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U.S. Department of Health and Human Services

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FY 1998 PDUFA Financial Report: Background

Table of Contents

PDUFA authorized FDA to collect fees from the pharmaceutical industry to augment FDA's base resources for a 5-year period. These additional resources were to be used to hire and support additional staff for the review of human drug applications so that effective drug products could reach the American public more quickly. PDUFA was very successful and, with support from the pharmaceutical industry and the Administration, Congress amended and extended it through FY 2002 by enacting the FDAMA.

Under PDUFA, as amended, an application fee must be submitted when certain new drug applications or biologic license applications are submitted. The application fee amount is set in statute, but is adjusted each year for cumulative inflation since FY 1997. In addition, FDA collects annual establishment and product fees. Under FDAMA amendments, FDA sets those fees each fiscal year so that the total revenue FDA receives from each category equals the amount FDA expects to collect from application fees. Thus, a third of the fee revenue each year comes from application fees, a third from establishment fees, and a third from product fees.

PDUFA, as amended, also requires FDA to submit two reports to Congress each fiscal year. A performance report is to be sent within 60 days of the end of the fiscal year, and a financial report is to be sent within 120 days. The FY 1998 PDUFA Performance Report, which discusses FDA's progress in meeting the goals referred to in FDAMA, was released in December 1998. This is FDA's FY 1998 PDUFA Financial Report, covering the period October 1, 1997, through September 30, 1998.

As required by statute, this report presents the legal requirements or "triggers" that must be satisfied before FDA can collect and spend the fees, and FDA's calculations showing how those conditions were met for FY 1998. This report also presents revenues and obligations from user fees and a summary statement of user fees by source (application, establishment, or product fees). The total costs applicable to the process for the review of human drug applications, as defined in FDAMA, are also presented, whether they were paid from fee revenues or appropriations.

In keeping with the requirements of the Chief Financial Officer's Act, FDA's financial statements as of the end of each fiscal year are subject to audit by the Office of the Inspector General (OIG), Department of Health and Human Services. Beginning with financial statements for FY 1995, this audit covered all of FDA's financial systems and funds, including PDUFA revenues. The most recently completed audit is for FY 1997. The OIG rendered a qualified opinion on FDA's financial statements for FY 1997. The qualifications expressed related to accounting for property (a minor part of PDUFA resources) and accounting for grants (which do not involve PDUFA funds). The OIG audit report on FDA's FY 1998 financial statement is expected to be available later in FY 1999. FDA expects the FY 1998 audit report to reflect substantial improvement since FY 1997.

Next Section: Meeting the Legal Conditions for User Fees in FY 1998