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Assumptions - Inflation and Inflation Adjustments

Table of Contents: PDUFA III Five-Year Plan

Previous Section : PDUFA Goals

The statute provides for annual adjustment of revenues for the costs of inflation after FY 2003. This is identical to the inflation adjustments that have been in place since 1998. The inflation adjustment is the greater of the total percentage change that occurred in either the Consumer Price Index (CPI) for all urban consumers for the 12 month period ending June 30 preceding the beginning of the fiscal year for which fees are being established, or the total percentage change for the previous fiscal year in pay for Federal employees stationed in the Washington DC metropolitan area. The adjustment made each fiscal year by this subsection will be added on a compounded basis to the sum of all adjustments made each fiscal year after fiscal year 2003.

For FY 2004, the adjustment factor specified for Federal pay is 4.27 percent—the rate of increase for employees in the Washington DC area that took place in January 2003. This was greater than the CPI change for the 12-month period ending June 30, 2003—which was 2.225 percent. As a result this plan will use 4.27 percent as the estimated inflation adjuster to apply to FY 2004. For this unique workload adjuster defined in PDUFA, the plan will use the average annual increase in pay for Federal employees in the Washington DC area for the past five years as the basis for estimating future inflation adjustments. That average for the most recent five-year period is 4.08 percent. Future plans will replace this estimate with the actual inflation adjustment as it becomes available.

Inflation Adjustment Estimates

Inflation Adjustment 2003
Annual Inflation Estimate   4.27% 4.08% 4.08% 4.08%
Cumulative Inflation Estimate   4.27% 8.52% 12.95% 17.56%
Estimated Inflation Adjustor   4.27% 8.52% 12.95% 17.56%

Next Section : Assumptions - Workload and Workload Adjustments