The Federal Food, Drug, and Cosmetic Act (the FD&C Act) specifies three major conditions that must be met each year before prescription drug user fees may be collected and spent. A summary of these conditions and how FDA met them appears on page 2. A more detailed description of each of these conditions is provided below, with an explanation of how FDA met the conditions in FY 2010.
For making the calculations to determine if statutory conditions are met, an adjustment factor must be used. It is defined in Section 735(8) of the FD&C Act, as follows:
The term "adjustment factor" applicable to a fiscal year is the Consumer Price Index for all urban consumeres (all items, United States city average) for October of the preceding fiscal year divided by such Index for October 1996.
The consumer price index for October 2008, the October of the fiscal year preceding FY 2010, was 216.573. The consumer price index for October 1996 was 158.3. The result of dividing 216.573 by 158.3 is an adjustment factor of 1.368117 for FY 2010.
The first condition is based on Section 736(f)(1) of the FD&C Act. It states:
In general, fees under subsection (a) shall be refunded for a fiscal year beginning after FY 1997 unless appropriations for salaries and expenses of the Food and Drug Administration for such fiscal year (excluding the amount of fees appropriated for such fiscal year) are equal to or greater than the amount of appropriations for the salaries and expenses of the Food and Drug Administration for the fiscal year 1997 (excluding the amount of fees appropriated for such fiscal year) multiplied by the adjustment factor applicable to the fiscal year involved.
This provision does not allow FDA to collect or spend user fees unless FDA’s total Salaries and Expenses appropriation (excluding user fees) each year are greater than or equal to FDA’s FY 1997 Salaries and Expenses appropriation (excluding user fees) multiplied by the adjustment factor. FDA’s total FY 1997 Salaries and Expenses appropriation (excluding user fees) was $819,971,000. Multiplying this amount by the adjustment factor of 1.368117, results in a minimum Salaries and Expenses appropriation for FY 2010 (excluding user fees, and rounded to the nearest thousand dollars) of $1,121,816,000.
In FY 2010, FDA’s total Salaries and Expenses appropriation (excluding user fees and excluding rent to GSA, which was also not included in the FY 1997 appropriation amount) was $2,200,634,000. Table 7 displays how this $2,200,634,000 was calculated:
FDA’s FY 2010 Salary & Expense (S&E) Appropriation,
Less Fees and Rent to GSA
Total FDA S&E Appropriation (PL 111-80)
Total for FDA in Supplemental Appropriations (PL 111-212)
Total FDA S&E Appropriation for FY 2010
Fee Amounts Specified in Appropriations
Subtotal—All Fee Amounts in Appropriations
Rent Payments to GSA (Not in 1997 S&E Appropriation)
Amount of Rent to be paid from Fees
Rent Amount Appropriated Excluding Amounts from Fees
FY 2010 S&E Appropriation Less Fees and Rent
Because the FY 2010 appropriations, after deductions for fees and rent, exceeded the FY 1997 adjusted amount, the first condition was met.
The second condition is stated in Section 736(g)(2)(A)(i): 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 President signed Agriculture, Rural Development, Food And Drug Administration, And Related Agencies Appropriations Act, 2010 that specified the amounts from prescription drug user fees in FY 2010 ($578,162,000) on October 21, 2009 (Public Law 111-80). Therefore, the second condition was met.
The third condition in Section 736(g)(2)(A)(ii), 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 human drug 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 1997 multiplied by the adjustment factor.
In FY 1997, FDA’s actual obligation for the process for the review of human drug applications (excluding obligations paid from user fees) was $147,959,689, as reported in the FY 1997 Financial Report to Congress. Multiplying this amount by the FY 2010 adjustment factor of 1.368117, FDA’s adjusted minimum spending for the human drug applications review process from appropriations (exclusive of user fees) was $202,426,000, rounded to the nearest thousand dollars, in FY 2010.
In FY 2010, FDA obligated $358,587,181 from appropriations for the human drug applications review process. Because $358,587,1819 is greater than $202,426,000, the third condition was met.
Table 8 provides the amounts that FDA spent on the review process of human drug applications in FY 2009 and FY 2010, and the adjusted FY 1997 amount that had to be spent from appropriations in FY 2010. It also provides the amounts of these costs derived from appropriations and from user fees in each fiscal year.
Obligations for the Process for the Review of Human Drug Applications
As of September 30, 2010
FY 1997 Adjusted for FY 2010
From User Fee Revenues