they sometimes get the agency's input only a few days before a medicine is due to be approved, which gives them little time to negotiate changes without delaying approval.

The FDA has resisted offering such a guarantee, according to people with knowledge of the matter. A possible compromise would have the agency give drug makers projected review timelines about two and a half months after they file their applications, including an indication of when label negotiations would begin, among other benchmarks. These would not be firm guarantees, however.

Also at issue in the talks is FDA oversight of advertising and promotion. Members of PhRMA, the trade group, are voluntarily submitting commercials to the FDA, but want the agency to examine the ads quickly so the companies can craft campaigns and buy airtime efficiently. One early industry proposal was for a 30-day deadline, but discussions later moved toward longer time frames, according to the people with knowledge of the matter.

The FDA at one point suggested that to deal with the expected increase in ad submissions, it wanted about 50 new staffers, then later scaled the request down to around 30. But the result is far from clear. There are divisions among the drug companies: many BIO members don't run direct-to-consumer ads and object to their fee money going toward reviews of such promotions. So far, the agency has been reluctant to consider an industry proposal for a dedicated fee that companies would pay only when they submit ads, but a compromise remains possible.

Another central issue in the talks is the FDA's quest for more money to monitor drugs' safety after their approval. The industry is likely to agree to pay for improvements, people close to the talks say. This could include a new study of ways to improve post-market safety work. But some industry officials have opposed aspects of the FDA proposal. These include a suggestion to spend user-fee money to inspect the companies' own systems for collecting reports of drug side effects. The officials argue that the initiative should be supported by taxpayers.