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FY 2005 ADUFA Financial Report: Appendices

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  • Appendix A: Conditions for Assessment and Use of Fees
  • Appendix B: Summary of Number of Application Fees Paid in FY 2005
  • Appendix C: Waivers and Reductions Granted
  • Appendix D: Allowable and Excluded Costs for the Process for the Review of Animal Drug Applications
  • Appendix E: Development of Costs for the Process for the Review of Animal Drug Applications

     

 


 

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 in each fiscal year before the animal drug user fees can be collected and spent. A summary of these legal conditions has been introduced on page 2. Appendix A provides descriptions of these legal conditions and explanations of how they were accomplished in FY 2005.

In order to make parallel comparisons to determine whether the statutory conditions are satisfied, an adjustment factor which is defined in section 739(10) of the Act must be calculated and incorporated in the assessment of conditions one and three. 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 in particular, the base year is 2003 rather than 1997. The consumer price index for April 2003 was 183.8. The consumer price index for April 2004, the fiscal year preceding FY 2005, was 188.0. If dividing 188.0 by 183.8, it equals to 1.0229. That is the adjustment factor for FY 2005.

The first legal 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 fiscal 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 $1,373,714,000 (the actual amount after the rescission). Multiplying this amount by the adjustment factor of 1.0229 results in an adjusted FY 2003 Salaries and Expenses appropriation of $1,405,104,635.

In FY 2005, FDA's total Salaries and Expenses appropriation (excluding user fees) was $1,450,098,000 after the 0.80% rescission which was equivalent to $11,694,000. Since the FY 2005 total appropriation is greater than the adjusted FY 2003 appropriation by $44,993,365, the first legal condition was satisfied.

The second legal 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, and…"

The President signed the Appropriation Act that specified the collectable user fees for FY 2005 on December 8, 2004 (Public Law No. 108-447). The provision of the law approved FDA to collect up to $8,354,000 from animal drug user fees. Thus, the second condition was met.

The third legal 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, section 740(g)(2)(B) of the Act 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 —

(i) are not more than 3 percent below the level specified in subparagraph (A)(ii); or

(ii)(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

(II) such costs are not more than 5 percent below the level specified in subparagraph (A)(ii).

In FY 2003, FDA's actual total obligation from appropriations for the process for the review of animal drug applications was $32,748,000 (rounded to thousand). After applying the adjustment factor of 1.0229, the minimum appropriation spending for the process for the review of animal drug applications, excluding user fees, is $33,496,322.  1

In FY 2005 FDA obligated $34,407,704 from appropriations for the process for the review of animal drug applications. That amount is $911,382 or 2.7 percent above the spending minimum. Therefore, the third condition was achieved.

The table below shows the amounts FDA spent on the process for the review of animal drug applications in FY 2004 and FY 2005. 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, 2005

 

FY 2004
FY 2005
From Appropriations
$31,773,867
$34,407,704
From User Fee Revenues
$1,083,300
$8,489,000
Total Obligations
$32,857,167
$42,896,704

 1. Number may be different due to rounding. The adjustment factor in this report is shown and rounded at the fourth decimal place — 1.0229. $33,496,322 is calculated from the adjustment factor with full decimal places.

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Appendix B

 

SUMMARY OF NUMBER OF APPLICATION FEES PAID IN FY 2005

ADUFA established four fee categories and sets fee revenue for each category. Based on the statutory revenue amounts and estimated numbers of fees that would be paid in each category, FDA established fees for FY 2005 in August 2004. The highest fee was for an animal drug application — $119,300. A supplemental animal drug application (for which new safety or effectiveness data are required) must be 50 percent of an animal drug application fee according to ADUFA, which was $59,650. 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. They are $3,085, $42,600, and $32,150, respectively.

The table below summarizes the number and type of fees received in FY 2005 and the number and type of fees that FDA assumed it would receive in FY 2005 when ADUFA fees for FY 2005 were established in August 2004.

Numbers of Animal Drug User Fees Collected
and Anticipated in FY 2005
As of September 30, 2005

User Fee Category
Number of Fees Actually
Collected in FY 2005
Number of Fees Anticipated
When FY 2005 Fee Rates
Were Established
Animal Drug Application Fees
   
Application
6
11.5
Supplemental Application
9
12
Product Fees
740
677
Establishment Fees
58
49
Sponsor Fees
61
65

The number of fees reported in the table is net of refunds as of September 30, 2005.

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Appendix C

 

WAIVERS AND REDUCTIONS GRANTED

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 new animal drug application or the supplemental animal drug application is intended solely to provide for use of the animal drug in a free-choice medicated feed;
  • the new animal drug application or the supplemental animal drug application is intended solely to provide for a minor use or minor species indication; or
  • the sponsor involved is a small business submitting its first animal drug application to FDA for review.

The tables below summarize the waivers and the reductions actions taken by FDA for fees payables in FY 2005, as well as the value of each granted.

Waivers and Reductions Granted and Used
by Fee Category in FY 2005
As of September 30, 2005

Fee Category
Applications & Supplements
Products
Establishments
Sponsors
Total
Significant Barrier to Innovation
-
-
-
11
11
Fees Exceed Costs
-
-
-
-
-
Free Choice Feeds
1
-
-
2
3
Minor Use or Minor Species
3
5
2
38
48
Small Business
-
-
-
-
-
TOTAL - Exemptions Granted
4
5
2
51
62

 

Value of Waivers and Reductions Granted and used in FY 2005
As of September 30, 2005

Fee Category
Fee Rate
Number Used
Value
Application
$119,300
1
$119,300
Supplemental Application
$59,650
3
$178,950
Product
$3,085
5
$15,425
Establishment
$42,600
2
$85,200
Sponsor
$32,150
51
$1,639,650
Total  
62
$2,038,525

The waivers and the reductions presented in the table above were fees that were otherwise due and payable in FY 2005, 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, 2005 (and therefore the waiver was not used), or the waivers were for FY 2005 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 2006, and their impact will be reflected in the FY 2006 ADUFA Financial Report.

In addition to the waivers and reductions shown above, on September 30, 2005, there were six waiver requests pending relating to fees payable in FY 2004 and three waiver requests pending relating to fees payable in FY 2005 that were requested on the basis that fees assessed exceed FDA's costs.

In FY 2005 FDA also denied 18 applications for waivers and reductions. The following is a summary of the waiver requests that were denied:

  • 2 for application or supplement fees
  • 5 product fees
  • 7 sponsor fees
  • 4 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 No. 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 new animal drug applications, supplemental animal drug applications, investigational animal drug submissions, and among other activities includes:

  • 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, Supplemental Animal Drug Applications and Investigational New Animal Drug Submissions
CVM
Costs for Field Preapproval Inspection and Investigation
ORA
Costs for Agency General and Administrative
OC


The costs were accumulated using activity 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 SOPs and application review support; and 3) center-wide support activities. CVM's Activity Time Reporting (ATR) System supports the allocations 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 employees. The system was implemented center-wide on October 6, 2003. All CVM employees report their time in ATR.

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, 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 was 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 in FY 2004. It combined the support responsibilities and resources previously located both in the centers 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 Office of Shared Services FTEs and resources were originated in the organizations that are associated with the animal drug review process. In FY 2005, resources expended by the Office of Shared Services in supporting the animal drug review process are reported as if they were incurred in CVM, ORA, or OC for comparability to the FY 2003 base year.

 

Center Time Reporting Results for FY 2005

The time reporting system operated by CVM indicated 56 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, investigation, and laboratory analyses costs. ORA costs are incurred in both district offices (the "field") and headquarters offices. In FY 2000, the Agency began to track the accumulated ORA costs through a new system, called the Field Accomplishments 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 2004 and 2005.

Food and Drug Administration
Office of Regulatory Affairs
Costs of the Review Process for Animal Drug Applications
As of September 30, 2005

Cost Component
FY 2004
FY 2005
Staff Years Utilized
14
14
ORA Average Salary and Benefits
$86,376
$93,594
Salary and Benefits
$1,209,263
$1,310,313
Operations, Rent, and Shared Services
$664,481
$875,551
Total
$1,873,744
$2,185,864

 

Agency General and Administrative Costs

The Agency general and administrative costs are incurred in the FDA's Office of the Commissioner (OC). During FY 2005, 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 methodology, $2,275,763 and $2,754,149 in general and administrative obligations were dedicated to the animal drug review process in FY 2004 and FY 2005, respectively. They are the total costs including funds obligated from both appropriations and from fees. The Agency general and administrative intends to retain a low overhead for the review process of the animal drug applications. They account for approximately 6.9 percent in FY 2004 and 6.4 percent in FY 2005 of the total review costs.

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