REQUIRED BY THE
MEDICAL DEVICE USER FEE
AND MODERNIZATION ACT OF 2002
FOOD AND DRUG ADMINISTRATION
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Table of Contents
Appendix A: Conditions for Assessment and Use of Fees
Appendix B: Summary of Application Fees Paid in FY 2003
Appendix C: Waivers, Reductions, and Exemptions
Appendix D: Allowable and Excluded Costs for the Process for the Review of Device Applications
Appendix E: Development of Costs for the Process for The Review of Device Applications
March 10, 2004
The Honorable Richard Cheney
President of the Senate
United States Senate
Washington, D.C. 20510
Dear Mr. President:
Enclosed for your consideration is the first annual financial report to Congress required by the Medical Device User Fee and Modernization Act of 2002 (MDUFMA). This report covers fiscal year (FY) 2003, documenting how each of the conditions specified in MDUFMA for the continued collection of medical device user fees was met.
The report also presents the user fee revenues and related expenses for FY 2003, baseline data for FY 2002, and details the amounts carried over at the end of the year that remain available. For FY 2003, FDA collected $21.9 million in user fees, and spent $14.8 million. About 23 percent of the fees were spent for salaries and benefits for additional staff, and the remainder went toward increased support and infrastructure for the entire device review program. This enhanced infrastructure and the infusion of human resources are critical in enabling FDA to meet the performance goals associated with MDUFMA — goals that become increasingly more stringent each year.
We are pleased that Congress enacted MDUFMA, which will provide increasing levels of user fees, along with increased appropriations, through FY 2007. These additional resources will enable FDA to substantially strengthen and speed its medical device review process, while assuring that only safe and effective devices are available to the public.
Identical letters to:
The law requires the Food and Drug Administration (FDA) to report annually on the financial aspects of its implementation of the Medical Device User Fee and Modernization Act of 2002 (MDUFMA). This is FDA's first financial report required under this act, and it covers fiscal year (FY) 2003.
The MDUFMA specifies that the following three conditions must be satisfied each year in order for FDA to collect and spend MDUFMA fees:
- Within FDA's salaries and expenses appropriation, the amount appropriated for devices and radiological products must be at least $205,720,000 (excluding fees and adjusted for inflation), and any shortfalls must be made up by October 1, 2005 .
- Fee revenues collected must be specified in Appropriation Acts.
- FDA must spend at least as much from appropriated funds for the review of medical device applications as it spent in FY 2002, adjusted for inflation.
This report describes the extent to which these specific statutory conditions or "triggers" were met in FY 2003. The statements and tables included in this report also provide information on the user fee revenues and expenditures in FY 2003, and on the carryover balance. Baseline data for FY 2002 is also provided.
For FY 2003, FDA collected $21.9 million in fees — $3.2 million less than the revenue amount set in statute for FY 2003. The shortfall is due primarily to fewer applications that paid the highest fees and to a larger number of applications than expected that qualified for exemption from fees. Under MDUFMA, revenue shortfalls are made up in subsequent years by the compensating adjustment mechanism of the statute. Most or all of this shortfall is expected to be made up in FY 2004.
In FY 2003, FDA spent $14.8 million from MDUFMA revenues, and carried the balance of $7.1 million forward for use in FY 2004. The funds spent in FY 2003 went to support FDA's medical device review program, including information technology support, and to add additional staff to the review process. While $3.4 million went to pay 22 additional staff years in FY 2003, most of the additional staff was hired toward the end of the fiscal year, and FDA utilized only a small fraction of a staff year for each person hired. During FY 2004, FDA expects to spend user fees to pay for over 100 additional staff to conduct and support medical device reviews, positioning the agency to be able to meet the challenging performance goals associated with this program in FY 2004 and FY 2005. Hiring to accomplish the substantial increase in review staff necessary to meet the MDUFMA goals was well underway by the end of FY 2003.