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Development of Costs for the Process for the review of Human Drug Applications (FY2010 PDUFA)

Back of Table of Contents: FY 2010 PDUFA Financial Report

General Methodology

 
The costs associated with the process for the review of human drug applications are based on obligations recorded within FDA’s CDER, CBER), ORA, and the 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:
 

 
Cost Category
 
FDA Organization
 
Costs for the Review of New Drug Applications (NDAs), Biologic License Applications (BLAs), and Supplements
 
 CDER
Costs for the Review of BLAs 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 FD&C Act , a portion of the costs within each of the four organizations listed above was identified as part of the human drug review process.
 
Center Costs
 
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 during FY 2010 in activities 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 each PDUFA reauthorization, so that time could be reported in activities 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 explained 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 & Company. The CBER time reporting system collects on-line time reports for all employees, other than management and administrative support personnel, for a 2-week period each quarter of the fiscal year. The enhanced system reports time for 58 possible functional activities, by seven product classes. 
 
CDER also conducts an on-line time-reporting survey. It captures the expenditure of time by all employees, other than management and administrative support personnel, on activities that are part of the process for the review of human drug applications and all CDER mission-oriented activities of each employee within the Center for two 4-week periods—one in each half of the fiscal year.
 
FDA Centers are payroll-intensive organizations – about 60 percent of all FDA funds pay for employee salaries and benefits, and almost all other costs are directly supporting these employees. Thus the average percentage of time reported each year during this 8-week period (two weeks each quarter for CBER, and four weeks semiannually for CDER) as having been expended on drug review process activities for each cost center is then applied to all costs incurred for that cost center for the entire fiscal year. This provides an estimate of 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 Planning and Informatics, the Office of Management, the Office of Communications and the Office of Executive Programs. In CBER, these components include portions of the Office of the Center Director, Office of Management, Office of Information Technology, and the Office of Communications, Outreach, and Development. Most employees of these components do not report their time.
 
The time of the management and administrative support personnel supporting the process for the review of human drug applications is assumed to be the average percentage time of all Center employees in direct review and laboratory components who reported their time. Thus the total average percentage of time reported each year during this 8-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.
                                                                                                                                   
Center-Wide Expenses
 
A number of Center-wide expenses are paid from central FDA accounts rather than 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 time-reporting component costs for the process for the review of human drug applications divided by the total costs of these components.
 
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 2010 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 2010 report comparable with the reports of previous years. 
 
Center Time Reporting Results for FY 2010
 
The time reporting systems operated by CBER and CDER indicated that 68 percent of all time spent in CBER and 81 percent of all time spent in CDER in FY 2010 was dedicated to the process for the review of human drug applications as defined in PDUFA.
 
Field Inspection and Investigation Costs
 
ORA incurs all field inspection and investigation costs. ORA costs are incurred in both district offices (the “field”) and headquarters support offices and are tracked 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. Table 10 summarizes the calculation of ORA costs for the review of human drug applications for FY 2009 and FY 2010.
 
Table 10
Office of Regulatory Affairs
Costs of the Process for the Review of Human Drug Applications
As of September 30, 2009 and 2010
 
Cost Component
FY 2009
FY 2010
Staff Years Utilized
194
174
ORA Average Salary and Benefits
$107,401
$108,065
Salary and Benefits
$20,835,794
$18,803,310
Operations, Rent, and Shared Services
$15,673,286
$16,164,894
TOTAL
$36,509,080
$34,968,204
 
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.  The number of FTEs is lower than in FY 2010 because of decreased assignments of drug review process work from the centers.
 
Agency General & Administrative Costs
 
The Agency general and administrative costs are incurred in the FDA’s OC. At the end of FY 2010, OC was comprised of the following offices:
 
  • Immediate Office of the Commissioner
  • Office of the Chief Counsel
  • Office of the Chief of Staff
  • Office of the Administrative Law Judge
  • Office of Equal Employment Opportunity and Diversity Management
  • Office of International Programs
  • Office of Administration
  • Office of Policy, Planning and Budget
  • Office of Special Medical Programs
  • Office of Legislation
  • Office of the Counselor to the Commissioner
  • Office of Women’s Health
  • Office of Foods
  • Office of the Chief Scientist
  • Office of External Affairs
 
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 Assistant Secretary for Resources and Technology, and Office of the Secretary, HHS. The method uses the percentage derived by dividing total OC costs by the total salary obligations of the Agency, excluding the OC. 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, $63,138,931 and $80,014,481 in general and administrative obligations were dedicated to the human drug review process in FY 2009 and FY 2010, respectively.   They are the total costs, including the funds obligated both from appropriations and user fees. The Agency general and administrative obligations in FY 2010 accounted for about 8.6 percent of the total costs of the human drug application review process. This is up from the 7.4 percent reported for FY 2009. This percentage is still below the high point of 10.4 percent reported for general and administrative obligations in the FY 1998 PDUFA Financial Report.