The EPA recently extended the comment period, until September 14, 2016, of a proposed guidance document, PR Notice 2016-X, to clarify how non-agricultural products may qualify for the incentives available to minor use registrations of pesticides. Antimicrobial manufacturers in particular should take the opportunity to read and comment on the notice as this is the first time EPA has emphasized that antimicrobials are eligible for these incentives. The alternative means of qualifying for minor use registration described in this notice also may be of interest to biopesticide producers with non-agricultural applications.
A "minor use" of a pesticide on an animal, a commercial agricultural crop site or for public purposes is defined in two different ways. Under FIFRA section 2(11)(1), a "minor use" is defined in terms of crops grown on 300,000 acres or less in the United States. This standard applies generally to agrichemicals used on crops. However, FIFRA also defines minor uses to include a standard applicable to non-agricultural pesticides, including antimicrobial products. A minor use may separately qualify under FIFRA section 2(11)(2) as one that lacks sufficient economic incentives to seek or maintain a registration by meeting one of these four criteria:
- There are insufficient efficacious alternative registered pesticides for such use;
- The alternatives to the pesticide pose greater risk to the environment or human health;
- The minor use pesticide plays or will play a significant part in managing pest resistance; or
- The minor use pesticide plays or will play a significant part in the integrated pest management program.
The first definition is strictly based on acreage. The second definition requires an economic determination that a registrant's immediate market revenues do not provide sufficient economic incentive to support pesticide registration for a use site. In this new draft PR notice, EPA is clarifying and updating its interpretation of how this economic determination will be made.
FIFRA provides certain incentives for the registration of products that have low expected return on investment for the registrant. The primary incentive for registrants to seek minor use status is data rights protection - a registrant can gain up to 3 additional years of exclusive use. Exclusive use is a period of time, up to 10 years, after the initial registration for a new active or a new use of an existing product during which only the original registrant and data submitter may rely on, or authorize use of, the data to support the registration. The business question for registrants is whether the investment in the registration for a particular use will generate a future return from sales sufficient to justify the cost of obtaining and maintaining the registration. Therefore, EPA allows minor use registrants an exclusive market for an additional period of time to realize their return on the investment.
The new, draft PR Notice that is out for comment is meant to revise section VI of PR 97-2. To qualify as a minor use, PR 97-2 currently relies on evaluating economic criteria. EPA will evaluate whether costs associated with the registration are greater than gross revenues for one year. However, the use of gross revenues can overstate the registrant's true return on the registration cost and a single year's sales, which may understate the true revenue stream. In addition, PR 97-2 currently evaluates future returns by assessing net present value (NPV), the benefit-cost ratio, and the internal rate of return. To estimate the NPV and benefit cost ratio, EPA is proposing in the new draft PR notice to use a discount rate of seven percent to reflect the rate of return or opportunity cost of private capital.
Currently, EPA allows a return on the cost of a registration to be obtained only for data generation, registration fees and related costs associated with the registration process. However, neither the old or new PR notice seek to quantify the economic losses that may result between the time the registration is granted and the time that a future return is achieved which is sufficient to justify maintaining the registration.
PR 97-2 only applied to agricultural pesticides. The inclusion of antimicrobials and other non-agricultural products is appropriate and manufacturers should read and understand the draft notice. The admirable position taken by antimicrobial companies historically has been to develop protocols and test new and existing products against, in some cases, deadly pathogens, including Legionnaire, HIV, MSRA, Ebola and Influenza in the absence of incentives beyond those afforded by the normal registration process (a license to operate and potential data compensation). Some of these situations may qualify as minor uses and the incentive of an extended exclusive use period. Companies may want to propose additional and better targeted incentives during the currently open comment period that take into account the time as well as the cost of protocol development and testing, for example. These could include for antimicrobials, the establishment of testing facilities similar to the IR-4 resource that agricultural companies currently can take advantage of to perform testing, and reduced and expedited PRIA fees and timing.
The EPA's approach to minor use registrations reflects the fact that these represent an important but risky investment. The registrant incurs costs to secure a registration and only upon approval of the registration asset does it begin to provide a revenue stream, one which is admittedly narrow. Assessing incentives for registering non-agricultural minor use pesticides is a new initiative, and should be welcomed.