Appendix E: Development of Costs for the Process for the Review of Animal Drug Applications
The costs associated with the process for the review of animal drug applications are based on obligations recorded within FDA’s CVM, ORA, and Office of the Commissioner (OC). These organizations correspond to the cost categories presented as follows:
- 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 derived mostly from time reporting systems in CVM and ORA, and were calculated for OC, as described in more detail in this Appendix. Using the definitions of costs and activities included in the process for the review of animal drug applications in the ADUFA, as expanded in the discussion in Appendix D, the cost categories within each organization listed above were identified as parts of the animal drug review process.
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 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 in October 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. These activity definitions are consistent with the allowable costs for the process of the review of animal drug applications as detailed in Appendix D.
FDA’s budget is very payroll intensive—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 each individual cost center for the fiscal year.
CENTER TIME REPORTING RESULTS FOR FY 2009
The time reporting system operated by CVM showed 61 percent of all time spent in the Center was dedicated to the process for the review of animal drug applications and submissions as defined in ADUFA.
A number of agency-wide expenses are paid from the central accounts rather than from funds allocated to a specific center. These costs include rent for facilities that house CVM staff, telecommunications and utility costs, some computer equipment and support costs, facilities repair and maintenance costs, part of extramural and service contract costs, and costs of the Office of Shared Services which supports all FDA programs and activities. For these agency-wide costs that are chargeable to the center, we assumed that a percentage of them are chargeable to the process for the review of animal drug applications. That percentage was the amount of time reported for allowable activities (direct and indirect) in the center, as a percentage of total time reported for all center direct and indirect activities.
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 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 performed in CVM, ORA, and OC. In FY 2007, 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.
FIELD INSPECTION AND INVESTIGATION COSTS
ORA incur all field inspection, investigation, and laboratory analyses costs. ORA costs are incurred in both district offices (the "field") and headquarters offices, which are tracked in its 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, multiplies the total number of staff-years used in the process for the review of animal drug applications by the average salary cost in ORA to arrive at ORA salary costs for work that is a part of the process for the review of animal drug applications as defined in ADUFA. 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 2008 and FY 2009.
FOOD AND DRUG ADMINISTRATION
OFFICE OF REGULATORY AFFAIRS
COSTS OF THE REVIEW PROCESS FOR ANIMAL DRUG APPLICATIONS
AS OF SEPTEMBER 30, 2008 AND 2009
|Cost Component||FY 2008||FY 2009|
|Staff Years Utilized||10||10|
|ORA Average Salary and Benefits||$109,685||$107,401|
|Salary and Benefits (Staff Years times ORA Average Salary and Benefits)||$1,096,850||$1,074,010|
|Operating and Other Costs (1)||$813,542||$812,431|
|Grand Total (salary/benefits and operating/other costs)||$1,910,392||$1,886,441|
(1) Other costs are central, GSA rent, rent-related, and Shared Services costs that are applicable to the process for the review of device applications.
ORA costs for the process for the review of animal drug applications described above include total process costs, including costs paid from appropriations and costs paid from fee revenues. The cost per FTE declined slightly in FY 2009 because ORA hired a large number of entry-level personnel over the year.
AGENCY GENERAL AND ADMINISTRATIVE COSTS
The agency general and administrative costs are incurred in the FDA's OC. At the end of FY 2009, OC was comprised of the following offices:
- Immediate Office of the Commissioner
- Office of the Chief Counsel
- Office of the Chief of Staff
- Office of the Administrative Law Judge
- Office of Equal Employment and Diversity Management
- Office of International Programs
- Office of Administration
- Office of Policy, Planning and Budget
- Office of Special Medical Programs
- Office of Legislation
- Office of the Counselor to the Commissioner
- Office of Women’s Health
- Office of Foods
- Office of the Chief Scientist
- Office of External Affairs
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 $4,664,010 in general and administrative costs to the animal drug review process in FY 2009. The costs are total costs obligated from appropriations and user fees. FDA strives to maintain a low overhead cost for the review process of the animal drug applications. General and administrative costs are approximately 7 percent of FY 2009 total animal drug review process costs—about the same percent as in FY 2008.