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FY 2008 MDUFMA Financial Report

required by the

Medical Device User Fee and Modernization Act of 2002

As Amended

Food and Drug Administration
Department of Health and Human Services

May 2009  

Printer-friendly PDF (207 KB)


Executive Summary

The Medical Device User Fee and Modernization Act (MDUFMA) of 2002, as amended, requires the Food and Drug Administration (FDA) to report annually on the financial aspects of its implementation of MDUFMA.  This is the annual financial report to Congress that covers activities for fiscal year (FY) 2008.

MDUFMA, as amended, specifies that three conditions must be satisfied in order for FDA to collect and spend MDUFMA fees each year:

  1. Within FDA’s salaries and expenses appropriation, the amount appropriated for devices and radiological health, excluding fees, each year must be at least $205,720,000, multiplied by an adjustment factor specified in MDUFMA.
  2. The fee amounts that FDA can collect must be specified in the Appropriation Acts.
  3. FDA must spend at least as much from appropriated funds, exclusive of user fees, for the review of medical device applications as it spent in FY 2002, multiplied by the adjustment factor specified in MDUFMA.

MDUFMA also contains a provision that FDA must spend at least as much on medical device inspections as it spent in FY 2002, increased by 5 percent in each fiscal year.

This report explains how FDA met the statutory conditions in FY 2008.  The report also provides information on user fee collections, expenditures, and carryover balances.  In FY 2008, FDA net collections totaled $48.9 million from fees.  FDA obligated $36.4 million from MDUFMA collections to support FDA’s medical device review program.  FDA carried forward into FY 2008 a balance of $23 million—about $12 million more than the carryover balance at the end of FY 2007.  (It was expected that carryover balances would grow through 2010, and be drawn down in the final two years of the program (2011-2012).  About 63 percent of the total expenses for the medical device review program in FY 2008 went for employee pay and benefit costs.  The remaining 37 percent was spent on operating and the infrastructure costs necessary to support the medical device review program. 

MDUFMA fees, along with the increased appropriations from Congress, enabled FDA to dedicate 266 more full-time equivalents (FTEs) to the medical device review program in FY 2008 than the 829 FTE used in FY 2002—the year before MDUFMA was enacted.  An additional 72 contractor staff-years were also dedicated to the device review program in FY 2008 compared with FY 2002.  These resources have enabled FDA to achieve the performance goals associated with the enactment of MDUFMA and strengthen FDA’s medical device review program.  FDA looks forward to continuing to strengthening the medical device review program in FY 2009.


 Table of Contents

Background
Meeting the Statutory Conditions for User Fees in FY 2008
User Fee Collections
Obligation of User Fee Collections 
Carryover Balances
Total Cost of the Process for ths Review of Medical Device Applications
Management Challenges for FY 2009 
 

Appendices

Appendix A:  Statutory Conditions for Collection and Use of Fees
Appendix B:  Number of Fee Paid Applications in FY 2008
Appendix C:  Waivers, Reductions, and Exemptions
Appendix D:  Allowable and Excluded Costs for the Process for the Review of Medical Device Applications
Appendix E:  Development of Costs for the Process for the Review of Medical Device Applications


 Background

MDUFMA authorized FDA to collect fees from the medical device industry to augment appropriated funds for the medical device review process from FY 2003 through FY 2007.  MDUFMA also required increasing funding from appropriations each year.  FDA used 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 reached the American public more quickly.   

The Medical Device User Fee Amendments of FY 2007 (Title II of the Food and Drug Administration Amendments Act (FDAAA) of 2007) amended MDUFMA and extended its authorization for an additional 5 years, through FY 2012.  This reauthorization is referred to as MDUFMA II.   

Under MDUFMA II, 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, premarket notification submissions (510(k)s), 30-day notices of changes to manufacturing procedures or methods of manufacture affecting device safety and effectiveness, and requests for classification information under section 513(g).  In addition, under MDUFMA II, firms must pay an annual fee for each establishment subject to a registration fee and a fee for periodic reports regarding Class III devices.  The fees for a PMA and for device establishment registration are specified in the statute for each year through FY 2012.  Fees for each other application type and for periodic reports are fixed in statute as a percent of the PMA fee for each year.  Each year in August FDA publishes all fee rates for the next fiscal year based on the percents specified in the statute.

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 2008 MDUFMA Performance Report that discusses FDA’s progress in meeting the goals referred to in MDUFMA.  This report is FDA’s    FY 2008 MDUFMA Financial Report covering the period October 1, 2007 through September 30, 2008.

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 2008.  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 2008, including costs paid from both fee collections and appropriations.  The report also presents the FY 2008 fee collections, obligations, and carryover balances.

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 Meeting the Statutory Conditions for User Fees in FY 2008

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 2008. See summaries set forth below.

The first condition is a funding condition that affects FDA’s fee collections in FY 2008. MDUFMA, as amended, specifies a minimum amount that must be appropriated for the Device and Radiological Health line of FDA’s appropriation, exclusive of user fees, for each year.  For FY 2008, that minimum amount is $233,616,000 (rounded to the next whole thousand dollars).  In FY 2008, the final appropriation for the Device and Radiological Health line of FDA’s appropriation, exclusive of user fees, was $237,734,000.  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.  The President signed the FY 2008 Consolidated Appropriation Act, Public Law 110-161 on December 26, 2007.  It states that the amount collectable from medical device user fees is $48,431,000.  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, multiplied by an adjustment factor.  That adjusted minimum level for FY 2008 is $135,900,688.  FDA obligated $198,776,699 from appropriations in FY 2008 on the process for the review of device applications as defined in MDUFMA.  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 two 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 two 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 from the medical device applications as well as annual establishment registration fees and periodic report fees through FY 2012.  The statute directs FDA to set the fee rate for each application type and for periodic reports as a percentage of the standard fee for a PMA.  For FY 2008, MDUFMA specifies that the standard fee for a premarket application is $185,000 and for a device establishment fee is $1,706.  FDA then sets the other fees based on the percentages specified in the statute. 1 

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 balances carried to the next fiscal year are provided in the tables on page 5, in the section Carryover Balances.  The table below shows the amount of user fees FDA has collected over the most recent two fiscal years.

Food and Drug Administration
Statement of Medical Device Fee Collections 
As of September 30, 2008

 FY 2007FY 2008
Total Fees Collected$29,001,928$49,080,016
Unearned Fees 1$1,252,575$3,720,696
Fees Receivable$342,603$3,797,410

1/Unearned Fees are fees collected for applications that had not been received by FDA as of September 30, 2008 or for FY 2008 establishment fees received without identification of the remitter.  They are included above in the 'Total Fees Collected' amounts.

Note that user fees collected (the first line in the table) are initially credited to the year the fee is received.  However, the revenues are later reassigned to the year the application is received, if that is different.  This is referred to as the cohort year.  Last year’s report showed $29,432,013 of fees collected in FY 2007, of which $2,448,619 was shown as “unearned income” since the application for which the fee was paid had not been received by the end of FY 2007.  The FY 2007 total fees collected line is reduced to $29,001,928 in this report, and all but $1,252,575 of the unearned income reported last year has now been either refunded or credited to the year the application was actually received.  The total fees collected line for FY 2008, when seen in next year’s FY 2009 report, will also be different from than the figure shown here—reflecting both the refund or reassignment of unearned income, 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 2008 is contained in Appendix B.

 A summary of FY 2008 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 2008, FDA obligated $36,422,900 (15 percent of the total) from user fee collections and $198,776,699 (85 percent of the total) from appropriations, as reflected in the table below.
Food and Drug Administration

FY 2008 Medical Device Review Obligations by Expense Category and Revenue Source
As of September 30, 2008

Expense CategoryFrom AppropriationsFrom FeesTotal
Personnel Compensation and Benefits$121,515,605$27,721,709$149,237,314
Travel and Transportation$3,232,122$323,382$3,555,504
GSA Rent$13,928,082$2,102,920$16,031,002
Communications$3,782,093$113,620$3,895,713
Contract Services$45,751,748$2,759,344$48,511,092
Equipment and Supplies$7,029,743$760,090$7,789,833
Other /1$3,537,306$2,641,835$6,179,141
Total Obligations$198,776,699 $36,422,900 $235,199,599

1/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 7.

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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 2008 resulted in an increase of carryover balances of $12,533,427, and increased the net carryover balance from $10,862,872 to $23,396,299 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 of each Fiscal Year

Fiscal
Year
Beginning
Carryover
Net CashObligationsYear-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 $48,956,327$36,422,900 $23,396,299
2009$23,396,299   

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 2008 is less than the fees credited to FY 2008, shown on page 3.  Some of the cash collected in 2008 was for fees owed for previous years and even some payments for the following year.  The net cash in FY 2008 also reflects refunds for FY 2008 and for previous years made in FY 2008.

 Fee Amounts Appropriated, Fees Collected, and Differences

Under MDUFMA II, if cumulative collections through FY 2010 and estimated for FY 2011 exceed cumulative fee appropriations for the same period, FDA will reduce fees when fees are set for FY 2012 by the cumulative amount by which fees collected over this period exceed fees appropriated over the same period.  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 2008.

Food and Drug Administration
Statement of Fees Appropriated, Fees Collected, and Differences 

As of September 30, 2008

Fiscal YearFees AppropriatedFees CollectedDifferences
2003$25,125,000$21,620,549($3,504,451)
2004$31,654,000$26,280,073($5,373,927)
2005$33,938,000$31,817,879($2,120,121)
2006$40,300,000$35,084,438($5,215,562)
2007$43,726,000$29,001,928($14,724,072)
MDUFMA I Total$174,743,000 $143,804,867 ($30,938,133)
2008$48,431,000$49,080,016$649,016
MDUFMA II Total$48,431,000$49,080,016$649,016

As the table shows, the total amount of fees collected for each year of MDUFMA I fell short of the amount appropriated every year.  In FY 2008, for the first time, fees collected exceeded the appropriation, by a total of $649,016.  Cumulative differences from FY 2008 through 2010, and estimated for FY 2011, if positive, will offset fee amounts when they are set for FY 2012.

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 Availability of Carryover Balances

Of the FY 2008 carryover balance, $5,615,208 is the unearned or fees from applications that are not yet received by FDA.  This is the $3,720,696 for FY 2008, plus a total of $ 1,894,512 from previous years.  FDA also holds $1,000,000 in reserve for potential refunds in future years.  In addition, MDUFMA requires FDA to have at least one month of operating funds 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, $12,130,091, available for allocation in subsequent fiscal years.  (MDUFMA II anticipated a growing carryover balance through FY 2010, which would then be drawn down in the final two years.)

Food and Drug Administration
Proposed Allocations of Medical Device Fee Revenue Carryover Balance 

As of September 30, 2008

Status of Carryover FundsAmount
Unearned Fees$5,615,208
Reserve for Future Refunds$1,000,000
1-Month Reserve for Next Fiscal Year$4,751,000
Available Cash for Allocation in future$12,030,091
Total Carryover Balance$23,396,299


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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 is 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 2007 and FY 2008, 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 one year, and 96 percent within two 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, 2008

FDA Organizational ComponentFY 2007FY 2008
Center for Devices and Radiological Health$159,387,019 $ 179,941,933
Center for Biologics Evaluation and Research$22,889,470 $   26,815,222
Field Inspection and Investigation$11,511,598 $   11,835,564
Agency General and Administrative Costs$14,545,410 $   16,606,880
Total Process Costs$208,333,497$235,199,599
Obligations from Appropriations$173,130,797$198,776,699
Obligations from Medical Device User Fee Collections$35,202,700$36,422,900

The costs for all components increased in FY 2008.  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 2008. 

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 2008, FDA spent about 63 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, 2008

 

FTE Used Each Year
Organization  \ Fiscal Year200320042005200620072008
Center for Devices and Radiological Health (CDRH)662713794765806843
Center for Biologics Evaluation and Research (CBER)597087108105109
Office of Regulatory Affairs (ORA)596064656866
Office of the Commissioner (OC)777289829277
Total FTE857 915 1,034 1,020 1,071 1,095

FTE numbers for FY 2004 through FY 2008 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 2007 to FY 2008 resulted from hiring completed at various times during FY 2007 and FY 2008.

In addition to the FTE numbers shown in the table, CDRH also expended 72 more contractor staff-years on the medical device review process in FY 2008 than it did in FY 2002. 

Performance Goals

During FY 2008, FDA continued to make good progress in meeting our negotiated performance goals. FDA worked with stakeholders to improve communication and understanding of MDUFMA’s requirements and to ensure that its implementation accomplishes MDUFMA’s objectives. The performance gains and improved predictability in review processes achieved since medical device user fees were enacted in 2002 are providing significant benefits to industry, healthcare professionals, and patients.  Among the key activities and accomplishments during FY 2008 were:

  • Steady progress in meeting medical device performance goals.  FDA’s overall performance for the FY 2003 through FY 2008 receipt cohorts indicates FDA is meeting or exceeding most MDUFMA performance goals.  During FY 2008, FDA closed the FY 2003 cohort, meaning we have taken all required actions on the thousands of submissions that made up that cohort.
  • Implementation of new performance goals for FY 2008 through FY 2012.  FDA modified its business processes to effectively pursue and meet the new performance goals.  Implementation of an interactive review program was a particularly significant accomplishment.
  • Guidance Documents.  During FY 2008, FDA issued six guidance documents that relate to MDUFMA during FY 2008 —
    • Draft Guidance for Industry:  New Contrast Imaging Indication Considerations for Devices and Approved Drug and Biological Products — 9/30/2008
    • Draft Guidance for HDE Holders, Institutional Review Boards (IRBs), Clinical Investigators, and FDA Staff - Humanitarian Device Exemption (HDE) Regulation: Questions and Answers — 08/05/2008
    • Guidance for Industry, FDA, and Foreign Governments - FY 2009 Medical Device User Fee Small Business Qualification and Certification — 08/01/2008
    • FDA and Industry Actions on Premarket Approval Applications (PMAs): Effect on FDA Review Clock and Performance Assessment - Guidance for Industry and FDA Staff  — 06/30/2008
    • Draft Guidance for Industry and FDA Staff:  Establishing the Performance Characteristics of In Vitro Diagnostic Devices for the Detection or Detection and Differentiation of Influenza Viruses — 02/15/2008
    • Guidance for Industry and FDA Staff: Interactive Review for Medical Device Submissions: 510(k)s, Original PMAs, PMA Supplements, Original BLAs, and BLA Supplements — 12/28/2007; superseded by revised guidance on 02/28/2008.
  • Stakeholder communication and consultation.  During FY 2008, FDA’s consultations with stakeholders focused on implementation of the Medical Device User Fee Amendments of 2007 (Title II of FDAAA), including the new user fees and performance goals for FY 2008 thorough FY 2012.
  • Reports to Congress during FY 2008.  During FY 2008, FDA submitted three annual reports required by MDUFMA to Congress —
    • FY 2007 MDUFMA Performance Report
    • FY 2007 MDUFMA Financial Report, and
    • FY 2006 Office of Combination Products Report.
  • FDA also submitted one topical report required by the 2007 amendments:
    • A report on labeling of indoor tanning devices concerning the relationship between the use of such devices and development of skin cancer or skin damage.
  • Progress on FY 2008 cohort.  Preliminary data on FDA’s performance on the FY 2008 cohort — the first under MDUFMA’s new performance goals — indicates FDA is meeting or exceeding review times for actions completed on most performance goals (all except the goals for PMA module reviews).

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 Management Challenges for FY 2009

On September 27, 2007, the President signed the Food and Drug Administration Amendments Act of 2007 (FDAAA).  Title II of FDAAA, the Medical Device User Fee Amendments of 2007 reauthorizes medical device user fees for FY 2008 through FY 2012  (MDUFMA II).  MDUFMA II calls for a new set of challenging performance goals and a new fee structure.

FDA will continue to monitor performance against the goals for the MDUFMA cohorts that remain open (FY 2004 through FY 2007; the FY 2003 cohort is now closed) and against the new performance goals of MDUFA.
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 TypeType of GoalReview Time GoalPerformance Goal
Premarket approval application (PMA), panel-track PMA supplement, premarket reportFDA Decision180 days60%
295 days90%
Expedited PMA, expedited panel-track PMA supplementFDA Decision180 days50%
280 days90%
PMA moduleFDA Action90 days75%
120 days90%
180-day PMA supplementFDA Decision180 days85%
210 days95%
Real-time PMA supplementFDA Decision60 days80%
90 days90%
510(k) premarket notificationSE or NSE Decision90 days90%
150 days98%

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 five 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.  PMA decisions are approval, approvable, approvable pending GMP inspection, not approvable, withdrawal, and denial. 510(k) decisions are substantially equivalent (SE) or not substantially equivalent (NSE).
  • 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 use of two tiers helps ensure that FDA focuses on all applications within a cohort, rather than just those that are most likely to reach an FDA decision quickly.

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

Pursuant to section 738(c)(2) of the FD&C Act, during FY 2009, FDA must determine whether we must increase the establishment registration fee for fiscal years 2010 through 2012 to offset any deficit from the registration of fewer establishments than required during FY 2009.   If fewer than 12,250 establishments register during FY 2009, FDA may increase the annual establishment registration fee for fiscal years 2010 through 2012 by no more than an additional 8.5%.  FY 2008 registrations met the threshold requirement, and preliminary data indicates FY 2009 registrations will also meet the threshold, although it is too soon to make a final determination.

FDA is also working hard to implement key provisions of FDAAA by developing and promulgating regulations.  We are developing —

  • a proposed rule amending 21 C.F.R. Part 807 to require medical device establishments to register and list by electronic means, during the period 10/1 through 12/31 each year, and
  • a rule amending 21 C.F.R. Part 814 to implement section 515A of the FD&C Act, concerning pediatric uses of devices.

In addition, we are gathering data and comments to help us develop a rule providing for a unique device identification (UDI) system, as required by section 519(f) of the FD&C Act.

These actions will strengthen FDA’s ability to meet its regulatory responsibilities and public health missions.

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Footnotes

 1. FDA published FY 2008 medical device user fee rates in a Federal Register Notice on October 12, 2007 (pages 58103 through 58106).  The specific fees for FY 2008 are found in Appendix B, on page B-1.


 Appendix A
Statutory Conditions for Collection and Use of Fees

The FD&C Act (The Act) was amended by MDUFMA (Public Law 107-250), by MDUFSA (Public Law 109-43), and by MDUFMA II (Public Law 110-85).  The Act specifies three statutory conditions that must be satisfied before FDA can collect and spend medical device user fees.  A summary of these conditions is introduced on page 2.  Appendix A describes each of the conditions and explains how FDA met the conditions in FY 2008 in more detail.

In order to determine whether the statutory conditions are satisfied, FDA must calculate and apply an adjustment factor, defined in section 737(10) of the Act, as amended, in the assessments of the first and third conditions.  The Act defines the term “adjustment factor” as follows:

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 such Index for October 2001.

The October preceding FY 2008, which began on October 1, 2007, was October 2006.  The Consumer Price Index (CPI) for October 2006 was 201.8.  The CPI for October 2001 was 177.7.  Dividing the CPI of October 2006 by the CPI of October 2001 yields an adjustment factor of 1.1356 (rounded to 4 decimal places) for FY 2008.

The first condition is a funding condition that affects the collection of fees in FY 2008 and is found in section 738(g)(1) of the Act.

This provision specifies a minimum amount of budget authority that must be appropriated each year for the Device and Radiological Health line of FDA’s appropriation, exclusive of user fees.  That minimum amount for FY 2008 is $205,720,000 multiplied by the adjustment factor (1.1356), or $233,616,000 (rounded to the next thousand dollars).  In FY 2008, the final appropriated budget authority for the Device and Radiological Health line of FDA’s Appropriation, exclusive of user fees, was $237,734,000.  This is the combined amounts of appropriations from PL 110-161 and PL 110-252, exclusive of user fees.  Since this amount is greater than $233,616,000, FDA’s appropriation for FY 2008 met the first condition.

The second condition comes from section 738(h)(2)(A)(i).  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….”  The second condition means FDA cannot collect medical device user fees without an appropriation.

On December 26, 2007, the President signed FY 2008 Consolidated Appropriation Act, Public Law  110-161, which appropriated $48,431,000 from medical device user fees for FDA in FY 2008.  Therefore, FDA met the second condition.

The third condition requires a minimum spending from appropriations, exclusive of user fees, on the process for medical device review as defined in MDUFMA.  This condition in section 738(h)(2)(A)(ii), 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 device 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 2002 multiplied by the adjustment factor.

In FY 2002, FDA’s obligations for the process for the review of medical device applications totaled $119,673,026, as reported in the FY 2003 MDUFMA Financial Report.  The adjustment factor for FY 2008 is 1.1356.  Multiplying by the adjustment factor, FDA calculates the minimum spending from appropriations for the medical device review process in FY 2008 must be at least $135,900,688.

As this report documents, FDA obligated $198,776,699 from appropriations for the process for the review of medical device applications in FY 2008.  Since this amount is greater than the minimum spending from appropriation required under MDUFMA, FDA met the third condition.

The table below shows FDA obligations on the process for the review of medical device applications in FY 2006 and FY 2007.  The table separates the obligations that were funded by appropriations and user fees.

Food and Drug Administration
Obligations for the Process for the Review of Medical Device Applications
As of September 30, 2008

 FY 2007FY 2008
From Appropriations$173,130,797$198,776,699
From Medical Device Fee Collections$35,202,700$36,422,900
Total Obligations$208,333,497$235,199,599

In addition, MDUFMA imposes a provision that FDA obligations on medical device establishment inspections must be equal to or greater than its obligations for this purpose in FY 2002, with a 5 percent increase for each fiscal year.  If FDA does not satisfy this condition for two consecutive years, FDA is prohibited from allowing accredited third-parties to conduct device establishment inspections in the future years.  This condition is cited in section 704(g)(10) of the Act. 

The table below shows the statutory minimum to be obligated for device establishment inspections (2002 level increased by 5 percent each year, rounded to the nearest thousand dollars) and FDA obligations for medical device establishment inspections from FY 2002 to FY 2008.  Because FDA has spent more than the statutory minimum for device inspection for each of the past two fiscal years, FDA may continue to allow accredited third-parties to conduct certain device establishment inspections in future years.

Food and Drug Administration
Obligations for the Inspection of Medical Device Establishments
(Rounded to $000)
As of September 30, 2008

Fiscal
Year 
Minimum--2002 Obligations Increased by 5% per yearActual ObligationsExcess or Shortfall
FY 2002 Base$19,425,000$19,425,000$0
FY 2003$20,396,000$22,576,000$2,180,000
FY 2004$21,416,000$21,430,000$14,000
FY 2005$22,487,000$21,515,000($972,000)
FY 2006$23,611,000$29,230,000$5,619,000
FY 2007$24,792,000$31,926,000$7,134,000
FY 2008$26,031,000$32,989,000$6,958,000

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 Appendix B
Device Fees in FY 2008

Under MDUFMA II, fee rates for premarket applications (PMA) and Biologics License Application (BLA) fees and for annual establishment registration are set in the statute.  The rates for all other fees are statutorily set as a percent of the full PMA fee rate.  The premarket report fee and the efficacy supplement fee are equal to the PMA fee.  The panel track supplement fee is 75 percent of the PMA fee.  The 180-day supplement fee is 15 percent of the PMA fee.   The Real-Time Supplement fee is 7 percent of the PMA Fee.  The 30-day notice fee is 1.6 percent of the PMA fee.  The premarket notification submission (510(k)) fee is 1.84 percent of the PMA fee.  The request for classification information (513(g)) fee is 1.35 percent of the PMA fee.  And the fee for periodic reporting concerning class III devices is 3.5 percent of the PMA fee.  Qualified small businesses pay 25 percent of the specified fee, except that for premarket notifications (510(k)s),  30-day notices, and requests for classification they pay 50 percent of the specified rate.  The table below exhibits the rates for all types in FY 2007 (last year of MDUFMA I) and FY 2008 (first year of MDUFMA II).  

Food and Drug Administration
Medical Device User Fee Rates 
As of September 30, 2008

Application TypeFY 2007FY 2008
Full Fee Applications$281,600$185,000
Small Business Rate$107,008$46,250
Panel Track Supplement$281,600$138,750
        Small Business Rate$107,008$34,688
180-Day Supplements$60,544$27,750

Small Business Rate

$23,007$6,938
Real-Time Supplements$20,275$12,950

Small Business Rate

$7,705$3,237
510(k)s$4,158$3,404

Small Business Rate

$3,326$1,702
30-Day NoticeNA$2,960

Small Business Rate

NA$1,480
513(g) Request for Classification InformationNA$2,498

Small Business Rate

NA$1,249
Annual Fee for Class III Periodic ReportNA$6,475

Small Business Rate

NA$1,619
Annual Establishment RegistrationNA $1,706

The next table summarizes the number of applications/fees received by FDA in each year, FY 2006 through FY 2008, for which the fees had been paid in full by the companies before September 30.

Food and Drug Administration
Applications Received and Paid Fees 
As of September 30, 2008

Application TypeFY 2006 ActualFY 2007 ActualFY 2008 Actual
Full Fee Applications512317

Small Business

727
Panel Track SupplementCounted as Full Fee8

Small Business Rate

Counted as Full Fee0
180-Day Supplements7696126

Small Business

252218
Real-Time Supplements156140163

Small Business

162022
510(k)s2,9882,7672,736

Small Business

652648834
30-Day Notice  596

Small Business Rate

  58
513(g) Request for Classification Information--64

Small Business Rate

--26
---299
---47
Establishment Registration--13,835

Please note that the numbers of application fees received by FDA should not be used as a surrogate for medical device review workload.  Many applications submitted to FDA are not charged fees by FDA for the following reasons:

  • first applications submitted by small businesses;
  • applications bundled under one fee because of similarity of medical device review issues;
  • applications exempted from fees for pediatric indications; and
  • applications for investigational device exemptions (IDEs) and PMA supplements other than Real-Time and 180-Day Supplements;
  • other applications for which no fee is charged, such as requests for investigational device exemption and requests for humanitarian device exemption; and
  • annual report submissions that must be examined but that have no fees associated with them.
    Table of Contents

 Appendix C
Waivers, Reductions, and Exemptions

MDUFMA directs FDA to waive the first premarket application fee from a qualified small business and an application fee submitted solely for pediatric indications.  It also directs FDA to reduce fees for subsequent applications from qualified small businesses in all categories except the annual establishment registration fee.  In addition, FDA does not collect fees for the followings application types:

  • applications for Humanitarian Device Exemptions (HDE) submitted under section 520(m);
  • applications submitted under section 351 of the Public Health Service (PHS) Act for a product licensed for further manufacturing use only;
  • applications submitted by a state or federal government entity for devices that are not intended for commercial distribution; and
  • 510(k)s submitted to certified third-party reviewers, rather than to FDA.

FDA provides a summary of MDUFMA fee waivers, reductions, and exemptions granted in FY 2008 in this appendix.

FDA responded to thousands of e-mails and phone calls from companies asking for information regarding the small-business waiver for MDUFMA fees.  After carefully reviewing the requests from companies, FDA waived 12 fees for first-time submissions of PMAs or BLAs, and reduced a total of 1036 fees.  The following table portrays the number of small business-application fees that were waived or reduced by FDA, and the value of each category in FY 2008.

Food and Drug Administration
FY 2008 Small Business Fee Waivers and Reductions Granted 

As of September 30, 2008

CategoryNumberAmountTotal Value
Full Fees Waived12$185,000 $2,220,000
Full Fees Reduced7$138,750 $       971,250
Panel Track Supplements Reduced0$104,602 $0  
180-Day Supplements Reduced26$20,812 $541,112
Real-Time Supplements Reduced22$9,713 $213,686
510(k)s Fees Reduced858$1,702 $1,460,316
30-day Notice Fees Reduced58$1,480 $85,840
513(g)s Fees Reduced28$1,249 $34,972
Annual Periodic Report Fees Reduced47$4,856 $228,232
Total1058  $5,755,408

Note: Amount of reduction per fee type  =  full fee rate - small business fee rate

FDA collected $48,646,990 fees or net cash in FY 2008.  Had there been no small-business waivers and reductions, FDA would have collected an additional $5,755,408, or an additional 12 percent of collections. 

FDA received 3 HDE applications and 40 supplements in FY 2008.  None of these are subject to MDUFMA fees.  FDA does not know if any of them would have been submitted had they been subject to a fee.  Therefore, FDA does not know the extent to which this exemption resulted in any loss of revenue.

CBER received no exemption requests in FY 2008 for applications submitted under section 351 of the PHS Act for a product licensed for further manufacturing use only. 

FDA received and granted 3 requests from State or Federal government entities for exemptions  in FY 2008 for products that were not intended for commercial distribution.  Two were for 510(k)s and one was for a 180-day submission  .  Total cost of the exemptions in FY 2008 was $34,588.

FDA granted exemptions for pediatric indications in FY 2008 to 1 Premarket Application, 7 510(k)s, 3 180-day supplements, and 1 real-time.  Total value of these exemptions was $305,028.

FDA received 304 510(k) submissions subject to third-party review in FY 2008 compared to 287 in FY 2006 and 235 in FY 2007.  FDA exempted fees for these 304 submissions.  The total value of these exemptions in FY 2008 was $1,225,760 – assuming that 15 percent of the third-party submissions would have paid the reduced small business fee.

Food and Drug Administration
Summary and Total Value of All Fee Waivers, Reductions, and Exemptions Granted 
As of September 30, 2008

ReasonFY 2007FY 2008
Small Business$3,353,004$5,755,408
Govt. Sponsored Application not for Commercial Distribution$12,474$34,558
Pediatric Indications$359,396$305,028
510(k)s Reviewed by Third-Party Review$948,010$1,225,760
Total Value$4,672,884$7,320,754

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 Appendix D
Allowable and Excluded Costs for the Process for the Review of Device Applications

The Act, as amended by the Medical Device User Fee Amendments of 2007, defines the process for the review of medical device applications and the costs that may be included in that process.  Using these definitions (and further refinements identified below) and the methodologies described in this report, FDA identified those activities that were applicable to the “process for the review of device applications.”

In the past, over 81 percent of obligated funds in FDA are expended within one year, and  96 percent within two years.  Therefore, obligations represent an accurate measure of costs. 

MDUFMA Related Costs

Included Activities

[Section 737(8)(A)]  The activities necessary for the review of premarket applications, premarket reports, supplements, and premarket notification submissions, including, but not limited to, the following:

  • 510(k)s -- Traditional/Supplements/Abbreviated/Specials (third-party and non-third-party)
  • Evaluation of Automatic Class III Designations
  • Traditional and Expedited PMAs (includes amendments, supplements, and annual reports)
  • Modular PMAs (shell, modules, amendments, supplements, and annual reports)
  • PDPs (including amendments, supplements, and annual reports)
  • Premarket Reports (amendments, supplements, annual reports)
  • Reclassification Petitions
  • Class II Exemption Petitions
  • BLAs and BLA Supplements (Applications subject to 351 of the PHS Act)
  • Recruitment and use of outside experts during the review process
  • Obtaining advisory committee input (e.g., convened meetings, homework assignments)
  • Resolution of product jurisdictional issues
  • Dispute resolution/appeals
  • Information Technology (IT) support for review activities
  • Recruitment of review staff

[Section 737(8)(B)]  The issuance of action letters that allow marketing of devices or which set forth in detail the specific deficiencies in such applications, reports, supplements, or submissions and, where appropriate, the actions necessary to place them 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 737(8)(C)]  The inspection of manufacturing establishments and other facilities undertaken as part of the review of pending premarket applications, premarket reports, and supplements to include activities such as the review of manufacturing information submitted in premarket applications, pre-approval GMP inspections, and resolution of any identified GMP issues.

[Section 737(8)(D)] Monitoring of research conducted in connection with the review of such applications, reports, supplements, and submissions.  For the types of applications identified above, this would include monitoring activities such as:

  • conduct of bioresearch monitoring inspections (both “for cause” and pre-approval) of sponsors, institutional review boards, and clinical investigators;
  • adverse event and complaint investigations related to on-going clinical trials; and
  • Good Laboratory Practice inspections (21 CFR Part 58).

[Section 737(8)(E)]  Review of device applications subject to section 351 of the Public Health Service Act for an investigational new drug application (IND) under section 505(i) or for an investigational device exemption (IDE) under section 520(g) and activities conducted in anticipation of the submission of such applications under section 505(i) and 520(g).  This would include the review of the IDEs (original, amendments, and supplements) and INDs (amendments, supplements, and safety reports).  Also included are pre-IDEs (review of the submission and any meetings or correspondence), significant/non-significant risk determinations, and Determination/Agreement meetings.

[Section 737(8)(F)]  The development of guidance, policy documents, or regulations to improve the process for the review of premarket applications, premarket reports, supplements, and premarket notification submissions to include activities such as the development of device-specific, cross-cutting, special control, and program-related guidances as well as “Blue Book Memoranda” and Standard Operating Procedures.
 
[Section 737(8)(G)]  The development of voluntary test methods, consensus standards, or mandatory performance standards under section 514 in connection with the review of applications listed above.  This would include national and international standards development and coordination related to the review of premarket applications.

[Section 737(8)(H)]  The provision of technical assistance to device manufacturers in connection with the submission of such applications, reports, supplements, or submissions to include activities such as:

  • informal consultation via phone, meetings, e-mail, and facsimile;
  • meetings between FDA and applicants, such as pre-submission meetings, Determination/Agreement meetings, and meetings to discuss deficiencies in premarket applications;
  • use of outside experts in the review of premarket applications;
  • review of labeling prior to approval of a premarket application or supplement;
  • FDA sponsored conferences/workshops related to premarket submissions; and
  • staff participation at non-FDA meetings related to such applications.

[Section 737(8)(I)]  Any activity undertaken under section 513 or 515(i) in connection with the initial classification or reclassification of a device or under section 515 (b) in connection with any requirement for approval of a device to include activities such as the review of requests for information submitted under section 513(g) and the “call” for PMAs for pre-amendment devices.

[Section 737(8)(J)]  Evaluation of post-market studies required as a condition of approval of a premarket application or premarket report under section 515 or section 351 of the PHS Act.  This would include activities such as the review of:

  • protocols for the post-market studies;
  • modifications to such protocols;
  • data collected under the protocol; and
  • labeling changes (instructions for use, warnings, precautions, etc.), if needed as a result of the review of the data. 

[Section 737(8)(K)]  Compiling, developing, and reviewing information on relevant devices to identify safety and effectiveness issues for devices subject to premarket applications, premarket reports, supplements, or premarket notification submissions to include activities such as:

  • epidemiology studies; and
  • post-marketing problem identification/resolution, including reports filed under the Medical Device Report regulation.

Training related to premarket and post-market approval activities.  This would include the following types of training:

  • scientific, clinical, and statistical training;
  • managerial or other administrative training;
  • policy/regulatory training;
  • professional development (coursework, attendance at professional meetings, library resources);
  • “Vendor Days;” and
  • Site Visit Program for premarket reviewers.

User Fee Act implementation to include activities such as:

  • guidance/regulation development;
  • stakeholder outreach for educational and comment purposes;
  • training of agency staff; and
  • IT support for implementation.

*All user-fee-related costs represented by the above activities are collectively referred to in this report as costs for the process for the review of medical device applications.

Section 737(9) of the Act defines the "costs of resources allocated for the process for the review of device applications" as the expenses incurred in connection with this process for:

  1. officers and employees of the FDA, contractors of the FDA, advisory committees, and costs related to such officers, employees, committees and contracts;
  2. management of information, and the acquisition, maintenance, and repair of computer resources;
  3. leasing, maintenance, renovation, and repair of facilities and acquisition, maintenance, and repair of fixtures, furniture, scientific equipment, and other necessary materials and supplies; and
  4. collecting user fees and accounting for resources allocated for the review of premarket applications, premarket reports, supplements, and submissions.

Excluded Activities

  • Enforcement policy and regulation development
  • Third-party inspection program
  • Post-approval compliance actions and activities unrelated to PMA Conditions of Approval and investigations of safety and effectiveness issues for devices subject to FDA regulation
  • Post-approval activities relating to:
    Promotion and advertising
    International coordination/Mutual Recognition Agreement work
    International standard development
    Liaison/outreach and manufacturing assistance
    Device tracking
  • Inspections unrelated to the review of covered applications
  • Export/Import activities unrelated to the conduct of a clinical trial
  • Research related to future products
  • All activities conducted under the Mammography Quality Standards Act (MQSA), radiation safety authorities of the FD&C Act (Sections 531 et. seq.), and the Clinical Laboratories Improvement Amendments.

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 Appendix E
Development of Costs for the Process for the Review of Device Applications

General Methodology

The costs associated with the process for the review of medical device applications are based on obligations recorded within FDA’s CDRH, CBER, ORA, and OC.  These organizations correspond to the cost categories presented as follows:

Cost CategoryFDA Organization
Costs for PMAs, PDPs, PMRs, Modular PMAs, supplements, and 510(k)sCDRH
Costs for the Review of BLAs, PMAs, supplements, and 510(k)sCBER
Costs for field inspection and investigationORA
Costs for Agency general and administrationOC

The costs were accumulated using a variety of methods.  Using the definitions of costs and activities included in the process for the review of device applications in the Act, as expanded in the discussion in Appendix D, the cost categories within each organization listed above were identified as parts of the medical device review process.

Center Costs

Costs of the medical device review program are tracked for each organizational component in CDRH and CBER, usually at the division level.  Most FDA components involved in the process perform a mixture of activities – some within the definition of the process for the review of device applications, and some not.  FDA groups its organizational components into three categories:

  • direct review and laboratory;
  • indirect review and support; and
  • center-wide costs.

The allocation of costs for each category is discussed below.

Direct Review and Laboratory

Employees in all components of CDRH and CBER other than those noted below as Center indirect review and support components reported their time in activities that could be used to differentiate between time spent on the process for the review of device applications and all other time.

Both CDRH and CBER have existing time-reporting systems in place.  These time-reporting systems were modified after the enactment of MDUFMA, so that time could be reported in categories that could be separated into allowable and excluded activities with respect to the process for the review of device applications, as defined in MDUFMA and as further defined in Appendix D.  This process is further explained below.

Ten years prior to the enactment of MDUFMA, CDRH’s time-reporting system had been used to gather information about employee time for a 2-week period one or two times each year.  After the definitions of allowable and excluded costs for the process for the review of device applications under MDUFMA were further refined, as presented in Appendix D, the time-reporting categories in the CDRH time-reporting system were modified so that all data captured fit into either allowable or excluded costs.  These modifications to the system were completed in mid-June 2003. 

Once these modifications were completed, all CDRH employees other than management and administrative personnel reported all of the time they worked against these revised categories for a period of 8 consecutive weeks, from June 29 through August 23, 2003.  Whether time categories were counted as allowable or excluded was not apparent to employees as they reported their time. 

FDA Centers are very payroll-intensive organizations.  In most years about 60 percent of all FDA funds go to pay for employee salaries and benefits.  Almost all other costs directly support these employees.  Thus the percent of time reported during this 8-week period as having been expended on allowable device review process activities for each cost-center (usually an organization component at the Division level) was then applied to all costs incurred for that cost-center for the entire fiscal year.

Further, since these percentages of allowable costs had never been collected for earlier periods, the percentages of allowable costs reported in this 8-week period were likewise applied to each cost center’s direct costs (obligations) incurred in FY 2002, to get the baseline FY 2002 device review process cost data required under MDUFMA.

For FY 2004 and FY 2005, all CDRH employees, other than management and administrative personnel, reported all of the time they worked against these revised categories for one 2-week period during each quarter of the fiscal year.  The results from the 8 weeks of time reporting data were then averaged and extrapolated to the entire year.  This served as the basis for measuring CDRH costs for the device review process for direct review and laboratory components, and the same pattern has been followed in subsequent years.  In addition, further modifications were made in FY 2005 to be able to break out time for various specific types of application review.

In FY 2006, CDRH modified its time reporting categories to better account for effort on training, guidance document and standards development, and outreach initiatives.  Prior to FY 2006, most of these areas were considered part of the MDUFMA process.  These changes allowed CDRH to better distinguish between premarket and postmarket efforts.

In FY 2007, CDRH continued to make minor refinements to the CDRH automated time reporting system.  Based on requests from staff, CDRH added several reporting activities to improve reporting accuracy.  New activity codes were created to further define premarket review activities, reflect organizational transformation initiatives, and differentiate between user fee and appropriated Mammography Quality Standards Act of 1992 (MQSA) program management activity.  CDRH also added numerous "sub-activities" to the existing activities in all program areas so that staff could easily identify and report their time in the appropriate categories.  Further refinements were made in FY 2008 to accommodate changes under MDUFMA II (e.g., added time categories for 30-day notices, PMA supplements, and PMA annual reports).  These enhancements did not have a significant effect on FDA's MDUFMA process calculations.

A similar procedure is used in CBER to measure the direct review and laboratory components costs for the device review process.  CBER was able to use the time-reporting system it has had in place for over 10 years prior to the enactment of MDUFMA, and which was validated by studies done prior to and after the Prescription Drug User Fee Act (PDUFA) was initiated in 1993.  That system collects time reports from all employees other than management and administrative support personnel for a 2-week period during each quarter of the fiscal year. 

CBER’s existing time-reporting system was also modified to assure that activities against which time was reported could be clearly divided into those activities that were either allowable or excluded in the MDUFMA-defined process for device application review.  The results from each 2-week period of time reported are extrapolated for the quarter being reported.  The extrapolated results for each quarter are averaged to estimate the full year costs. 

CBER’s process for determining allowable and excluded costs for MDUFMA direct review and laboratory costs is identical to how costs for the process for the review of human drug applications was validated by Arthur Andersen, LLC under PDUFA for 1992 and 1993. 

Center Indirect Review and Support

Indirect review and support components provide the infrastructure for the review process.  In CDRH, these are the Office of the Center Director and the Office of Management and Operations.  In CBER, these components include the Office of the Center Director, Office of Management, Office of Information Technology, and the Office of Communications, Outreach and Development.

In both CDRH and CBER, the allowable costs for these indirect review and support components were determined by multiplying the average percent of allowable costs for all direct review and laboratory components by the total costs of each of these indirect review and support components.

Center-wide Costs

A number of Center-wide expenses are paid for centrally from FDA funds each year rather than from funds allocated to the Centers.  These costs include rent, utilities, some computer equipment, facilities repair and maintenance, and some extramural and service contracts. 

Many of these costs, such as building rent, can be traced back to the specific organization component that generated the cost and were assigned the user fee related percentage calculated for the division to which the expenditure related.  For the costs that benefited the Center as a whole and could not be traced to a specific division, a weighted average user fee percentage was calculated based on the level of user fee related costs to total costs in the Center.

Field Inspection and Investigation Costs

All field inspection and investigation costs are incurred by FDA's ORA.  ORA costs are incurred in both district offices (the "field") and headquarters support offices.  In FY 2002, the agency began tracking accumulated ORA costs through the use of the Field Accomplishment and Compliance Tracking System (FACTS).  FACTS is a time and activity tracking system which captures time in a variety of categories, including pre-approval inspections of manufacturing facilities, investigations of clinical studies, and analytical testing of samples--which are included in the process for the review of device applications.

Total direct hours reported in FACTS are used to calculate the total number of staff-years required by ORA to perform activities in the process for the review of device applications as defined in MDUFMA.  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 staff years devoted to the process for the review of device applications to the average salary cost in ORA to arrive at the ORA salary costs for the process for the review of device applications as defined in MDUFMA.  The final step is to allocate ORA obligations for operations and rent to the device review process based upon the ratio of user fee related staff years to total ORA staff years.  The following table summarizes the calculation for the FY 2007 and FY 2008, respectively.

Food and Drug Administration
Office of Regulatory Affairs
Costs of the Process for the Review of Medical Device Applications

As of September 30, 2008

Cost ComponentFY 2007FY 2008
Staff Years Utilized6462
ORA Average Salary and Benefits$104,700$109,685
Total Salary and Benefits$6,700,800$6,800,470
Operating and Other Costs 1$4,810,798$5,035,095
Total$11,511,598$11,835,565

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.

The ORA costs for the process for the review of medical device applications shown in the table include costs paid from appropriations and user fee collections.

Agency General and Administrative Costs

The agency general and administrative costs are incurred in the FDA's OC.  At the end of    FY 2008, 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 and Special Programs
  • Office of Operations
  • Office of Policy, Planning and Preparedness
  • Office of Scientific and Medical Programs

The OC costs applicable to the process for the review of medical device applications were calculated using a method prescribed in 1993 by the Division of Cost Determination Management, Office of Finance, Office of the Secretary, Department of Health and Human Services.  (Today the Office of Finance is under the Office of the Assistant Secretary for Resources and Technology.) This method uses the percentage derived by dividing total Office of the Commissioner costs by the total FDA salary expenses after subtracting the salary expenses from the Office of the Commissioner.  The percentage is then multiplied by the sum of salaries applicable to the process for the review of medical devices in CDRH, CBER, and ORA to derive the agency general and administrative costs applicable to the process for the review of medical device applications.

Using this methodology, FDA dedicated $14,545,410 and $16,606,880 in general and administrative expenses to the medical device review process in FYs 2007 and 2008, respectively.  The FY 2008 general and administrative obligations from appropriations and user fees combined accounted for about 7 percent of the total cost of the process for the review of device applications.

At the beginning of FY 2004, FDA implemented a reorganization and streamlining of its administrative support activities.  Many functions and resources from FDA Centers, ORA, and components of the OC were consolidated into the Office of Shared Services under Office of Management – a component of OC.  This was done in an effort to achieve greater efficiency in the provision of these services.  For reporting comparability purposes, however, resources expended by the Office of Shared Services in FY 2008 supporting the device review process are shown as having been incurred by CDRH, CBER, ORA, or OC, in proportion to the resources allocated from each these components to the Office of Shared Services.  This makes the figures shown for FY 2008 comparable with figures reported in prior years.