Appendix A: Conditions for Assessment and Use of Fees in FY 2011
The FD&C Act, as amended by MDUFMA (Public Law 107-250), the Medical Device User Fee and Stabilization Act (MDUFSA, Public Law 109-43), and by MDUFMA II (Public Law 110-85) specifies three legal conditions that must be met each fiscal year for FDA to collect and spend medical device user fees. A summary of these legal conditions was presented on page 2 of this report. This appendix provides detailed descriptions of these conditions and explanations of how FDA met these conditions in FY 2011.
In order to compare and determine whether the legal conditions are satisfied, FDA must calculate and incorporate adjustment factors [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 states:
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 Consumer Price Index (CPI) for October 2009, the October of the fiscal year preceding
FY 2011, was 216.177. The CPI for October 2001 was 177.7. Dividing the CPI of October 2009 by the CPI of October 2001 yields an adjustment factor of 1.216528 (rounded to six decimal places) for FY 2011.
The first legal condition 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. The minimum amount for FY 2011 is $205,720,000 multiplied by the adjustment factor (1.216528), or $250,264,000 (rounded to the nearest thousand dollars). In FY 2011, the final appropriated budget authority for the Device and Radiological Health line of FDA’s appropriation, exclusive of user fees, was $322,370,000. This is the amount of appropriations for the Devices and Radiological Health line from Public Law 112-10, exclusive of user fees. Since this amount is greater than $250,264,000, the first legal condition was met.
The second legal condition is described in section 738(h)(2)(A)(i) of the FD&C Act. It states that fees:
[S]hall 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….
Public Law 111-242, effective beginning October 1, 2010 authorized FDA to begin collecting and obligating user fees for FY 2011. Subsequently, on April 15, 2011, the President signed the FY 2011 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act (Title II of Public Law 112-10, the “Department of Defense and Full-Year Continuing Appropriations Act, 2011”), which appropriated the full amount of $61,860,000 from medical device user fees for FDA in FY 2011. Therefore, the second legal condition was met.
The third legal condition is defined in section 738(h)(2)(A)(ii) of the FD&C Act. It states that fees:
[S]hall 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.
The third condition requires a minimum spending from appropriations, excluding user fees, on the process of medical device review. The minimum spending from appropriations is the amount that FDA spent on the process for the review of medical device applications in FY 2002, adjusted for inflation. FDA must spend at or above this minimum spending level from appropriations.
In FY 2002, the amount spent from appropriations for the process for the review of medical device applications was $119,673,026. After applying the adjustment factor of 1.216528 (rounded to the sixth decimal place), the minimum appropriation spending level for the process for the review of medical device applications for FY 2011 is $145,586,000 (rounded to the nearest thousand dollars).
In FY 2011, FDA obligated $234,496,548 from appropriations, exclusive of user fees, for the process for the review of medical device applications, which exceeds the specified minimum appropriation spending level. Therefore, the third legal condition was met.
Table 8 shows the amounts FDA spent on the process for the review of medical device applications from appropriations and user fees for FY 2010 and FY 2011.
Summary Statement Of Obligations for the Process for the Review
of Medical Device Applications
As of September 30, 2011
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 certain device establishment inspections. This condition is cited in section 704(g)(10) of the FD&C Act.
FY 2010 FY 2011 From Appropriations $235,520,440 $234,496,548 From Fee Revenues $57,187,100 $59,256,500 TOTAL OBLIGATIONS $292,707,540 $293,753,048
Table 9 shows the required statutory minimum to be obligated for device establishment inspections (FY 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 2011. 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.
Obligations For The Inspection Of Medical Device Establishments
(Rounded to $000)
As of September 30, 2011
Next Section: Number of Fees Paid in FY 2011
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 $27,333,000 $35,927,000 $8,594,000 FY 2010 $28,700,000 $41,596,000 $12,896,000 FY 2011 $30,135,000 $43,261,000 $13,126,000