FY 2004 PDUFA FINANCIAL REPORT: Appendix D
Previous Section: Appendix C: Allowable and Excluded Costs for the Process for the Review of Human Drug Applications
Development of Costs for the Process for the Review of Human Drug Applications
The costs associated with the process for the review of human drug applications are based on obligations recorded within FDA's Center for Drug Evaluation and Research (CDER), the Center for Biologics Evaluation and Research (CBER), Office of Regulatory Affairs (ORA), and the Office of the Commissioner (OC). These organizations correspond to the cost categories presented on the Statement of Costs for the Process for the Review of Human Drug Applications as follows:
|Costs for the Review of New Drug Applications (NDA's) and Supplements||CDER|
|Costs for the Review of Biologic License Applications (BLA's) and Supplements||CBER|
|Field Inspection and Investigation Costs||ORA|
|Agency General and Administrative Costs||OC|
The costs were accumulated using time reporting systems in CDER, CBER, and ORA, and were extrapolated for OC. Using the definitions of costs and activities included in the "process for the review of human drug applications" in the Act, a portion of the costs within each of the four organizations listed above was identified as part of the human drug review process.
Costs are accumulated in CDER and CBER in cost centers corresponding to the organizational components (usually divisions) within the Centers. Most FDA components involved in the human drug review process perform a mixture of activities--some included in the definition of the process for the review of human drug applications, and some not included. These components fall into three categories: 1) direct review and laboratory components; 2) indirect review and support components; and 3) center-wide expenses. The allocation of costs for the three categories is discussed below.
Direct Review and Laboratory Components
Employees in all components of CDER and CBER, other than those noted below as center indirect review and support components, reported their time for eight weeks in FY 2004 in categories that could be used to differentiate between time spent on the process for the review of human drug applications and all other time.
Both CDER and CBER time reporting systems were modified after the enactment of PDUFA, 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 human drug applications, as defined in PDUFA and as further defined in Appendix C. This method for determining allowable and excluded costs for PDUFA direct review and laboratory costs has been used consistently, with only minor modifications, since 1993 when costs were initially measured by Arthur Andersen. Beginning in FY 1996, the CBER time reporting system was enhanced to collect on-line time reports for all employees for a two-week period each quarter of the year. The enhanced system reports time for 70 possible functional activities, by 10 product classes.
In November 1997, CDER initiated an on-line time reporting survey of each employee within the Center. Beginning in FY 2001, this survey captures the expenditure of time on activities that are part of the process for the review of human drug applications and all other CDER mission-oriented activities for two four-week periods -- one in each half of the fiscal year.
A similar procedure was used in CBER's direct review and laboratory components to measure costs for the process for the review of human drug applications. CBER's time reporting system was validated by studies done just after PDUFA was initiated. That system collects time reports on-line from all employees other than management and administrative support personnel for a two-week period during each quarter of the fiscal year.
FDA Centers are very payroll-intensive organizations -- 60 percent of all FDA funds go to pay for employee salaries and benefits, and almost all other costs are directly supporting these employees. Thus the average percent of time reported each year during this eight-week period as having been expended on drug review process activities for each cost center is then applied to all costs incurred for each cost center for the entire fiscal year to estimate the costs for each cost center that were part of the process for the review of human drug applications.
Center Indirect Review and Support Components
Indirect review and support components provide the infrastructure for the review process. In CDER, these components include portions of the Office of the Center Director, the Office of Regulatory Policy, the Office of Information Technology, the Office of Management, the Office of Training and Communications, the Office of Medical Policy, the Office of Executive Programs, the Office of Information Management, and the Office of Compliance. In CBER, these components include portions of the Office of the Center Director, Office of Management, Office of Information Technology Management, and the Office of Communications, Training, and Manufacturers Assistance. Most employees of these components do not report their time.
Instead, the time of the management and administrative support personnel is assumed to be the average percent time of all center employees in direct review and laboratory components who reported their time. Thus the average percent of time reported each year during this eight-week period as having been expended on drug review process activities for all direct review and laboratory components was then applied to all costs incurred for the entire fiscal year by the indirect review and support components.
A number of center-wide expenses are paid from central FDA accounts rather than being charged directly to a specific center. These costs include rent for facilities that house drug review staff, telecommunications and utility costs, some computer equipment and support costs, facilities repair and maintenance, and some extramural and service contracts. Many of these costs were traced back to the specific division that generated the cost and were assigned the user fee 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.
In support of the President's Management Agenda and Secretarial Goal of "One-HHS," FDA consolidated administrative functions from the Centers and the Office of Management (including facilities, procurement, finance, EEO, and IT services) into the Office of Shared Services in FY 2004. The goal of implementing the Office of Shared Services is to keep the administrative functions related to the review costs more efficient.
In the FY 2004 financial report, the resources that were previously provided by the Centers, but are now provided by the Office of Shared Services, are reported as if they were still performed by the centers, in order to make the FY 2004 report comparable with the reports of previous years.
Center Research Covered by the Prescription Drug User Fee Act
Research activities supporting the process for the review of human drug applications were included when FDA originally calculated base costs for the process for the review of human drug applications for FY 1992 and 1993. Under PDUFA I, from FY 1993 through FY 1997, both appropriated funds and user fee revenues were used to fund research activities supporting the drug review process, just as was the case with all other PDUFA activities. During informal discussions that led to PDUFA II, FDA agreed to phase out the use of fee revenues to support these research costs. The phase-out was complete in FY 2001. The remaining research related to the drug review process is now supported solely by appropriated funds, just as it was prior to FY 1993.
Center Time Reporting Results for FY 2004
The time reporting systems operated by CBER and CDER indicated the 62 percent of all time spent in CBER and 79 percent of all time spent in CDER in FY 2004 was dedicated to the process for the review of human drug applications as defined in PDUFA.
Field Inspection and Investigation Costs
FDA's Office of Regulatory Affairs (ORA) incurs all field inspection and investigation costs. 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 human drug applications.
Total direct hours reported in FACTS are used to calculate the total number of staff-years required by ORA to perform these activities. 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 user fee related staff years to the average salary cost in ORA to arrive at ORA user fee related salary costs. The final step is to allocate ORA obligations for operations and rent to the human drug review process based upon the ratio of user fee related staff years to total ORA staff years. The following table summarizes the calculation of ORA costs for the review of human drug applications for the Fiscal Years 2003 and 2004.
Food and Drug Administration
Office of Regulatory Affairs
Costs of the Process for the Review of Human Drug Applications
As of September 30, 2003 and 2004
|Cost Component||FY 2003||FY 2004|
|Staff Years Utilized||147||147|
|ORA Average Salary & Benefits||$79,696||$86,376|
|Salary and Benefits||$11,715,260||$12,697,262|
|Operations, Rent and Shared Services||$7,383,122||$6,948,825|
The ORA costs for the process for the review of human drug applications described above include total process costs, including costs paid from appropriations and costs paid from fee revenues.
Agency General and Administrative Costs
The Agency general and administrative costs are incurred in the FDA's Office of the Commissioner (OC). During most of FY 2004, OC was comprised of the following offices:
- Immediate Office of the Commissioner
- Office of the Chief Counsel
- Office of Equal Employment Opportunity and Diversity Management
- Office of the Administrative Law Judge
- Office of Science and Health Coordination
- Office of International Activities and Strategic Initiatives
- Office of Crisis Management
- Office of Legislation
- Office of External Relations
- Office of Policy and Planning
- Office of Management
The OC costs applicable to the process for the review of human drug applications were calculated using a method prescribed by the Division of Cost Determination Management, Office of Finance, Office of the Secretary, Department of Health and Human Services. The method uses the percentage derived by dividing total Office of the Commissioner costs by the total salary obligations of the Agency, excluding the Office of the Commissioner. That percentage is then multiplied by the total salaries (excluding benefits) applicable to the process for the review of human drug applications in CDER, CBER, and ORA to arrive at the total General and Administrative Costs.
Using this process, $29,840,492 and $31,313,598 in general and administrative obligations were dedicated to the human drug review process in FY's 2003 and 2004, respectively. They are the total costs, including the funds obligated both from appropriations and user fees. The Agency general and administrative obligations in FY 2004 accounted for about 7.2 percent of the total FY 2004 costs of the human drug applications review process, which is very similar to FY 2003 (7.3 percent).