PDUFA IV Five-Year Financial Plan - 2009 Update: OC Plan Summary
OC Plan Summary
The Office of the Commissioner provides support to the process for the review of human drug applications in a variety of ways. It collects and manages the fee revenue, coordinates the acquisition and management of the additional space, provides contract and acquisition support to the centers, provides IT support, and reports to Congress on the financial aspects of the program each year. It is also responsible for the annual PDUFA performance report to Congress and for assisting with other management responsibilities. Funds for the management of contracts necessary for the continuation of Performance Management from PDUFA III funds ($2.495 million in FY 2008 and with annual inflation adjustments) are also included in the OC totals.
OC personnel necessary to support the drug review process are paid for under the overhead calculation described below.
As FDA developed PDUFA baseline costs in 1993, the Office of the Assistant Secretary for Finance prescribed the formula FDA uses to determine OC overhead costs. For this discussion, OC is used in its larger sense to encompass the several management and staff offices that report to the Commissioner. That formula conforms with generally accepted accounting principles and was found reasonable by Arthur Andersen consultants in subsequent annual audits. The formula is:
Total Costs of OC ÷ (Salary Costs of All of FDA - OC Salary Costs) = Overhead Rate
The salary costs used in this formula do not include the costs of any benefits. At the end of each fiscal year, the Office of Financial Management recalculates this overhead rate. To determine overhead costs attributable to the drug review process activities, this rate is multiplied by the total drug review process salary costs (excluding benefits) for CDER, CBER, and ORA. This is the method used at the end of each year to report the actual costs of the process for the review of human drug applications that may be charged to overhead.
As with all drug review process costs, this overhead has two components: (1) a portion paid from traditional appropriations and (2) a portion paid from fees collected from industry. This plan assumes that OC costs paid from fees will total about 7.9% of the total FY 2008 costs, and this percent decreases steadily each year, to about 7.4 percent by FY 2012.
All overhead costs paid from PDUFA fees are now treated as indirect costs. The fees allocated to overhead are used to pay for the same percent of the costs of all components of the Office of the Commissioner. The table on the next page reflects the estimated cost of OC overhead to be paid from fees for each of the next five years.
Workload Adjustment Increases
The September 2008 PDUFA 5-Year Financial Plan reflected a workload adjustment that was made in 2009 (3 percent) and then increased only for inflation each subsequent year. That adjustment funded a total of 6 FTE for OC in FY 2009, and maintained that same FTE level for the remaining 3 years. This FY 2009 Update to the plan reflects the increase of 6.82 percent in FY 2010, and annual increases at the rate of 3.41 percent for each subsequent year. With these revised assumptions, the workload adjustment funds an additional 6 FTE in FY 2010, for a total of 12 FTE that year. It funds an additional 6 FTE in FY 2011, for a total of 18 FTE in FY 2011. It funds an additional 6 FTE in FY 2012 for a total of 24 FTE in FY 2012 funded from the workload adjustment increases. These additional FTE will help assure that OC is better able to support CDER and CBER in meeting their performance goals.