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Minutes from Negotiation Meeting on MDUFA III Reauthorization, February 23, 2011
FDA – Industry MDUFA III Reauthorization Meeting
February 23, 2011, 10:00 am – 3:00 pm
FDA Switzer Building, Washington, DC
To provide historical financial information for the MDUFA program and the current financial baseline status.
|Lisa Berry||Office of Financial Management (OFM)|
|Malcolm Bertoni||Office of the Commissioner (OC)|
|Nathan Brown||Office of Chief Counsel (OCC)|
|Kate Cook||Center for Biologics Evaluation and Research (CBER)|
|Christy Foreman||Center for Devices and Radiological Health (CDRH)|
|William Hubbard||FDA Consultant|
|Don St. Pierre||CDRH|
|Ruth Watson||Office of Legislation (OL)|
|David Fisher||Medical Imaging Technology Alliance (MITA)|
|John Ford||Abbott Laboratories|
|Donald Horton||Laboratory Corporation of America Holdings|
|Mark Leahey||Medical Device Manufacturers Association (MDMA)|
|Joseph Levitt||Hogan Lovells US LLP|
|John Manthei||Latham and Watkins|
|David Mongillo||American Clinical Laboratories Association (ACLA)|
|James Ruger||Quest Diagnostics|
|Patricia Shrader||Becton Dickinson|
Meeting Start Time: 11:00 am
FDA Presentation of Financial Baseline
FDA presented the device line in FDA’s appropriation budget authority (exclusive of user fees) for fiscal years 2005 – 2010. Relatively steady increases in appropriations were seen from 2006-2008, with a larger increase in 2009 and 2010 due to a supplemental appropriation for postmarket compliance and regulatory science. The appropriations from 2007 – 2010 have met the appropriation trigger stipulated under MDUFA II. FDA noted that appropriations in FY 2011 and FY 2012 are highly uncertain and are likely to be reduced from the proposed President’s Budget levels.
FDA then presented data on costs associated with the process for the review of device applications. The term “process for the review of device applications” pertains to particular activities listed in FD&C Act Sec. 737(8)(A-K). The types of expenses incurred in connection with the process for the review of device applications are listed in FD&C Act Sec. 737(9)(A-D). FDA explained that the costs for the review of device applications are covered by a combination of appropriations and user fees. Actual obligations from appropriations and fees were presented for fiscal years 2008 – 2010. User fees currently cover approximately 20% of the program. FDA then presented data on how costs were distributed for each year among the following components: CDRH, CBER, ORA, and OC. FDA further broke down the cost data for each year into expense categories. FDA noted that salaries remain roughly 60% of the cost of the program over time. FDA also noted that there was an escalation in costs for contract services from 2008 – present. This can be attributed to CDRH’s relocation to White Oak, IT infrastructure and enterprise-wide IT initiatives, increased security costs, and contractor support.
FDA discussed annual cost increases and presented rolling averages based on costs associated with fully loaded Agency FTEs over the past five years. The cost of salary and benefits has increased at an average of 3.72% per year over the past five years. In the current environment, FDA anticipates salary costs will increase slightly over the next two years; benefit costs are likely to rise at roughly the same rate as the past five years. Costs for expenses other than pay and benefits have increased at an average of 11.5%, with high variability. In the current environment, FDA believes non-pay costs are likely to rise at a lower rate in upcoming years. The composite average increase of costs was 6.9% annually over the past five years. FDA then presented the “fully loaded” cost of an Agency FTE for each fiscal year from 2005 – 2010. FDA also calculated and presented the percent change from year to year, which varied from 13.2% in 2008 to 1.2% in 2010.
FDA then presented the fundamentals of the MDUFA II financial plan. Specifically, FDA planned to collect more than it would spend during the first three years of MDUFA II, while drawing down on carryover to cover costs in the final two years. This was due to Industry’s preference for steady and predictable annual fee increases of 8.5%. The combination of fees and budget authority appropriations would ensure that FDA supported a steady level of FTEs dedicated to the process for the review of device applications. FDA presented the actual (2008 – 2010) and estimated (2011 – 2012) MDUFA II spending amounts broken down into several categories for each year. Of note, fee revenues contributed a lower fraction of program costs than originally estimated due to appropriations increases in FY 2008 and FY 2009. In FY 2010, device user fees covered less than 20% of the overall device review process. FDA has increased the number of FTEs for the device review process from appropriations. However, due to multiple Continuing Resolutions, FDA was delayed bringing staff on board in a timely fashion in FY 2008, FY 2009 and FY 2011.
To assist with planning for MDUFA III, FDA presented estimated baseline resource requirements for FYs 2013 – 2017, assuming a steady state of 1,230 FTEs for the medical device review process and annual percentage increases in costs per FTE based on the five year rolling average described above. According to this projection, the cost of a fully loaded FTE in FY 2013 would be $282,743. Industry asked for projections of the average base salary per year (versus fully loaded FTE per year).
FDA provided an update on the MDUFA II offset. The offset provision in the FD&C Act, Sec. 738(h)(4), creates a mechanism to ensure that the total fees paid over the 5 years of the MDUFA II program do not exceed what was agreed upon by FDA and Industry during MDUFA II negotiations and authorized in the MDUFA II legislation. If the aggregate amount of fees collected by FDA during FYs 2008 – 2010, along with the amount FDA estimates it will collect in FY 2011, exceeds the amount authorized for the first four fiscal years, those excess fees are to be held in reserve and that amount is to be offset by reducing FY 2012 collections accordingly. FDA reported that current excess collections from FYs 2008 through 2010 are approximately $8.75 million. FDA also pointed out that the current continuing resolution for FY 2011 (through March 4) only appropriates the FY 2010 authorized user fee collections limit (i.e., $57M), rather than the FY 2011 authorized amount (i.e., $61.9 million). This could result in an increase in the aggregate excess collection, because FDA has set its FY 2011 fees based on the FY 2011 authorized collection level. FDA is currently analyzing FY 2012 appropriations language to ensure that the excess collections held in reserve are available to the Agency for the process for the review of device applications during FY 2012.
Industry began the discussion with a general question as to why FDA referred to different categories (i.e., CDRH’s budget authority, cost of medical device review process, Agency-wide fully loaded FTE, etc) throughout the presentation, indicating this makes interpretation difficult. FDA explained that the device line in the annual appropriation is relevant to triggers, but does not represent the entire process for the review of medical device applications. The “process” includes resources from CDRH, CBER, ORA and OC. The Agency has historically used FDA fully loaded FTE estimates for all user fee negotiations as it provides a more stable estimate due to the larger base. FTE estimates tied solely to the medical device review process are more volatile on a year by year basis. FDA also pointed out that the Agency-wide estimates are generally in the same ballpark as process estimates. Industry asked if medical device estimates are generally lower than FDA estimates due to the differences in average salaries between device and drug review staff. FDA replied that it depends on the year and other factors, and presented medical device review process FTE costs for 2008 – 2010.
Industry asked if the President has ordered a 5-year freeze. FDA clarified that there is a discretionary spending freeze and a 2-year pay freeze that applies to General Schedule employees but not to Public Health Service officers. During the freeze, benefits costs would still be expected to rise, and promotions and step increases are permitted. Industry questioned whether the implications of the freezes are incorporated in FDA’s presentation. FDA indicated that, due to the freezes, FDA projected a low change from FY 2010 to FY 2011. FDA’s projections estimated the costs associated with maintaining 1,230 employees working on medical device reviews.
Industry questioned what the 1,230 FTEs include. FDA replied that this FTE estimate reflects a combination of CDRH, CBER, OC, and ORA staff effort dedicated to the medical device review process. Industry pointed to a Congressional report which sites the total medical device review FTEs were 1,755 for 2010. FDA clarified that that figure likely includes the entire device and radiological health program line of the President’s Budget, including activities funded through Mammography Quality Standards Act (MQSA) user fees, MDUFA user fees, and budget authority appropriations, and therefore does not match the 1,230 FTEs reported for MDUFA process activities. Industry asked how FDA determines which portion of a given organization is applied to the device review process FTE calculation. FDA explained that CDRH, CBER, and ORA estimates are derived from activity-based time reporting systems. To determine the OC contribution, the total OC costs are divided by the total FDA salary expenses (after subtracting the salary expenses from OC) and multiplying by the sum of salaries applicable to the process for the review of medical devices in CDRH, CBER, and ORA. Industry also asked if this FTE number includes contract employees; FDA replied it does not include contractors or Special Government Employees (SGEs).
Industry questioned the methodology behind FDA’s projections, especially the validity of using a 5 year rolling average for percent increases given that the data presented are variable from year to year. It was agreed that FDA would provide alternative scenarios using different models in a future meeting.
Industry noted that FDA has had large increases in funding over the past 5 years. FDA acknowledged the recent increases, but noted that the increased funding was designated for postmarket compliance and regulatory science. In addition, the increased funding has only allowed the Agency to rebuild back up to the FTE levels from 1992. Industry stated that FDA has received $100M more than was estimated during FYs 2008 through 2010, yet not all goals are not being met. FDA noted that the Agency is meeting Tier 1 and Tier 2 goals for 510(k)s, and Tier 1 goals for original PMAs and most PMA supplements. The Agency is having some difficulties with the new goals as well as Tier 2 goals; however, if you consider the submission volume within each cohort, the Agency is meeting goals on over 95% of submissions. Industry indicated that they view performance as more than just the agreed upon goals. For example, it is taking longer on average to clear 510(k)s. Although FDA is meeting most of the associated performance goals, Industry views the increase in average review time as deteriorating performance. FDA replied that while average 510(k) review time is going up slightly, the Agency is meeting most of the established MDUFA goals and has improved PMA review times, all while the volume of work is increasing. Industry questioned the premise of an increased CDRH review workload, noting that 510(k) and PMA submissions have been basically flat since 2004. FDA stated that Pre-IDE and PMA Supplement submissions have increased significantly over the past few years. Industry noted that the total cost of the process for device review was $147 million in 2004, whereas it is almost double that in 2010. FDA noted that these dollar numbers are in current dollars and do not reflect equivalent buying power across time due to inflation. FDA also noted that this phenomenon of increasing average review times while meeting the MDUFA performance goals is consistent with what we would expect to see when a review system is close to or even beyond capacity. FDA agreed with Industry that the ultimate aim is for safe and effective products to reach the market as quickly as possible; the challenge is to design review goals that will help achieve that result.
Industry indicated that interactive review was a very important goal of MDUFA II. Member organizations have reported interactive review is inconsistently applied. Industry stated that if it were applied more consistently, the overall review times could easily be reduced. FDA agreed that interactive review is important, and stated that FDA and Industry share responsibility for its improvement. FDA asked Industry for examples of factors that impact whether interactive review is successful in Industry’s opinion, as well as specific examples of where it is being applied inconsistently. FDA also pointed out that the timeliness and quality of Industry’s responses play a role in its success. Industry indicated there are cases in which new or unnecessary questions are asked, often due to reviewer turnover or new reviewers. FDA asked Industry to provide examples of specific questions which they believe were inappropriate. Industry also pointed out that FDA’s perception of success of interactive review may not be the same as theirs. For example, in the previous meeting FDA noted one original PMA in which interactive review was applied, which missed the Tier 1 goal but ultimately registered a total time to market of 279 days. Industry views this example as a success. Both FDA and Industry agreed that a more in-depth analysis and discussion of the interactive review process are needed at a future meeting.
All agreed to meet from 10:00am – 4:30pm on March 7 th to discuss topics associated with 510(k) performance. FDA will present an analysis of 510(k) performance and outcomes, root causes of increasing numbers of review cycles, and analyses of submission quality.
Meeting End Time: 3:00 pm