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Appendix A: Conditions for Assessment and Use of Fees

The Federal Food, Drug, and Cosmetic Act (the Act), as amended by AGDUFA, specifies three legal conditions that must be met in each fiscal year before FDA can collect and spend generic new animal drug user fees.  A summary of the legal conditions has been introduced on page 2 of this report.  This appendix provides detailed descriptions of these conditions and explanations of how FDA met these conditions in  FY 2009.

In order to compare and determine whether the legal conditions are satisfied, FDA must calculate and incorporate adjustment factors.

Paragraph 741(k)(2) 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 October of the preceding fiscal year divided by –

(A) For the purpose of subsection (f)(1), such Index for October 2002; and
(B) For purposes of subsection (g)(2)(A)(ii), such Index for October 2007.

We refer to item (A) above as the first legal condition adjustment factor, and to item (B) above as the third legal condition adjustment factor.  (The second legal condition does not have an adjustment factor associated with it.)

For the first legal condition adjustment factor above, the base month is October 2002.  The consumer price index for October 2002 was 181.3.  The consumer price index for October 2007, the October preceding FY 2009, was 208.936.  208.936 divided by 181.3 equals 1.152432 (rounded to sixth decimal place).  This is the adjustment factor for FY 2009 for the first legal condition (subsection (f)(1)).

For the third legal condition adjustment factor above, the base month is October 2007.  The consumer price index for October 2007 was 208.936.  The consumer price index for October 2007, the October preceding FY 2009, was 208.936.  208.936 divided by 208.936 equals 1.000000 (rounded to sixth decimal place).  This is the adjustment factor for FY 2009 for the third legal condition (subsection (g)(2)(A)(ii)).

The first legal condition is found in section 741(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 2009 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 1.152432 (rounded to sixth decimal place) equals \$1,583,111,972.

In FY 2009, Congress appropriated \$2,038,964,000 to FDA for salaries and expenses, excluding user fees.  Because the FY 2009 salaries and expenses appropriation is greater than the adjusted FY 2003 Salaries and Expenses appropriation (\$1,583,111,972) the first legal condition was met.

The second legal condition is described in section 741(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”.

On March 11, 2009, the President signed the FY 2009 Omnibus Appropriations Act, Public Law 111-8, which specified the collectable user fees amount for AGDUFA.  That provision appropriated \$4,831,000 in generic new animal drug user fees.  Therefore, the second legal condition was met.

The third legal condition is defined in section 741(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 abbreviated applications for generic new animal drugs (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 2008 multiplied by the adjustment factor.

The third condition requires a minimum spending from appropriations, excluding user fees, on the process of generic new animal drug review.  The minimum spending from appropriations is the amount that FDA spent on the process for the review of abbreviated applications for generic new animal drugs in FY 2008, adjusted for inflation.  FDA must spend at or above this minimum spending level from appropriations.

In accordance with AGDUFA, the base amount to be spent from appropriations for the process for the review of abbreviated applications for generic new animal drugs is the amount that FDA obligated from for the process for the review of abbreviated applications for generic new animal drugs in FY 2008, multiplied by the applicable adjustment factor, which for FY 2009 is 1.0000.  In FY 2008 FDA obligated a total of \$5,524,745 for the process for the review of abbreviated applications for generic new animal drugs.  Since the adjustment factor is 1.0, FDA must spend at least this amount from appropriations, exclusive of user fees, in FY 2009.  In FY 2009, FDA obligated \$7,705,137 from appropriations for the process for the review of abbreviated applications for generic new animal drugs.  Since the FY 2009 amount obligated from appropriations exceeds the specified minimum appropriation spending level, FDA met the third condition.

The table below shows the amounts FDA spent on the process for the review of abbreviated applications for generic new animal drugs from appropriations and user fees for FY 2009.

OBLIGATIONS FOR THE PROCESS FOR THE REVIEW OF
GENERIC NEW ANIMAL DRUG APPLICATIONS
AS OF SEPTEMBER 30, 2009

Minimum Required from Appropriations in FY 2009 FY 2008  FY 2009 \$5,524,745 \$5,524,745 \$7,705,137 \$0 \$2,125,300 \$5,524,745 \$9,830,437

Next Section:  Appendix B - Number of Applications Paid by Fees in FY 2009

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