Appendix E: Development of Costs for the Process for the Review of Medical Device Applications
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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:
- Costs for PMAs, PDPs, PMRs, Modular PMAs, Supplements, and 510(k): CDRH
- Costs for the Review of BLAs, PMAs, Supplements, and 510(k)s: CBER
- Costs for Field Inspection and Investigation: ORA
- Costs for Agency General and Administration: OC
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.
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 eight 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 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 ensure 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 CBER determines costs for the process for the review of human drug applications. This process 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.
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 FY 2008 and FY 2009, respectively.
FOOD AND DRUG ADMINISTRATION
OFFICE OF REGULATORY AFFAIRS
COSTS OF THE PROCESS FOR THE REVIEW OF MEDICAL DEVICE APPLICATIONS
AS OF SEPTEMBER 30, 2009
Cost Component FY 2008 FY 2009 Staff Years Utilized 62 57 ORA Average Salary and Benefits $109,685 $107,401 Total Salary and Benefits $6,800,470 $6,121,857 Operating and Other Costs (1) $5,035,095 $4,625,369 Total $11,835,565 $10,747,226
(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 2009, OC was comprised of the following offices:
• Immediate Office of the Commissioner
• Office of the Chief Counsel
• Office of the Chief of Staff
• Office of the Administrative Law Judge
• Office of Equal Employment and Diversity Management
• Office of International Programs
• Office of Administration
• Office of Policy, Planning and Budget
• Office of Special Medical Programs
• Office of Legislation
• Office of the Counselor to the Commissioner
• Office of Women’s Health
• Office of Foods
• Office of the Chief Scientist
• Office of International Programs
• Office of External Affairs
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 OC. 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 $16,606,880 and $18,762,325 in general and administrative expenses to the medical device review process in FY 2008 and FY 2009, respectively. The FY 2009 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 2009 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 2009 comparable with figures reported in prior years.