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FY 2004 ADUFA Financial Report: Appendices

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Appendix A

 

CONDITIONS FOR ASSESSMENT AND USE OF FEES

The Food, Drug, and Cosmetic Act (the Act) specifies three major conditions that must be met each year before the animal drug user fees can be collected and spent. A summary of these conditions and how they were met was provided earlier on page 2. A description of each of these conditions is provided below with an explanation of how the condition was met in FY 2004.

For making the comparisons to determine whether the statutory conditions are met, an adjustment factor, which is defined in section 739(10) of the Act, must be calculated in each year. It states:

The term 'adjustment factor' applicable to a fiscal year refers to the formula set forth in section 735(8) with the base or comparator year being 2003.

Paragraph 735(8) of the Act contains the following definition:

The term 'adjustment factor' applicable to a fiscal year is the Consumer Price Index for all urban consumers (all items; United States city average) for April of the preceding fiscal year divided by such Index for April 1997.

For ADUFA, the base year is 2003 rather than 1997. The consumer price index for April 2003, the fiscal year preceding FY 2004, is 183.8. Since this number, 183.8, is both the numerator and denominator of the adjustment factor for FY 2004, the first year of the program, the applicable adjustment factor is 1.0000.

The first condition is found in section 740(f)(1) of the Act. It states:

Fees may not be assessed under subsection (a) for a fiscal year beginning after fiscal year 2003 unless appropriations for salaries and expenses of the Food and Drug Administration for such fiscal year (excluding the amount of fees appropriated for such fiscal year) are equal to or greater than the amount of appropriations for the salaries and expenses of the Food and Drug Administration for the fiscal year 2003 (excluding the amount of fees appropriated for such fiscal year) multiplied by the adjustment factor applicable to the fiscal year involved.

This condition requires that FDA's total Salaries and Expenses appropriation (excluding user fees) in each year must be greater than or equal to FDA's FY 2003 Salaries and Expenses appropriation (excluding user fees) multiplied by the adjustment factor. FDA's total FY 2003 Salaries and Expenses appropriation, excluding user fees, was $1,382,702,000. Multiplying this amount by the adjustment factor of 1 results in an adjusted FY 2003 Salaries and Expenses appropriation of $1,382,702,000.

For FY 2004, FDA's total Salaries and Expenses appropriation, excluding user fees, was $1,386,962,000. Since FY 2004 amount is greater than FY 2003 by $4,260,000, the first condition was met.

The second condition is described in section 740(g)(2)(A)(i) of the Act. It states that fees "shall be retained in each fiscal year in an amount not to exceed the amount specified in appropriation Acts, or otherwise made available for obligation for such fiscal year, andÖ"

The President signed the Appropriation Act specifying amounts collectable from user fees for FY 2004 on January 23, 2004 (Public Law 108-199). It provided $5,000,000 to come from ADUFA fees. Therefore, the second condition was met.

The third condition is defined in section 740(g)(2)(A)(ii) of the Act. It states that fees:

shall only be collected and available to defray increases in the costs of the resources allocated for the process for the review of animal drug applications (including increases in such costs for an additional number of full-time equivalent positions in the Department of Health and Human Services to be engaged in such process) over such costs, excluding costs paid from fees collected under this section, for fiscal year 2003 multiplied by the adjustment factor.

In addition, in section 740(g)(2)(B) of the Act, it also states:

The Secretary shall be considered to have met the requirements of subparagraph (A)(ii) in any fiscal year if the costs funded by appropriations and allocated for the process for the review of animal drug applications --
  1. are not more than 3 percent below the level specified in subparagraph (A)(ii); or
  2. (I) are more than 3 percent below the level specified in subparagraph (A)(ii), and fees assessed for the fiscal year following the subsequent fiscal year are decreased by the amount in excess of 3 percent by which such costs fell below the level specified in subparagraph (A)(ii); and
  3. such costs are not more than 5 percent below the level specified in subparagraph (A)(ii).

In FY 2003, FDA's actual total obligations from appropriation for the process for the review of animal drug applications were $32,748,388. The adjustment factor for FY 2003 was 1.0000. Thus, FDA's 2003 adjusted minimum spending for the process for the review of animal drug applications from appropriations in FY 2004, excluding user fees, must be $32,748,388.

The FDA obligations from appropriation for the process for the review of animal drug applications for FY 2004 were $31,773,867. This amount is 2.97 percent less than $32,748,388. However, the Act provides that FDA shall be considered to have met the requirements of this provision if its obligations from appropriations are not more than 3 percent below the FY 2003 costs multiplied by the adjustment factor. The third condition was met.

The table below shows the amounts FDA spent on the process for the review of animal drug applications in FY 2003 and FY 2004. It also shows the portions of the total obligations that were spent from the appropriation funds and user fee revenues.

FOOD AND DRUG ADMINISTRATION
OBLIGATIONS FOR THE PROCESS FOR THE REVIEW OF
ANIMAL DRUG APPLICATIONS
As of September 30, 2004

Obligations
FY 2003
FY 2004
From Appropriations
$32,748,388
$31,773,867
From User Fee Revenues
0
$1,083,300
Total Obligations
$32,748,388
$32,857,167

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Appendix B

 

SUMMARY OF NUMBER OF APPLICATION FEES PAID IN FY 2004

ADUFA established four fee categories and sets fee revenue amounts for each. Based on those statutory revenue amounts, and estimated numbers of fees that would be paid in each category, FDA established fees for FY 2004 in April 2004. The highest fee rate was for an animal drug application -- $61,000. The fee rate for a supplemental animal drug application for which safety or effectiveness data are required is set to be 50 percent of an animal drug application fee, which is $30,500. The other categories of ADUFA fees are animal drug product, animal drug establishment, and animal drug sponsor fees, each of which must be paid annually. For FY 2004, the product fee was the lowest among all, $1,750. The establishment fee was $23,950, and the sponsor fee was $15,450.

The Table below summarizes the number and type of fees received in FY 2004 and the number and type of fees that FDA assumed it would receive in FY 2004 when ADUFA fees for FY 2004 were established in April 2004.

NUMBERS OF FEES COLLECTED AND ANTICIPATED IN FY 2004
As of September 30, 2004

User Fee Category
Number of Fees Actually Collected in FY 2004 [1]
Number of Fees Anticipated when FY 2004 Fee Rates were Established
Application Fee
12
16.3
Supplemental Application Fee
15
8.3
Product Fee
766
714
Establishment Fee
55
52
Sponsor Fee
66
81

[1] The number of fees collected does not include those that were assessed but that were not paid, were waived, or were refunded in full.

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Appendix C

 

WAIVED OR REDUCED FEES

ADUFA directs FDA to waive or reduce fees in five different circumstances when:

  • the assessment of the fee would present a significant barrier to innovation because of limited resources available to such person or other circumstances;
  • the fees to be paid by such person will exceed the anticipated present and future costs incurred by FDA in conducting the process for the review of animal drug applications for such person;
  • the animal drug application or supplemental animal drug application is intended solely to provide for use of the animal drug in a free-choice medicated feed;
  • the animal drug application or supplemental animal drug application is intended solely to provide for a minor use or minor species indication;
  • the sponsor involved is a small business submitting its first animal drug application to FDA for review.

The tables below summarize the waiver actions taken by FDA for fees payable in FY 2004, as well as the value of the waivers and reductions granted.

Waivers and Reductions Granted by Fee Category in FY 2004
As of September 30, 2004

Fee Category
Applications & Supplements
Products
Establishments
Sponsors
Total
Significant Barrier to Innovation
10
10
Fees Exceed Costs
Free Choice Feeds
1
2
3
Minor Use or Minor Species
1
2
29
32
Small Business
1
 
1
TOTAL - Exemptions Granted
3
2
0
41
46

 

Value of FY 2004 Waivers and Reductions Granted in FY 2004
As of September 30, 2004

Fee Category
Fee Amount
Number Granted
Value
Application
$61,000
1
$61,000
Supplemental Application
$30,500
2
$61,000
Product
$1,750
2
$3,500
Establishment
$23,950
0
0
Sponsor
$15,450
41
$633,450
 Total
 NA
 46
 $758,950

The waivers reflected in the tables above were all for fees that were otherwise due and payable in FY 2004, and reflect revenue that would otherwise have been collected by FDA. FDA also approved other fee waivers but the corresponding applications were not submitted as of September 30, 2004, or the waivers were for FY 2004 fees that were invoiced after the close of the fiscal year. We expect that these will result in the waiver of fees that would otherwise have been collected in FY 2005, and their impact will be reflected in the FY 2005 ADUFA Financial Report.

In addition to the waivers and reductions shown above, on September 30, 2004, there were two waiver requests pending relating to fees payable in FY 2004 that were requested on the basis that fees assessed exceed FDA's costs. To evaluate them, FDA must establish the standard costs for major types of review action. After those standard costs are developed, then FDA will make decisions on these requests received in FY 2004.

In FY 2004 FDA also denied 18 applications for waivers. The following is a summary of the waiver requests that were denied:

  • 4 for application or supplement fees
  • 4 product fees
  • 7 sponsor fees
  • 3 establishment fees

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Appendix D

 

ALLOWABLE AND EXCLUDED COSTS FOR THE PROCESS
FOR THE REVIEW OF ANIMAL DRUG APPLICATIONS

The Federal Food, Drug, and Cosmetic Act (the Act), as amended by the Animal Drug User Fee Act of 2003 (ADUFA), Public Law 108-130, defines the process for the review of animal drug applications and the costs that may be included in that process. Fees may only be spent for activities that are included in this definition, although fee-generating activities are only a small subset of the activities that are included in this definition. Using the statutory definition and the methodologies described in Appendix E, the Agency identified those activities that were applicable to the process for the review of animal drug applications.

Because over 96 percent of the amounts obligated by FDA each year are expended within two years, obligations represent an accurate measure of costs.

 

ADUFA Related Costs


Included Activities

[Section 739(8)] The term 'process for the review of animal drug applications' means the following activities of the Secretary with respect to the review of animal drug applications, supplemental animal drug applications, and investigational animal drug submissions:

[Section 739(8)(A)] The activities necessary for the review of animal drug applications, supplemental animal drug applications, and investigational animal drug submissions.

This encompasses, among other things, the review of the following types of information:

  • With respect to New Animal Drug Applications - original applications, pre- and post-market supplements, chemistry reports, reactivations, Veterinary Master Files, Public Master Files, and application-related correspondence
  • With respect to investigational new animal drugs (INADs) - initial submissions, reauthorization requests, Emergency/Compassionate Use requests, protocols with or without data, and studies with or without data
  • With respect to abbreviated new animal drug applications (ANADAs) - supplements that request a change to an approved ANADA and for which data with respect to safety or effectiveness are required

Furthermore, the activities necessary for the review of animal drug applications, supplemental animal drug applications, and investigational animal drug submissions includes, among other activities:

  • Agency initiated action related to these applications and submissions
  • General NADA and INAD activities that do not directly relate to a pending submission, such as staff training and administrative support
  • Administrative processing of these applications and submissions
  • Maintenance and support of automated systems that track these applications and submissions
  • Quality assurance and quality control standards and policy development activities related to the review of these applications and submissions

[Section 739(8)(B)] The issuance of action letters which approve animal drug applications or supplemental animal drug applications or which set forth in detail the specific deficiencies in animal drug applications, supplemental animal drug applications, or investigational animal drug submissions and, where appropriate, the actions necessary to place such applications, supplements or submissions in condition for approval.

This includes activities such as the issuance of deficiency letters, meetings with applicants to discuss such letters, and review of the responses.

[Section 739(8)(C)] The inspection of animal drug establishments and other facilities undertaken as part of the Secretary's review of pending animal drug applications, supplemental animal drug applications, and investigational animal drug submissions.

[Section 739(8)(D)] Monitoring of research conducted in connection with the review of animal drug applications, supplemental animal drug applications, and investigational animal drug submissions.

This includes monitoring of clinical and other research conducted in connection with the review of these applications and submissions.

[Section 739(8)(E)] The development of regulations and policy related to the review of animal drug applications, supplemental animal drug applications, and investigational animal drug submissions.

This includes activities such as development of drug-specific, cross-cutting, special control, program-related guidance, and Standard Operating Procedures.

[Section 739(8)(F)] Development of standards for products subject to review.

This includes FDA's activities on national and international standards development for products subject to review.

[Section 739(8)(G)] Meetings between the agency and the animal drug sponsor.

This includes activities such as:

  • Informal consultation in person and via phone, mail, e-mail, and facsimile
  • Meetings between FDA and sponsors, such as pre-submission conferences
  • Use of Advisory Committees and outside experts in the review of premarket applications
  • FDA sponsored conferences/workshops related to premarket submissions

[Section 739(8)(H)] Review of advertising and labeling prior to approval of an animal drug application or supplemental animal drug application, but not such activities after an animal drug has been approved.

[Section 739(9)] The term 'costs of resources allocated for the process for the review of animal drug applications' means the expenses incurred in connection with the process for the review of animal drug applications for--

[Section 739(9)(A)] officers and employees of the Food and Drug Administration, contractors of the Food and Drug Administration, advisory committees consulted with respect to the review of specific animal drug applications, supplemental animal drug applications, or investigational animal drug submissions, and costs related to such officers, employees, committees, and contractors, including costs for travel, education, and recruitment and other personnel activities,

This includes costs management and administrative services related to the process for the review of animal drug applications, as well as costs for personnel development and training such as:

  • Scientific, clinical, and statistical training
  • Managerial and other administrative training
  • Policy/regulatory training
  • Professional development (coursework, attendance at professional meetings, library resources)
  • Site Visit Program for premarket reviewers

[Section 739(9)(B)] management of information, and the acquisition, maintenance, and repair of computer resources,

[Section 739(9)(C)] leasing, maintenance, renovation, and repair of facilities and acquisition, maintenance, and repair of fixtures, furniture, scientific equipment, and other necessary materials and supplies, and

[Section 739(9)(D)] collecting fees under section 740 and accounting for resources allocated for the review of animal drug applications, supplemental animal drug applications, and investigational animal drug submissions.

These sections include all forms of information management and infrastructure acquisitions in support of the process for the review of animal drug applications and in support of user fee collections and accounting.


Excluded Activities

  • Review of ANADAs
  • Enforcement policy development
  • Post-approval surveillance and compliance activities
  • Post-approval activities relating to the review of advertising
  • Inspections unrelated to the process for review of animal drug applications
  • Research unrelated to the process for review of animal drug applications

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Appendix E

 

DEVELOPMENT OF COSTS FOR THE PROCESS FOR THE REVIEW OF ANIMAL DRUG APPLICATIONS

GENERAL METHODOLOGY

The costs associated with the process for the review of animal drug applications are based on obligations recorded within FDA's Center for Veterinary Medicine (CVM), Office of Regulatory Affairs (ORA), and the Office of the Commissioner (OC). These organizations correspond to the cost categories presented on the Statement of Costs for the Process for the Review of Animal Drug Applications as follows:

Cost Category
FDA Organization
Costs for the Review of New Animal Drug Applications, Supplements, Products, and Sponsors
CVM
Costs for Field Inspection and Investigation
ORA
Costs for Agency General and Administrative
OC

The costs were accumulated using time reporting systems in CVM and ORA, and were extrapolated for OC. Using the definitions of costs and activities included in the "process for the review of animal drug applications" in the Act, a portion of the costs within each of the three organizations listed above was identified as part of the animal drug review process.

 

CENTER COSTS

Costs are accumulated for CVM in FDA's financial system in cost centers corresponding to the organizational components at the Office level within CVM. Most CVM components involved in the animal drug review process perform a mixture of activities--some included in the definition of the process for the review of animal drug applications, and some not included (see Appendix D). The activities involved in the process for the review of animal drug applications are categorized into three areas: 1) direct process activities, such as submission specific work; 2) indirect process and support activities, such as development of review process guidance to industry and infrastructure support; and 3) center-wide expenses. CVM's Activity Time Reporting (ATR) System supports the allocation of costs for all three areas.

 

CVM's Activity Time Reporting System (ATR)

CVM developed and implemented a total time reporting system as part of a multi-year Activity Based Costing initiative. The ATR has a robust Activity Dictionary developed by CVM employees, describing the work "activities" of the Center employee. The system was implemented center-wide on October 6, 2003. All employees participated in the implementation process.

Using the Activity Dictionary in conjunction with the definition of the process for the review of animal drug applications in ADUFA, CVM was able to attribute activity time reported by its employees to direct and indirect process and support activities as distinguished from non-process activities. For a representation of this, please refer to Appendix D -- Allowable and Excluded Costs for the Process for the Review of Animal Drug Applications.

FDA Centers are very payroll intensive organizations--about 60 percent of all FDA funds go to pay for employee salaries and benefits, and almost all other costs are directly supporting these employees. Thus the percent of time reported as having been expended on allowable animal drug review process activities for each cost center was then applied to all costs incurred for that cost center for the entire fiscal year.

 

Center-Wide Expenses

A number of center-wide expenses are paid from the central accounts rather than being charged directly to a specific center. These costs include rent for facilities that house CVM staff, telecommunications and utility costs, part of computer equipment and support costs, facilities repair and maintenance, part of extramural and service contracts, and Shared Services costs. For the costs that are chargeable to the center, a weighted average of the process activity percentage methodology was utilized.

In support of the President's Management Agenda and the Secretary's Goal of "One-HHS", FDA is requested to consolidate its administrative functions (including facilities, procurement, finance, EEO, and IT services) to carry out more efficient realignment of the resources which would provide high quality administrative services from a single organization. FDA created an Office of Shared Services (OSS) in FY 2004. It combined the support responsibilities and resources previously located both in the center and in the Office of the Commissioner, and ensured effective and efficient services in a competitive market environment.

Prior to FY 2004, many of the OSS FTE and resources were part of the CVM organization. In FY 2004, the OSS expenses related to the review of the animal drug process costs are reported as if they were incurred in CVM or in the Office of the Commissioner, to keep them consistent with the way these costs were reported in the FY 2003 base year.

Center Time Reporting Results for FY 2004

The time reporting system operated by CVM indicated 48 percent of all time spent in the Center was dedicated to the process for the review of animal drug applications as defined in ADUFA.

 

FIELD INSPECTION AND INVESTIGATION COSTS

FDA's Office of Regulatory Affairs (ORA) incurs all field inspection and investigation costs. ORA costs are incurred in both district offices (the "field") and headquarters support offices. In FY 2002, the Agency began to track the accumulated ORA costs through a new system, called the Field Accomplishment and Compliance Tracking System [FACTS]. FACTS is a time and activity tracking system that captures time spent in a variety of categories, including pre-approval inspections of manufacturing facilities, investigations of clinical studies, and analytical testing of samples, which are all part of the review process for animal drug applications.

Total direct hours reported in FACTS are used to calculate the total number of staff-years required by ORA to perform these activities. In addition to the direct time, an allocation of support time is also included to represent the work done by the ORA administrative and management personnel. The Agency, then, applies the total number of user fee related staff-years to the average salary cost in ORA to arrive at ORA user fee related salary costs. The final step is to allocate ORA obligations for operations and rent to the animal drug review process based upon the ratio of user fee related staff-years to total ORA staff-years. The following table summarizes the calculation of ORA costs for the review of animal drug applications for the fiscal years 2003 and 2004.

Food and Drug Administration
Office of Regulatory Affairs
Costs of the Review Process for Animal Drug Applications
As of September 30, 2004

Cost Component
FY 2002
FY 2003
Staff Years Utilized
14
14
ORA Average Salary & Benefits
$79,696
$86,376
Salary and Benefits
$1,115,739
$1,209,263
Operations, Rent, and Shared Services $705,183 $664,481
Total $1,820,921 $1,873,743

 

AGENCY GENERAL AND ADMINISTRATIVE COSTS

The Agency general and administrative costs are incurred in the FDA's Office of the Commissioner (OC). During most of FY 2004, OC was comprised of the following offices:

  • Immediate Office of the Commissioner
  • Office of Chief Counsel
  • Office of the Administrative Law Judge
  • Office of Equal Employment Opportunity and Diversity Management
  • Office of Science and Health Coordination
  • Office of International Activities and Strategic Initiatives
  • Office of Crisis Management
  • Office of Legislation
  • Office of External Relations
  • Office of Policy and Planning
  • Office of Management

The OC costs applicable to the process for the review of animal drugs were calculated using a method prescribed by the Division of Cost Determination Management, Office of Finance, Office of the Secretary, Department of Health and Human Services. The method uses the percentage derived by dividing total Office of the Commissioner costs by the total salary obligations of the Agency, excluding the Office of the Commissioner. That percentage is then multiplied by the total salaries (excluding benefits) applicable to the process for the review of animal drugs in CVM and ORA to arrive at the total General and Administrative Costs.

Using this process, $2,243,755 and $2,275,763 in general and administrative obligations were dedicated to the animal drug review process in FY 2003 and FY 2004, respectively. These are total costs, including funds obligated both from appropriations and from fees. The Agency general and administrative obligations in FY 2003 and FY 2004, similarly, accounted for about 6.9 percent of the total costs in each fiscal year for the review process of the animal drug applications.

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