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Appendix A: Statutory Conditions for Collection and Use of Fees (MDUFMA, FY 2010)

Back to Table of Contents: FY 2010 MDUFMA Financial Report

The FD&C Act was amended byMDUFMA (Public Law 107-250), by the Medical Device User Fee and Stabilization Act (MDUFSA, Public Law 109-43), and by MDUFMA II (Public Law 110-85). It 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 in more detail how FDA met the conditions in FY 2010.

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 FD&C Act, as amended, in the assessments of the first and third conditions. The FD&C 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 2010, which began on October 1, 2009, was October 2008. The Consumer Price Index (CPI) for October 2008 was 216.573. The CPI for October 2001 was 177.7. Dividing the CPI of October 2008 by the CPI of October 2001 yields an adjustment factor of 1.218756 (rounded to 6 decimal places) for FY 2010.

The first condition is a funding condition that affects the collection of fees in FY 2010 and is found in section 738(g)(1) of the FD&C 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 2010 is $205,720,000 multiplied by the adjustment factor (1.218756), or $250,722,000 (rounded to the nearest thousand dollars). In FY 2010, the final appropriated budget authority for the Device and Radiological Health line of FDA’s Appropriation, exclusive of user fees, was $315,377,000. This is the amount of appropriations for the Devices and Radiological Health line from P.L. 111-80, exclusive of user fees. Since this amount is greater than $250,722,000, FDA’s appropriation for FY 2010 met the first condition.

The second condition comes from section 738(h)(2)(A)(i) of the FD&C Act. It states that fees “shall be retained in each fiscal year in an amount not to exceed the amount specified in appropriation Acts, or otherwise made available for obligation, for such fiscal year….” The second condition means FDA cannot obligate user fees in excess of appropriations; fees collected during MDUFMA II that exceed cumulative fee appropriations are subject to the offset provision of section 738(h)(4) of the FD&C Act. On October 21, 2009, the President signed the FY 2010 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriation Act, Public Law 111-80, which appropriated $57,014,000 from medical device user fees for FDA in FY 2010. Therefore, the second condition was met.

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) of the FD&C Act, 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 2010 is 1.218756. Multiplying by the adjustment factor, FDA calculates the minimum spending from appropriations for the medical device review process in FY 2010 must be at least $145,852,218.

As this report documents, FDA obligated $235,520,440 from appropriations, exclusive of user fees, for the process for the review of medical device applications in FY 2010. Since this amount is greater than the minimum spending from appropriations required under MDUFMA, FDA met the third condition.

Table 8 shows FDA obligations for the process for the review of medical device applications in FY 2009 and FY 2010. The table separates the obligations that were funded by appropriations and user fees.

 
Table 8
Obligations for the Process for the Review
of Medical Device Applications
As of September 30, 2010
 
FY 2009
FY 2010
From Appropriations
$223,545,693
$235,520,440
From Medical Device Fee Collections
$47,302,744
$57,187,100
Total Obligations
$270,848,437
$292,707,540

In addition, MDUFMA includes a provision that FDA’s fiscal year obligations for medical device establishment inspections must be equal to or greater than its obligations for this purpose in FY 2002, with a five 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 FD&C Act. 

Table 9 shows the required statutory minimum to be obligated for device establishment inspections (2002 level increased by five percent each year, rounded to the nearest thousand dollars) and FDA obligations for medical device establishment inspections from FY 2002 to FY 2010. 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.

Table 9
Obligations for the Inspection of Medical Device Establishments
(Rounded to $000)
As of September 30, 2010
 
Fiscal
Year 
Minimum--2002 Obligations Increased by 5% per year
Actual Obligations
Excess 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
FY 2009
$27,332,926
$35,927,125
$8,594,199
FY 2010
$28,699,572
$41,596,442
$12,896,870

 

Next Section: Appendix B - Number of Fees Paid Applications in FY 2010