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FY 2007 MDUFMA Performance Report: Main Report

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Background

 

MDUFMA authorizes FDA to collect fees from the medical device industry to augment appropriated funds for the medical device review process. MDUFMA also requires additional funding from appropriations. FDA uses the additional funds from fees and appropriations to support the process for the review of medical device applications as defined in MDUFMA, so that safe and effective devices reach the American public more quickly.

Under MDUFMA, companies must pay application fees when submitting certain device applications to FDA. Fee-paying applications include premarket applications (PMAs), product development protocols (PDPs), premarket reports (PMRs), modular PMAs, biologics license applications (BLAs), certain supplements to all of these applications, and premarket notification submissions (510(k)s). A fee for each application type is fixed in statute as a percent of a standard fee for a PMA. The MDUFSA, Public Law 109-43, amended MDUFMA on August 1, 2005. MDUFSA set the standard fee for a premarket application for FY 2007 at $281,600. FDA then established fee rates for all other applications based on the percents specified in the statute. Unlike the Prescription Drug User Fee Act (PDUFA), MDUFMA does not have product or establishment fees in the first 5 years.

MDUFMA requires FDA to submit two reports to Congress each fiscal year: 1) a performance report is to be sent within 60 days after the end of each fiscal year, and 2) a financial report is to be sent within 120 days after the end of each fiscal year. FDA is separately transmitting the FY 2007 MDUFMA Performance Report that discusses FDA's progress in meeting the goals referred to in MDUFMA. This report is FDA's FY 2007 MDUFMA Financial Report covering the period October 1, 2006 through September 30, 2007.

As required by MDUFMA, this report presents the statutory conditions or "triggers" that must be met as a condition for FDA to be able to collect and spend the fees, and explains how they were met in FY 2007. This report describes the process for the review of medical device applications, as defined in MDUFMA and states the total costs of this process in FY 2007, including costs paid from both fee collections and appropriations. The report also presents the FY 2007 fee collections, obligations, and carryover balances.

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Meeting the Statutory Conditions for User Fees in FY 2007

 

MDUFMA imposes three statutory conditions that FDA must satisfy before it can collect and spend user fees. FDA's calculations show that FDA met these conditions in FY 2007. See summaries set forth below.

The first condition is a funding condition that affects FDA's fee collections in FY 2007. MDUFMA, as amended by MDUFSA, specifies a minimum amount that must be appropriated for the Device and Radiological Health line of FDA's appropriation, exclusive of user fees, for FY 2007. That minimum amount is $230,551,000 (rounded to the next whole thousand dollars). In FY 2007, the final appropriation for the Device and Radiological Health line of FDA's appropriation, exclusive of user fees, was $230,682,000. Therefore, FDA met the first condition.

The second condition is that the amount of user fees collected by FDA in each fiscal year must be specifically stated in the Appropriation Acts of February 15, 2007. The President signed the FY 2007 Appropriation Act, Public Law 110-5. It states that the amounts collectable from medical device user fees are $43,726,000. Therefore, FDA met the second condition.

The third condition is that user fees may only be retained and spent in years when FDA also spends a specified minimum level of appropriated funds, exclusive of user fees, for the review of medical device applications. The minimum level is the appropriations that FDA spent on the process for the review of medical device applications in FY 2002, adjusted for inflation. That adjusted minimum level for FY 2007 is $134,117,560. FDA obligated $173,130,797 from appropriations. Because FDA spent more than the specified minimum level, FDA met the third condition.

MDUFMA also contains a provision that FDA obligations on medical device establishment inspections must be equal to or greater than it spent in FY 2002, increased by 5 percent each fiscal year. If FDA does not satisfy this condition for 2 consecutive years, FDA is not allowed to use accredited third-parties to conduct certain medical device establishment inspections in the future years. FDA spending on medical device establishment inspections exceeded the specified minimum level for each of the most recent fiscal years, so FDA may continue to permit accredited third-parties to conduct certain medical device establishment inspections in the future years.

FDA provides more details on the calculations that show FDA satisfied these statutory conditions in Appendix A.

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User Fee Collections

 

MDUFMA directs FDA to receive fees only from the medical device applications through FY 2007. The statute directs FDA to set the fee rate for each application type as a percentage of the standard fee for a PMA. For FY 2007, MDUFMA, as amended by MDUFSA, specified that the standard fee for a premarket application is $281,600. FDA, then, establishes other application fees based on the specified percents mentioned in MDUFMA.

Under MDUFMA, medical device user fees continue to remain available to FDA for use in future years for the medical device review process if they are not obligated at the end of the fiscal year. The cash balance carried to the next fiscal year is discussed on page 6, section Carryover Balances. The table below shows the amount of user fees FDA has collected since MDUFMA began.

Food and Drug Administration
Statement of Medical Device Fee Collections
As of September 30, 2007
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007
Total
Total Fees Collected
$21,620,549
$25,280,073
$31,801,091
$35,288,344
$29,342,013
$143,332,070
Unearned Fees
 
 
 
$721,156
$2,448,619
$3,169,774
Fees Receivables
$32,265
 
 
 
$221,056
$253,321

Unearned Fees are fees collected for applications that had not been received by FDA as of September 30, 2007. They are included above in the 'Total Fees Collected' amounts.

Note that user fees collected (the first line above) are initially credited to the year the fee was received. However, the revenues are later reassigned to the year the application is received — referred to as the cohort year. Last year's report showed $35,358,220 of fees collected in FY 2006, of which $2,568,581 was shown as "unearned income" since the application for which the fee was paid had not been received by the end of FY 2006. The FY 2006 total fees collected line is reduced to $35,288,344 in this report, since all but $721,156 of the unearned income reported last year has now been either refunded or credited to FY 2007 — the year the application was actually received. The total fees collected line for FY 2007, when seen in next year's FY 2008 report, will also be different from than the figure shown here — reflecting both the refund or reassignment of most of the unearned income to FY 2007, and the refunds that will be made over the next 12 months. Totals reported for each year are net of any refunds for that year, as of September 30, but do not take into account any refunds that may be made after September 30. Information on the number of each type of fee received in FY 2007 is contained in Appendix B.

In addition to the revenue shown in the table above, a total of $32,265 is due from unpaid invoices for fees for applications that were submitted between October 1, 2002, and March 30, 2003. These FY 2003 accounts receivable have been turned over to a collection agency. After April 1, 2003, FDA no longer accepted applications for review unless a fee for the application had been received. Accounts receivable after that date reflect applications that initially paid a lower fee than FDA subsequently determined was appropriate for the submission.

A summary of FY 2007 waivers, reductions, and exemptions is provided in Appendix C.

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Obligation of User Fee Collections

 

The user fees collected are expended only for costs necessary to support the process for the review of medical device applications, as defined in MDUFMA. The allowable and excludable costs for the process for the review of medical device applications are defined in Appendix D. In FY 2007, FDA obligated $35,202,700 (17 percent of the total) from user fee collections and $173,130,797 (83 percent of the total) from appropriations, as reflected in the table below.

Food and Drug Administration
FY 2007 Medical Device Review Obligations
by Expense Category and Revenue Source
As of September 30, 2007
Expense Category
From Appropriations
From Fees
Total
Personnel Compensation and Benefits
$112,261,370
$25,312,174
$137,573,544
Travel and Transportation
$2,086,865
$290,248
$2,377,113
GSA Rent
$12,855,664
$2,348,500
$15,204,164
Communications
$3,064,112
$180,859
$3,244,971
Contract Services
$33,938,817
$6,412,302
$40,351,119
Equipment and Supplies
$6,060,452
$419,676
$6,480,128
Other*
$2,863,518
$238,941
$3,102,459
Total Obligations
$173,130,797
$35,202,700
$208,333,497

*Other includes expense categories like rent payments to others, printing & reproduction, and other miscellaneous expenses.

More information about the costs of the process for device review, as defined in MDUFMA, begins on page 8.

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Carryover Balances

 

Under MDUFMA, fees collected, appropriated, and not obligated by the end of a fiscal year remain available to FDA for future fiscal years.  They are referred to as carryover balances. Operations in FY 2007 resulted in a reduction of carryover balances of $5,377,746, and reduced the net carryover balance from $16,240,618 to $10,862,872 by the end of the year.

The table below captures FDA's carryover balances at the beginning and each fiscal year since the beginning of MDUFMA in FY 2003.

Food and Drug Administration
Statement of Cash, Obligations, and
Carryover Balances by Fiscal Year
As of September 30, 2007
Fiscal Year
Beginning Carryover
Net Cash
Obligations
Year-End Carryover
2003
 
$21,936,910
$14,837,600
$7,099,310
2004
$7,099,310
$26,828,534
$23,875,200
$10,052,644
2005
$10,052,644
$31,102,864
$27,171,400
$13,984,108
2006
$13,984,108
$34,325,120
$32,068,610
$16,240,618
2007
$16,240,618
$29,824,954
$35,202,700
$10,862,872
2008
$10,862,872
 
 
 

The carryover balances in the table reflect the cumulative cash from the beginning to the end of each fiscal year, the net cash collected, and any refunds or other adjustments that occurred during each fiscal year. The net cash amount for FY 2007 is more than the fees credited to FY 2007, shown on page 3. Some of the cash collected in 2007 was for fees owed for previous years, and reflected as previous year collections in the table on page 3. The net collection in FY 2007 also reflects refunds made in FY 2007.

 

Fee Amounts Appropriated, Fees Collected, and Differences

Under MDUFMA, if fees are collected in excess of the amount of fees appropriated each year, the differences may be kept and used to reduce fees that would otherwise be assessed in a later fiscal year. The following table depicts for each year cumulative net collections, collection ceilings (appropriated amount of fees that may be collected each year), and differences through the end of FY 2007.

Food and Drug Administration
Statement of Fees Appropriated, Fees Collected, and Differences
As of September 30, 2007
Fiscal Year
Fees Appropriated
Fees Collected
Differences
2003
$25,125,000
$21,620,549
($3,504,451)
2004
$31,654,000
$26,280,073
($6,373,927)
2005
$33,938,000
$31,801,091
($2,136,909)
2006
$40,300,000
$35,288,344
($5,011,656)
2007
$43,726,000
$29,342,013
($14,383,987)
Total
$174,743,000
$143,332,070
($31,410,930)

As the table shows, the total amount of fees collected in each year always fell short of the amount appropriated for that year, and over the 5 years of MDUFMA, the total fee collections have been $31.4 million less than fee appropriations. As a result, there have been no excess collections in any year that need to be used to reduce future years' collections.

 

Availability of Carryover Balances

Of the FY 2007 carryover balance, $3,169,774 is the unearned fees from applications that are not yet received by FDA. FDA also holds $1,000,000 in reserve for potential refunds in future years. In addition, MDUFMA requires FDA to have at least 1 month of operating expenses from fees in reserve at the end of each fiscal year for use at the beginning of the next fiscal year. All three of these amounts must be held in reserve and are not available for allocation. The table below shows the amounts of carryover that must be held in reserve and the amount available for allocation in FY 2008.

Food and Drug Administration
Proposed Allocations of Medical Device Fee Revenue
Carryover Balance
As of September 30, 2007
Status of Carryover Funds
Amount
Unearned Fees
$3,169,774
Reserve for Future Refunds
$1,000,000
1-Month Reserve for Next Fiscal Year
$4,031,000
Available Cash for Allocation in FY 2008
$2,662,098
Total Carryover Balance
$10,862,872

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Total Costs of the Process for the Review of Medical Device Applications

 

FDA uses data from time reporting surveys conducted during four 2-week periods each fiscal year to determine the percent of cost of each organizational component devoted to activities that are included in the process for the review of device applications, as defined in MDUFMA. See Appendix D for the descriptions of the allowable activities and Appendix E for more detail on how FDA develops the costs of the process for the review of medical device applications.

The following table presents the total costs for the review of medical device applications for FY 2006 and FY 2007, by FDA organizational components and by source of funds (appropriations and user fee collections). The amounts are based upon obligations recorded as of the end of each fiscal year. In the past, over 81 percent of obligated funds in FDA were expended within 1 year, and 96 percent within 2 years. Thus, obligations represent an accurate measure of costs.

Food and Drug Administration
Process for the Review of Medical Device Applications
Total Costs by Components and Funds
As of September 30, 2007
FDA Organizational Component
FY 2006
FY 2007
Center for Devices and Radiological Health
$155,850,979
$159,387,019
Center for Biologics Evaluation and Research
$20,830,565
$22,889,470
Field Inspection and Investigation
$10,499,258
$11,511,598
Agency General and Administrative Costs
$12,313,468
$14,545,410
Total Process Costs
$199,494,271
$208,333,497
Obligations from Appropriations
$167,425,661
$173,130,797
Obligations from Medical Device User Fee Collections
$32,068,610
$35,202,700

The costs for all components increased in FY 2007. The increase reflects both the increase in costs for pay and support, and an increase in the total number of FTEs devoted to the process for the review of medical devices in FY 2007.

 

Full Time Equivalents (FTEs)

The table below presents FTE levels that support the medical device application review process by FDA organizational components. This is a measure of paid staff years devoted to device review. In FY 2007, FDA spent about 60 percent of its total funds for the salaries and benefits of the medical device process FTEs, and the balance of the funds went for support of these employees.

Food and Drug Administration
Process for the Review of Medical Device Applications
Total FTEs
As of September 30, 2007
 
Fiscal Years
 
2003
2004
2005
2006
2007
Center for Devices and Radiological Health
662
713
794
765
806
Center for Biologics Evaluation and Research
59
70
87
108
105
Office of Regulatory Affairs
59
60
64
65
69
Office of the Commissioner
77
72
89
82
92
Total FTE
829
857
915
1,034
1,071

FTE numbers for FY 2004 through FY 2007 show CDRH, CBER, and ORA staff transferred to the consolidated shared services organization in OC as if they are still in CDRH, CBER, and ORA, to make the numbers comparable to the FY 2002 and FY 2003 numbers.

The increase in CDRH FTEs from FY 2006 to FY 2007 resulted from hiring completed at various times during FY 2006 and FY 2007.

In addition to the FTE numbers shown in the table, CDRH also expended 76 more contractor staff-years on the medical device review process in FY 2007 than it did in FY 2002.

The change in CBER's FTE between FY 2006 and FY 2007 is the result of minor variations in workload.

 

Performance Goals

In FY 2007, FDA made steady progress in implementing MDUFMA. FDA continued to focus on consulting with its stakeholders, developing guidance documents, and implementing new review processes and process improvements required to meet MDUFMA's progressively challenging performance goals. Among the key activities and accomplishments during FY 2007 were:

  • Steady progress in meeting MDUFMA performance goals.  FDA's overall performance for the FY 2003 through FY 2007 receipt cohorts indicates FDA is meeting or exceeding most MDUFMA performance goals.
  • Guidance Documents.  FDA issued two guidance documents that related to MDUFMA during FY 2007. 
  • Stakeholder communication and consultation.  During FY 2007, FDA's consultations with stakeholders focused on reauthorization of medical device user fees and performance goals for FY 2008 through FY 2012.  On April 30, 2007, FDA held an open public meeting to discuss proposals for reauthorization.
  • Reports to Congress issued in FY 2007.  During FY 2007, FDA submitted three annual reports required by MDUFMA to Congress: 1) FY 2006 MDUFMA Performance Report, 2) FY 2006 MDUFMA Financial Report, and 3) FY 2006 Office of Combination Products Report.  FDA also submitted three topical reports required under MDUFMA: 
    1. Postmarket Surveillance of Medical Devices Used in Pediatric Populations:  A report concerning the adequacy of existing postmarket surveillance of implanted devices used in children and devices used in pediatric populations.  The report followed, and was based on, a study conducted by the Institute of Medicine under an agreement with FDA.  This report was required by section 212(c) of MDUFMA.
    2. Effect of the Medical Device User Fee Program on Postmarket Surveillance of Medical Devices:  A study of the effects of medical device user fees on FDA's ability to conduct postmarket surveillance, the extent to which device companies comply with postmarket surveillance requirements, and improvements needed for adequate postmarket surveillance.  This report was required by section 104(b) of MDUFMA.
    3. Third-Party Review of Medical Device Premarket Notifications:  A study of FDA's experience with third-party reviews of 510(k) premarket notifications. This report was required by section 523(d) of the Food, Drug, and Cosmetic (FD&C) Act, a provision added by MDUFMA.

CBER expects to achieve all its FY 2007 MDUFMA performance goals when the cohort is completed.  Thus far, CBER has met or exceeded all the FY 2007 MDUFMA decision-performance goals.  CBER continues to emphasize the medical device review process oversight, such as focusing on communication with sponsors during the first review cycle and updating 510(k) standard operating procedures and policies to implement process improvements.  CBER also continues to harmonize with CDRH on revisions or updates of common device review processes and policies to improve review efficiency, such as review of the Quality System Record section of a PMA, when to file supplements to PMAs and review of PMA annual reports.  During FY 2007, CBER made a number of modifications for information technology systems, Regulatory Management Systems/Biologics Licensing Application, and Blood Logging and Tracking.  These changes include updates to fields, forms, views, and reports for payment information and bundled submissions.  These enhancements facilitate the transfer of data between CBER and the Office of Financial Management for MDUFMA payments to expedite the start of application review.

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Management Challenges for FY 2008

 

On September 27, 2007, the President signed the Food and Drug Act Amendments Act (FDAAA) of 2007, Title II of which reauthorizes medical device user fees for an additional  5 years, for  FY 2008 through FY 2012.  This reauthorization of MDUFMA (referred to as MDUFMA II) calls for both challenging performance goals and a new fee structure.

During FY 2008, FDA will focus on implementing the Medical Device User Fee Amendments of 2007 (Title II of FDAAA of 2007, P.L. 110-85, enacted September 27, 2007).  The 2007 Amendments provides a significantly changed fee structure.  All fees established under MDUFMA I have been significantly reduced (for example the standard fee for a 510(k) premarket notification submitted during FY 2008 is 18 percent less than the fee for an FY 2007 submission, and the standard fee for a premarket application submitted during FY 2008 is 34 percent less than the fee for an FY 2007 submission).  Small businesses receive more generous discounts than under MDUFMA I (for example the small business fee for a 510(k) premarket notification submitted during FY 2008 is 49 percent less than the fee for an FY 2007 submission, and the small business fee for a premarket application submitted during FY 2008 is 57 percent less than the fee for an FY 2007 submission). 

These fee reductions are made possible by new categories of fees, most notably a new annual registration fee that will apply to certain medical device establishments; establishment registration fees are to supply about 45 percent of the anticipated device fee revenue in       FY 2008.  Implementation of the annual establishment registration fee is a particularly complex challenge, because this new fee should be paid by almost 13,000 establishments worldwide.  This is a much larger volume of user fee transactions than FDA has had to process before, and the fee payments are also linked to the on-line registration of these establishments, which is also required by the 2007 Amendments beginning with registrations for FY 2008.  To effectively implement and oversee the changes made by the 2007 Amendments, FDA must:

  • develop new IT systems to process on-line registrations and associated fee payments;
  • develop new IT systems to track FDA's performance against the new set of performance goals for FY 2008 - FY 2012;
  • develop new control mechanisms; and
  • educate the industry concerning the new provisions.

The performance goals for applications filed or accepted from FY 2008 through FY 2012 are defined in a September 27, 2007, letter from HHS Secretary Michael O. Leavitt to Congress; see the following table for a summary of these goals.

Medical Device Review Performance Goals for FY 2008 through FY 2012
Application Type
Type of Goal
Review Time Goal
Performance Goal
Premarket approval application (PMA), panel-track PMA supplement, premarket report
FDA Decision
180 days
60%
295 days
90%
Expedited PMA, expedited panel-track PMA supplement
FDA Decision
180 days
50%
280 days
90%
PMA module
FDA Action
90 days
75%
>120 days
90%
180-day PMA supplement
FDA Decision
180 days
85%
210 days
95%
Real-time PMA supplement
FDA Decision
60 days
80%
90 days
90%
510(k) premarket notification
SE or NSE Decision
90 days
90%
150 days
98%

An "FDA Decision" is any of the following: a denial order, an approvable letter (including approvable pending GMP inspection), a not approvable letter, a withdrawal, or a denial order.

An "FDA Action" on a PMA module is any of the following: accepting the module, a request for additional information, receipt of the PMA, or withdrawal of the module

These goals are structured in ways that differ from the goals for FY 2003 through FY 2007:

  • The FY 2008 – FY 2012 goals do not vary from one fiscal year to the next. Instead, each goal will apply throughout the 5 years from FY 2008 through FY 2012.
  • Except for PMA modules, all of FDA's performance goals focus on making an "FDA decision" and FDA will not have any cycle goals.  An "FDA decision" is any of the following: a denial order, an approvable letter (including approvable pending Good Manufacturing Practice (GMP) inspection), a not approvable letter, a withdrawal, or a denial order.
  • For PMA modules only, FDA's performance goals focus on FDA taking an "action" on the module.  An "FDA action" on a PMA module is any of the following: accepting the module, a request for additional information, receipt of the PMA, or withdrawal of the module.  PMA modules are not subject to a decision goal, because the modular submission is converted to a PMA upon submission of the final module.
  • Each goal has two tiers, and all submissions are measured in both tiers.  Compared with the lower tier, the upper tier of each goal provides for additional review time, but requires a higher percentage of reviews to have an FDA decision (or, in the case of PMA modules, an FDA action) within the specified review time.

The new goals are very challenging, and FDA will have to carefully monitor our review processes to ensure we meet each goal.

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