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FY 2006 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 Federal Food, Drug, and Cosmetic Act (the Act), as amended by ADUFA, specifies three legal conditions that must be met in each fiscal year before FDA can collect and spend animal drug user fees.  A summary of the legal conditions has been introduced on page 2 of this report.  Appendix A provides descriptions of these conditions and explanations of how FDA accomplished these conditions in FY 2006 in more detail.

In order to compare and determine whether the legal conditions are satisfied, FDA must calculate and incorporate adjustment factors (defined in section 739(10) of the Act) in the assessments of the first and the third conditions.  The Act 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 states 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 was 183.8.  The consumer price index for April 2005, the fiscal year preceding FY 2006, was 194.6.  194.6 divided by 183.8 equals to 1.0588 (rounded to fourth decimal place).  That is the adjustment factor for FY 2006.

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.

The first condition requires that FDA's salaries and expenses appropriation excluding user fees for FY 2006 must be greater than or equal to FDA's salaries and expenses appropriation excluding user fees for FY 2003 multiplied by the adjustment factor for inflation.  FDA's salaries and expenses appropriation (excluding user fees) for FY 2003 was $1,373,714,000 after the rescission.  Multiplying this amount by the adjustment factor of 1.0588 (rounded to fourth decimal place) equals to $1,454,432,777 1.  

In FY 2006, Congress appropriated $1,486,801,000 after 1.0 percent rescission (equivalent to $14,816,000) to FDA for salaries and expenses, excluding user fees.  Because the FY 2006 Salaries and Expenses appropriation is greater than the adjusted FY 2003 Salaries and Expenses appropriation by $32,368,223, 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 … ”

On November 10, 2005, the President signed the FY 2006 Appropriation Act, Public Law 109-97, that specified the collectable user fees amount for ADUFA.  That provision approved FDA to collect $11,318,000 in animal drug user fees.  Therefore, the second legal 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.

The third condition requires a minimum spending from appropriations, excluding user fees, on the process of animal drug review.  The minimum spending from appropriations is what FDA spent on the process for the review of animal drug applications in FY 2003, adjusted for inflation.  FDA must spend at or above this minimum spending level from appropriations.

Under ADUFA, the condition is considered satisfied if spending for the animal drug review process in any year is no more than 3 percent below the minimum spending level from appropriations. 

It states in section 740(g)(2)(B) of the Act:

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, the costs from appropriations for the process for the review of animal drug applications were $32,748,000 (rounded to thousand).  After applying the adjustment factor of 1.0588 (rounded to fourth decimal place), the minimum appropriation spending level for the process for the review of animal drug applications for FY 2006, excluding user fees, is $34,672,257 2.

In FY 2006, FDA obligated $36,636,831 from appropriations for the process for the review of animal drug applications, which is $1,964,574 or 5.7 percent above the minimum appropriation spending level.  Therefore, FDA met the third condition.

The table below shows the amounts FDA spent on the process for the review of animal drug applications from appropriations and user fees for FY 2005 and FY 2006.

Food and Drug Administration
Obligations for the Process for the Review of
Animal Drug Applications
As of September 30, 2006

 
FY 2005
FY 2006
From Appropriations
$34,407,704
$36,636,831
From Fee Revenues
$8,489,000
$9,675,678
Total Obligations
$42,896,704
$46,312,509

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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 revenues and estimated numbers of fees that would be paid in each category, FDA published the FY 2006 fee rates all categories in August 2005 3.  In FY 2006, the highest fee was for an animal drug application – $151,800.  A supplemental animal drug application (for which safety or effectiveness data are required) must be 50 percent of an animal drug application fee according to ADUFA, which was $75,900.  The other fee categories under ADUFA are animal drug products, animal drug establishments, and animal drug sponsor fees, each of which must be paid annually.  They are $3,905, $49,200, and $44,400, respectively.

The table below summarizes the number and type of fees actually received in FY 2006 for cohort year 2006 in comparison to what the FDA estimated it would receive in FY 2006 when ADUFA fees for FY 2006 were established in August 2005.

 

Numbers of Animal Drug User Fees Collected
and Anticipated in FY 2006
As of September 30, 2006

User Fee Category
# of Fees Actually
Collected in FY 2006
# of Fees Anticipated
to Establish FY 2006 Fees
Animal Drug Application Fees
   
Application
7
12
Supplemental Application
13
11.7
Product Fees
740
693
Establishment Fees
58
55
Sponsor Fees
60
61

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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 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 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 payable in FY 2006, as well as the value of each granted.  Please note that the waivers and the reductions granted in the tables below are for cohort year 2006 only.

Waivers and Reductions Granted and Used
by Fee Category in FY 2006
As of September 30, 2006

Reason
Application & Supplement
Product
Establishment
Sponsor
Total
Significant Barrier to Innovation
-
-
-
15
15
Fees Exceed Costs
-
-
-
-
0
Free Choice Feeds
-
-
-
2
2
Minor Use or Minor Species
3
5
2
42
52
Small Business
2
-
-
-
2
Total
5
5
2
59
71

 

Value of Waivers and Reductions Granted and used in FY 2006
As of September 30, 2006

Fee Category
Fee Rate
Number
Value
Applications
$151,800
4
$607,200
Supplemental Applications
$75,900
1
$75,900
Products
$3,905
5
$19,525
Establishments
$49,200
2
$98,400
Sponsors
$44,400
59
$2,619,600
Total
 
71
$3,420,625

The waivers and the reductions presented in the table above were fees that were otherwise due and payable in FY 2006, 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, 2006 (and therefore the waiver was not used), or the waivers were for FY 2006 fees that were invoiced after the close of the fiscal year.  The agency expects that these will result in the waiver of fees that would otherwise have been collected in FY 2007, and their impact will be reflected in the FY 2007 ADUFA Financial Report.

In addition to the waivers and reductions shown above, on September 30, 2006, there were four waiver requests pending relating to fees payable in FY 2006 that were requested on the basis that fees assessed exceed FDA's costs.

In FY 2006 FDA denied 6 applications for waivers and reductions.  The followings are the waiver requests that were denied:

  • one for application fees,
  • four for sponsor fees,
  • one for 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 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 (NADA) - 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; and
  • 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 NADAs, supplemental animal drug applications, INADs, 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; and
  • 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 pre-market applications; and
  • FDA sponsored conferences/workshops related to pre-market 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); and
  • 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 Office of the Commissioner (OC).  These organizations correspond to the cost categories presented 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 Pre-approval Inspection and Investigation
ORA
Costs for Agency General and Administrative
OC

The costs were accumulated using activity time tracking 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 ADUFA, the cost categories within each organization listed above were identified as parts 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 standard operating procedures 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 61 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 Fiscal Year (FY) 2004.  It combined the support responsibilities and resources previously located both in the centers and in OC, and ensured effective and efficient services in a competitive market environment.

Prior to FY 2004, many of the Office of Shared Services Full Time Equivalent employees and resources were originated in the organizations that are associated with the animal drug review process.  In FY 2006, 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 2006

The time reporting system operated by CVM indicated 58 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 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 FY 2005 and FY 2006.

Food and Drug Administration
Office of Regulatory Affairs
Costs of the Review Process for Animal Drug Applications
As of September 30, 2006

Cost Component
FY 2005
FY 2006
Staff Years Utilized
14
14
ORA Average Salary and Benefits
$93,594
$99,675
Salary and Benefits
$1,310,313
$1,395,453
Operating and Other Costs (Other costs are central, GSA rent, rent-related, and Shared Services costs that are applicable to the process for the review of animal drug applications.)
$875,551
$902,636
Grand Total
$2,185,864
$2,298,089

 

Agency General and Administrative Costs

The agency general and administrative costs are incurred in the FDA's OC.  During FY 2006, 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 OC costs by the total FDA salary expenses (excluding benefits) after subtracting the salary expense (excluding benefits) from OC.  That percentage is then multiplied by the sum of salaries (excluding benefits) applicable to the process for the review of animal drug applications in CVM and ORA to derive the applicable general and administrative costs.

Using this methodology, FDA dedicated $3,039,062 in general and administrative costs to the animal drug review process in FY 2006.   The costs are total costs obligated from appropriations and user fees.  FDA intends to maintain a low overhead cost for the review process of the animal drug applications.  General and administrative costs are approximately 6.6 percent of FY 2006 total animal drug review process costs. 

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Footnotes

 

1 Number may be different due to rounding.  The adjustment factor in this report is shown and rounded to the fourth decimal place.  $1,454,432,777 is calculated from the adjustment factor with full decimal places.

2 Number may be different due to rounding.  The adjustment factor in this report is shown and rounded to the fourth decimal place .  $34,672,257 is calculated from the adjustment factor with full decimal places.

3 FDA published FY 2006 animal drug user fee rates in the federal register notice – August 1, 2005 (70 FR 44101).

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