[House Report 108-287]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    108-287

======================================================================



 
                    ANIMAL DRUG USER FEE ACT OF 2003

                                _______
                                

 September 30, 2003.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

 Mr. Tauzin, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 1260]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 1260) to amend the Federal Food, Drug, and 
Cosmetic Act to establish a program of fees relating to animal 
drugs, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     1
Background and Need for Legislation..............................     2
Hearings.........................................................     2
Committee Consideration..........................................     2
Committee Votes..................................................     2
Committee Oversight Findings.....................................     3
Statement of General Performance Goals and Objectives............     3
New Budget Authority, Entitlement Authority, and Tax Expenditures     3
Committee Cost Estimate..........................................     3
Congressional Budget Office Estimate.............................     3
Federal Mandates Statement.......................................     6
Advisory Committee Statement.....................................     6
Constitutional Authority Statement...............................     6
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     7
Changes in Existing Law Made by the Bill, as Reported............    11

                          Purpose and Summary

    H.R. 1260 authorizes a program of fees by the Food and Drug 
Administration (FDA) relating to the review of new animal 
drugs.

                  Background and Need for Legislation

    Congress, in enacting the Prescription Drug User Fee Act of 
1992, Public Law 102-571 (PDUFA I) for human pharmaceuticals, 
required FDA in section 108(a) to conduct a study to evaluate 
whether, and under what conditions, to impose user fees to 
supplement appropriated funds in order to improve the process 
of reviewing applications for new animal drugs under section 
512 of the Federal Food, Drug, and Cosmetic Act.
    FDA submitted a report to Congress in 1994. That report 
revealed several problems: inadequate review resources, a 
growing workload, and low quality applications submitted by 
industry. The combination of problems had slowed the approval 
process to a rate unacceptable to the industry. The report 
noted that if Congress were to consider legislation authorizing 
the FDA to impose and collect user fees, approximately $11 
million would need to be collected annually.
    The situation has not improved. A prolonged decrease in 
resources in the 1990's resulted in a slower, less predictable 
animal drug review program. In recent years, while funding for 
FDA's Center for Veterinary Medicine (CVM) programs, in 
general, has increased significantly, most of these increases 
were earmarked for CVM activities other than its animal drug 
review process. Recent modest increases in drug review 
resources, combined with intense effort on the part of review 
personnel, have resulted in some improvement in review times. 
However, the intense level of effort needed to accomplish this 
improvement cannot be maintained over the long term without 
increased funds.
    Under H.R. 1260, the additional revenues generated from 
fees paid by the animal health industry would be dedicated for 
use in expeditingthe new animal drug review process, in 
accordance with performance goals that would be developed by FDA in 
consultation with the industry. This legislation will provide resources 
to improve the animal drug review process through the new hiring of 
personnel, purchase and maintenance of technological management and 
information systems thereby increasing the program's performance 
capacity and efficiency.

                                Hearings

    The Committee on Energy and Commerce has not held hearings 
on the legislation.

                        Committee Consideration

    On Wednesday, September 10, 2003, the Full Committee on 
Energy and Commerce met in open markup session and favorably 
ordered H.R. 1260 reported to the House, without amendment, by 
a voice vote, a quorum being present.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 1260 reported. A motion by Mr. Tauzin to order H.R. 1260 
reported to the House, without amendment, was agreed to by a 
voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has not held oversight 
or legislative hearings on this legislation.

         Statement of General Performance Goals and Objectives

    The goal of H.R. 1260 is to provide resources to improve 
the animal drug review process through the new hiring of 
personnel, purchase and maintenance of technological management 
and information systems thereby increasing the program's 
performance capacity and efficiency.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee finds that H.R. 
1260, the Animal Drug User Fee Act of 2003 (ADUFA), would 
result in no new or increased budget authority, entitlement 
authority, or tax expenditures or revenues.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                  Congressional Budget Office Estimate

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 16, 2003.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1260, the Animal 
Drug User Fee Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Margaret 
Nowak.
            Sincerely,
                                       Douglas Holtz-Eakin.
                                                          Director.
    Enclosure.

H.R. 1260--Animal Drug User Fee Act of 2003

    Summary: H.R. 1260 would amend the Federal Food, Drug, and 
Cosmetic Act to authorize the Food and Drug Administration 
(FDA) to collect fees to cover the cost of expediting the 
review of new and supplemental animal drug applications and 
investigational animal drug submissions. Such fees could be 
collected and made available for obligation only to the extent, 
and in the amount, provided in advance in appropriation acts.
    H.R. 1260 also would require the Secretary of Health and 
Human Services to submit annual performance and fiscal reports 
related to the animal drug user fee program to the 
Congressional committees of jurisdiction.
    Because the spending of new fees would lag behind their 
collection, CBO estimates that implementing H.R. 1260 would 
reduce net outlays by $4 million over the 2004-2008 period, 
assuming the necessary authorities are provided in 
appropriation acts.
    H.R. 1260 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    The bill would impose private-sector mandates as defined in 
UMRA on manufacturers of new animal drugs, by requiring them to 
pay fees to the Food and Drug Administration. CBO estimates 
that the direct cost of the mandates would not exceed the 
annual threshold specified in UMRA ($117 million in 2003, 
adjusted annually for inflation) in any of the first five years 
that the mandates would be effective.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 1260 is shown in the following table. 
The costs of this legislation fall within budget function 550 
(health).

----------------------------------------------------------------------------------------------------------------
                                                                       By fiscal year, in millions of dollars--
                                                                    --------------------------------------------
                                                                       2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                                  CHANGES IN SPENDING SUBJECT TO APPROPRIATION

Collection of FDA user fees:
    Estimated authorization level..................................       -5       -8      -11      -11      -14
    Estimated outlays..............................................       -5       -8      -11      -11      -14
Spending of FDA user fees:
    Estimated authorization level..................................        5        8       11       11       11
    Estimated outlays..............................................        3        7       10       10       11
FDA administrative expenses:
    Estimated authorization level..................................        1        *        *        *        1
    Estimated outlays..............................................        1        *        *        *        1
Net effect on spending by the Food and Drug Administration:
    Estimated authorization level..................................        1        *        *        *       -2
    Estimated outlays..............................................       -1        *        *        *      -2
----------------------------------------------------------------------------------------------------------------
Note.--* = less than $500,000.

    Basis of Estimate: For this estimate, CBO assumes the bill 
will be enacted early in fiscal year 2004 and that 
appropriation acts will provide the necessary authority for fee 
collection and spending.

Estimated authorizations

    H.R. 1260 would establish a new user fee program to help 
defray FDA's costs of expediting the review process for animal 
drugs. CBO estimates that implementing the bill would save $1 
million in 2004 and $4 million over the 2004-2008 period.
    User Fees. H.R. 1260 would require FDA to assess and 
collect application and other user fees from manufacturers of 
drugs for animals to expedite the development of such drugs and 
the review of new and supplemental animal drug applications and 
investigational animal drug submissions. H.R. 1260 would create 
four types of user fees: (1) Animal drug application and 
supplement fees, (2) animal drug product fees, (3) animal drug 
establishment fees, and (4) animal drug sponsor fees. The fees 
could be refunded, waived, or reduced in certain situations. 
The aggregate amounts of such fees are specified for each of 
fiscal years 2004 through 2008. Each year the amounts to be 
collected would be adjusted further for inflation, workload 
estimates, and other factors, when applicable. CBO assumes FDA 
would collect the amounts specified in the bill increased by 
the inflation index for wages and salaries for Federal workers. 
In total, we estimate receipts from those fees would amount to 
$48 million over the 2004-2008 period. Such fees could be 
collected and made available for obligation only to the extent, 
and in the amount, provided in advance in appropriation acts.
    Under the bill, those user fees could not be assessed in a 
given year unless appropriations for salaries and expenses of 
FDA (excluding the amount of user fees appropriated for such 
fiscal year) in that year satisfy a maintenance-of-effort 
requirement: The amount appropriated would have to exceed the 
amount appropriated for 2003 by the percentage increase since 
2003 in the consumer price index for all urban consumers (CPI-
U). In addition, fees could be collected and made available to 
defray increases in the cost of resources allocated to 
reviewing animal drug applications only to the extent that the 
percentage increase in those costs (excluding fees) exceeds the 
costs for fiscal year 2003 adjusted by CPI-U. (The bill defines 
special circumstances under which the Secretary would be 
considered to have met the maintenance-of-effort requirement.) 
This estimate assumes that these conditions would be met.
    Before accounting for costs associated with additional 
administrative activities not covered by the user fees, CBO 
estimates that establishing the user fee program would reduce 
net outlays by $2 million in 2004 and $7 million over the 2004-
2008 period, assuming appropriation of the necessary amounts. 
The estimated budget authority for collections and spending 
offset each other exactly from 2004 through 2007, while outlays 
would lag slightly, resulting in small savings each year. For 
fiscal year 2008, the bill would authorize the assessment and 
collection of up to three months of operating reserves for the 
review of animal drug applications for the first three months 
of fiscal year 2009. However, the user fee program is 
authorized only through fiscal year 2008. CBO assumes that the 
amounts available for obligation and spending in fiscal year 
2008 would not include those special reserve funds collected in 
that year. The difference between the estimated collections and 
spending of the user fees in fiscal year 2008 would result in 
savings of $3 million for that year, CBO estimates.
    Other Administrative Expenses. Based on the experience with 
similar activities of FDA, CBO assumes that funding for certain 
administrative activities associated with the new user fee 
program would not be fully covered by the new fees. The bill 
would require that FDA report annually to the Congress on its 
performance under the user fee program and on the fiscal status 
of the program. H.R. 1260 also would require that FDA consult 
with the Congressional committees of jurisdiction and outside 
experts, including industry and consumer groups, and publish 
its recommendations concerning reauthorization of the user fee 
program. CBO estimates that the administrative activities 
associated with implementing the user fee program that are not 
covered by the user fees would cost about $2 million over the 
2004-2008 period.
    Estimated impact on state, local, and tribal governments: 
H.R. 1260 contains no intergovernmental mandates as defined in 
UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact on the private sector: Subject to approval 
in appropriation acts, H.R. 1260 would require manufacturers of 
new drugs for animals to pay application fees, product fees, 
establishment fees, and drug sponsor fees to the FDA. The 
application fees would apply to new or supplemental animal drug 
applications that are submitted after September 1, 2003. The 
product, establishment, and drug sponsor fees would apply to 
manufacturers of new animal drug products that have an 
application pending with the FDA after September 1, 2003. The 
duty to pay those fees would be a private-sector mandate under 
UMRA. CBO estimates that the fees collected over the 2004-2008 
period would total $48 million. Those amounts would not exceed 
the annual threshold specified in UMRA ($117 million in 2003, 
adjusted annually for inflation) in any of the first five years 
that the mandates would be effective.
    Previous CBO estimate: On May 15, 2003, CBO transmitted a 
cost estimate for S. 313, the Animal Drug User Fee Act of 2003, 
as ordered reported by the Senate Committee on Health, 
Education, Labor, and Pensions on February 12, 2003. The two 
bills are nearly identical and the estimated budgetary effects 
are the same.
    Estimate prepared by: Federal Estimate: Margaret Nowak. 
Impact on State, Local, and Tribal Governments: Leo Lex. Impact 
on the Private Sector: Daniel Wilmoth.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for this legislation is provided in 
Article I, section 8, clause 3, which grants Congress the power 
to regulate commerce with foreign nations, among the several 
States, and with the Indian tribes.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    Section 1 designates the short title of the bill as the 
``Animal Drug User Fee Act of 2003.''

Section 2. Findings

    Section 2 designates the findings of Congress relating to 
the authorization of animal drug user fees.

Section 3. Fees relating to animal drugs

    Section 3 adds a new part 4 to subchapter C of chapter VII 
of the Federal Food, Drug, and Cosmetic Act.
            Section 739. Definitions
    New section 739 adds definitions for the following 11 terms 
when used related to animal drug user fees: ``animal drug 
application,'' ``supplemental animal drug application,'' 
``animal drug product,'' ``animal drug establishment,'' 
``investigational animal drug submission,'' ``animal drug 
sponsor,'' ``final dosage form,'' ``process for the review of 
animal drug applications,'' ``costs of resources allocated for 
the process for the review of animal drug applications,'' 
``adjustment factor,'' and ``affiliate.'' These definitions are 
necessary to give effect to the procedures instituted by the 
authorization of the Animal Drug User Fee Act (ADUFA). The term 
``process for the review of animal drug applications'' is a 
term of art that describes all of the functions related to the 
pre-market review of submissions and applications pertaining to 
animal drugs. The term is used throughout the document to 
provide simplicity and consistency in the language referring to 
the process funded by this legislation. ``Affiliates'' is also 
a term of art and is intended to include affiliates, partners, 
and parent firms.
            Section 740. Authority to assess and use animal drug fees
    New section 740(a) allows fees authorized by the Act to be 
assessed beginning on October 1, 2004. The fees authorized are 
animal drug application and supplemental animal drug 
application fees, animal drug product fees, animal drug 
establishment fees, and animal drug sponsor fees. Application 
fees, in general, are due upon submission of the application. 
Fees paid and not refunded for filed applications that were not 
approved or were withdrawn do not have to be paid a second 
time. If an application is refused for filing, the Secretary 
shall refund 75 percent of the fee. If the application is 
withdrawn, the Secretary has sole discretion to refund the fee 
or any portion of the fee.
    Product, establishment, and sponsor fees are assessed in 
any fiscal year when certain specified criteria are met. Only 
one such fee shall be paid each year. Transition rules for 
product, establishment, and sponsor fees related to products 
under review at the time of implementation of this law are 
specified.
    New section 740(b) lists the total fee revenues for fiscal 
years 2004 through 2008 for application and supplement fees and 
for product, establishment, and sponsor fees.
    New section 740(c) sets forth adjustments to take into 
account changes in workload and the cost of performing the 
work. The subsection contains inflation, workload, and final 
year adjustments as well as annual fee adjustment timing 
requirements. The subsection also sets forth a limit on the 
total amount of fees charged for any year to not exceed total 
costs for that fiscal year.
    New section 740(d) sets the rules for the waivers or 
reduction of fees. The waivers and reductions are for those 
situations in which:
           Assessing the fees would be a significant 
        barrier to innovation;
           The fees exceed the anticipated costs;
           The animal drug application or supplemental 
        application is solely to provide for use of the drug in 
        a Type B medicated feed intended for use in the 
        manufacture of Type C free-choice medicated feeds or a 
        Type C free-choice medicated feed;
           The waiver or reduction is necessary to 
        promote the availability of animal drugs for minor uses 
        or minor species; or
           The sponsor is a small business submitting 
        its first animal drug application. Periodically, the 
        Secretary shall publish a list of companies that 
        qualify for a waiver.
    New section 740(e) states that, due to a failure to pay 
required fees, the Secretary may consider an application or 
submission incomplete or discontinue review of an application 
or submission.
    New section 740(f) limits assessment of fees for any fiscal 
year after fiscal year 2003 unless appropriations are at least 
equal to the adjusted salaries and expenses for FDA for fiscal 
year 2003, excluding fees appropriated. If the trigger 
conditions for collecting fees are not met until later in the 
year, the full year's fees will still be required.
    New section 740(g) authorizes appropriations (as adjusted) 
of $5 million in fiscal year 2004, $8 million in fiscal year 
2005, $10 million in fiscal year 2006, $10 million in fiscal 
year 2007, and $10 million for fiscal year 2008, in amounts 
consistent with the total fee revenue amounts set forth in 
subsection (b). Such collected fees remain available until 
expended without fiscal year limitation. Fees may be collected 
only to the extent and in the amount provided in advance 
through the appropriations process.
    New section 740(h) states that fees overdue by 30 days 
shall be treated as a claim of the U.S. Government subject to 
subchapter II of Chapter 37 of 31 U.S.C.
    New section 740(i) requires written requests for waivers, 
reductions, and refunds be submitted within 180 days after the 
fee is due.
    New section 740(j) states that this law may not be 
construed to require the number of FTEs in the Department of 
HHS to be reduced to offset FTEs under this user fee act.
    New section 740(k) requires the Agency, to the extent 
practicable, to take appropriate action to segregate the review 
of generic animal drug applications, which are not under the 
user fee program, from the user fee funded program. It also 
requires the agency to adopt other administrative procedures to 
ensure that the review times for generic animal drugs do not 
increase from their current level due to activities under the 
user fee program.
    The language contained in new section 740 uses a revenue 
model that is based on the latest Prescription Drug User Fee 
Act (PDUFA) reauthorization, enacted on June 12, 2002--referred 
to as PDUFA III. The major features of this revenue model are 
described below:
    Statutory Revenue Amounts--Like PDUFA III, the total 
revenue amounts FDA is expected to collect each year are stated 
in section 740(g)(3), not the amounts of the various fees 
individual firms will pay are not specified. The fees will be 
established to generate $5 million in fiscal year 2004, $8 
million in fiscal year 2005 and reaching $10 million in fiscal 
year 2006 and subsequent years, plus adjustments. Adjustments 
are to be made to these statutory amounts for years after 
fiscal year 2004. The adjustment provisions are in section 
740(c), and are discussed below.
    Inflation Adjustment--An inflation adjustment provision, 
section 740(c)(1), similar to provisions in PDUFA III, adjusts 
statutory revenue levels each year after fiscal year 2004. Fee 
revenues are adjusted each year by the greater of either the 
increase in the CPI index for all urban consumers for the most 
recent year (this means the 12-month period ending June 30 
preceding the fiscal year for which the fees are being 
established), or for the most recent change in pay for Federal 
employees stationed in the Washington, D.C. metropolitan area. 
These adjustments assure that the personnel resources acquired 
with additional fee revenue are not diminished over time by 
inflation.
    Workload Adjustment--A workload adjustment provision, 
section 740(c)(2), increases fee revenue if, over time, there 
is an increase in the aggregate in the major components of 
FDA's animal drug review work. This parallels the workload 
adjustment provision included in PDUFA III. The components of 
the animal drug review workload that will be considered in 
making this measurement are: (1) Animal drug applications; (2) 
supplements for which data with respect to safety or 
effectiveness are required; (3) manufacturing supplemental 
animal drug applications; (4) investigational animal drug study 
submissions; and, (5) investigational animal drug protocol 
submissions.
    The Secretary shall publish in the Federal Register the 
fees resulting from this adjustment and the supporting 
methodologies. Because a revenue target for each year is set in 
the statute rather than specific fee levels, this adjustment is 
essential to assure that revenues remain in balance with 
workload. If, over time, the number of applications or 
submissions submitted to FDA for review increases, this will 
generate additional revenue in proportion to such a workload 
increase. If there is no workload increase, there is no 
increase in fee revenues as a result of this provision.
    Final Year Adjustment--Section 740(c)(3) allows FDA to make 
a one-time increase in fees in fiscal year 2008, if necessary, 
to assure that the agency will have up to three months of 
operating reserves on hand at the end of fiscal year 2008, when 
this legislation will sunset. This will allow the agency to use 
fees for the review of animal drug applications for up to 3 
months in fiscal year 2009. Further, delaying this payment 
until fiscal year 2008 minimizes the need for FDA to carry 
large balances over from year to year, thereby reducing 
industry outlays until they are necessary to support 
operations.
    Annual Fee Setting--Section 740(c)(4) requires FDA to 
publish the actual fees for each year in a notice in the 
Federal Register 60 days before the beginning of the fiscal 
year. This is the same process used for PDUFA fees. The fee 
levels will be established to generate the revenue levels set 
in the statute, plus adjustments in years after fiscal year 
2004 as provided in the statute. This annual fee setting may 
also take into account the most current information available 
about the volume of each type of application forecast for the 
coming year.
    Small Business Provisions--Section 740(d)(3), for purposes 
of this legislation, defines a small business as an entity that 
has fewer than 500 employees, including employees of 
affiliates. The term ``affiliates'' is defined in section 
739(11). A fee waiver is granted to a qualifying small business 
submitting its first animal drug application for review.
    Limitations--Section 740(f)(1) specifies that FDA must 
receive appropriated budget authority, exclusive of user fees, 
each year for the next five years that is equal to or greater 
than the budget authority level provided in fiscal year 2003 
adjusted for inflation based on the CPI index for all urban 
consumers. Further, consequences are established if FDA's 
appropriated budget authority falls short of this level.
    Crediting and Availability of Fees--Section 740(g)(1) 
provides standard language that assures that the fees 
subsequently appropriatedunder this act are treated as revenue 
generated and appropriated at the same time, so that they are neutral 
in their budget impact. FDA is also given the authority to transfer 
these fees to appropriation accounts for specific fiscal years, in 
order to pay for operations each year. This language parallels 
provisions in PDUFA III.
    Spending From Appropriations on Animal Drug Review--Section 
740(g)(2)(A) provides two further limitations, both parallel to 
limitations in PDUFA III.
    The first limitation, section 740(g)(2)(A)(i), is that fees 
may be retained in each fiscal year only up to the amount 
specified in each year for appropriation acts. FDA may begin 
collecting fees in any year in which an appropriation for fees 
for the year, or any portion of it, has been enacted. However, 
the appropriation act itself sets the upper limit each year on 
the amount of fees that may be kept and spent each year. 
Section 740(g)(4) specifies that if, in any year, FDA collects 
more fees than specified in appropriations, the excess fees 
collected shall be used to reduce fees that would otherwise be 
collected in a subsequent fiscal year. Those excess fee 
revenues would then be used in such subsequent fiscal year.
    The second limitation, in section 740(g)(2)(A)(ii), 
dissolves FDA's authority to collect and spend fees in any year 
that FDA fails to spend on the process for the review of animal 
drug applications from appropriations as much as it spent on 
that process from appropriations in fiscal year 2003, adjusted 
for inflation.
    Like a similar provision in PDUFA III, section 740(g)(2)(B) 
provides FDA some leeway in its effort to meet this 
requirement. If FDA's spending is within 3 percent of the 
amount required by this provision of law, the requirement of 
this section is considered satisfied. If FDA under-spends by 3 
percent or less, there is no penalty. If FDA under-spends by 
more than 3 percent, but not more than 5 percent, FDA will be 
required to reduce collections in a subsequent year by the 
amount in excess of 3 percent by which FDA under-spent from 
appropriations. Spending from appropriations on the animal drug 
review process each year is expected to be at or very close to 
the amount specified by this trigger, and may never be more 
than 5 percent less than the trigger amount.

Section 4. Accountability and reports

    Section 4 requires the Secretary to consult with the 
authorizing committees, scientific and academic experts, 
veterinary professionals, consumer advocacy groups and the 
regulated industry in developing recommendations to Congress 
for goals and plans for reauthorization of this law. The 
recommendations are to be published in the Federal Register, 
and a public meeting is to be held and a 30-day comment period 
is to be provided for written comments on the recommendations.
    This section requires an annual Performance Report and an 
annual Financial Report to be submitted to the authorizing 
committees by the Secretary.

Section 5. Sunset clause

    Section 5 provides that the amendments made by section 3 
(relating to definitions and to the authority to assess and use 
drug fees) shall cease to be effective on October 1, 2008. The 
section further provides that section 4, relating to annual 
reports, shall cease to be effective 120 days after October 1, 
2008. The additional 120 days will allow the animal drug user 
fee reports for fiscal year 2008 to be prepared and submitted.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (and existing law 
in which no change is proposed is shown in roman):

FEDERAL FOOD, DRUG AND COSMETIC ACT

           *       *       *       *       *       *       *



CHAPTER VII--GENERAL AUTHORITY

           *       *       *       *       *       *       *



Subchapter C--Fees

           *       *       *       *       *       *       *



                 Part 4--FEES RELATING TO ANIMAL DRUGS

SEC. 739. DEFINITIONS.

  For purposes of this subchapter:
          (1) The term ``animal drug application'' means an 
        application for approval of any new animal drug 
        submitted under section 512(b)(1). Such term does not 
        include either a new animal drug application submitted 
        under section 512(b)(2) or a supplemental animal drug 
        application.
          (2) The term ``supplemental animal drug application'' 
        means--
                  (A) a request to the Secretary to approve a 
                change in an animal drug application which has 
                been approved; or
                  (B) a request to the Secretary to approve a 
                change to an application approved under section 
                512(c)(2) for which data with respect to safety 
                or effectiveness are required.
          (3) The term ``animal drug product'' means each 
        specific strength or potency of a particular active 
        ingredient or ingredients in final dosage form marketed 
        by a particular manufacturer or distributor, which is 
        uniquely identified by the labeler code and product 
        code portions of the national drug code, and for which 
        an animal drug application or a supplemental animal 
        drug application has been approved.
          (4) The term ``animal drug establishment'' means a 
        foreign or domestic place of business which is at one 
        general physical location consisting of one or more 
        buildings all of which are within 5 miles of each 
        other, at which one or more animal drug products are 
        manufactured in final dosage form.
          (5) The term ``investigational animal drug 
        submission'' means--
                  (A) the filing of a claim for an 
                investigational exemption under section 512(j) 
                for a new animal drug intended to be the 
                subject of an animal drug application or a 
                supplemental animal drug application, or
                  (B) the submission of information for the 
                purpose of enabling the Secretary to evaluate 
                the safety or effectiveness of an animal drug 
                application or supplemental animal drug 
                application in the event of their filing.
          (6) The term ``animal drug sponsor'' means either an 
        applicant named in an animal drug application, except 
        for an approved application for which all subject 
        products have been removed from listing under section 
        510, or a person who has submitted an investigational 
        animal drug submission that has not been terminated or 
        otherwise rendered inactive by the Secretary.
          (7) The term ``final dosage form'' means, with 
        respect to an animal drug product, a finished dosage 
        form which is approved for administration to an animal 
        without substantial further manufacturing. Such term 
        includes animal drug products intended for mixing in 
        animal feeds.
          (8) The term ``process for the review of animal drug 
        applications'' means the following activities of the 
        Secretary with respect to the review of animal drug 
        applications, supplemental animal drug applications, 
        and investigational animal drug submissions:
                  (A) The activities necessary for the review 
                of animal drug applications, supplemental 
                animal drug applications, and investigational 
                animal drug submissions.
                  (B) The issuance of action letters which 
                approve animal drug applications or 
                supplemental animal drug applications or which 
                set forth in detail the specific deficiencies 
                in animal drug applications, supplemental 
                animal drug applications, or investigational 
                animal drug submissions and, where appropriate, 
                the actions necessary to place such 
                applications, supplements or submissions in 
                condition for approval.
                  (C) The inspection of animal drug 
                establishments and other facilities undertaken 
                as part of the Secretary's review of pending 
                animal drug applications, supplemental animal 
                drug applications, and investigational animal 
                drug submissions.
                  (D) Monitoring of research conducted in 
                connection with the review of animal drug 
                applications, supplemental animal drug 
                applications, and investigational animal drug 
                submissions.
                  (E) The development of regulations and policy 
                related to the review of animal drug 
                applications, supplemental animal drug 
                applications, and investigational animal drug 
                submissions.
                  (F) Development of standards for products 
                subject to review.
                  (G) Meetings between the agency and the 
                animal drug sponsor.
                  (H) Review of advertising and labeling prior 
                to approval of an animal drug application or 
                supplemental animal drug application, but not 
                such activities after an animal drug has been 
                approved.
          (9) The term ``costs of resources allocated for the 
        process for the review of animal drug applications'' 
        means the expenses incurred in connection with the 
        process for the review of animal drug applications 
        for--
                  (A) officers and employees of the Food and 
                Drug Administration, contractors of the Food 
                and Drug Administration, advisory committees 
                consulted with respect to the review of 
                specific animal drug applications, supplemental 
                animal drug applications, or investigational 
                animal drug submissions, and costs related to 
                such officers, employees, committees, and 
                contractors, including costs for travel, 
                education, and recruitment and other personnel 
                activities,
                  (B) management of information, and the 
                acquisition, maintenance, and repair of 
                computer resources,
                  (C) leasing, maintenance, renovation, and 
                repair of facilities and acquisition, 
                maintenance, and repair of fixtures, furniture, 
                scientific equipment, and other necessary 
                materials and supplies, and
                  (D) collecting fees under section 740 and 
                accounting for resources allocated for the 
                review of animal drug applications, 
                supplemental animal drug applications, and 
                investigational animal drug submissions.
          (10) The term ``adjustment factor'' applicable to a 
        fiscal year refers to the formula set forth in section 
        735(8) with the base or comparator year being 2003.
          (11) The term ``affiliate'' refers to the definition 
        set forth in section 735(9).

SEC. 740. AUTHORITY TO ASSESS AND USE ANIMAL DRUG FEES.

  (a) Types of Fees.--Beginning in fiscal year 2004, the 
Secretary shall assess and collect fees in accordance with this 
section as follows:
          (1) Animal drug application and supplement fee.--
                  (A) In general.--Each person that submits, on 
                or after September 1, 2003, an animal drug 
                application or a supplemental animal drug 
                application shall be subject to a fee as 
                follows:
                          (i) A fee established in subsection 
                        (b) for an animal drug application; and
                          (ii) A fee established in subsection 
                        (b) for a supplemental animal drug 
                        application for which safety or 
                        effectiveness data are required, in an 
                        amount that is equal to 50 percent of 
                        the amount of the fee under clause (i).
                  (B) Payment.--The fee required by 
                subparagraph (A) shall be due upon submission 
                of the animal drug application or supplemental 
                animal drug application.
                  (C) Exception for previously filed 
                application or supplement.--If an animal drug 
                application or a supplemental animal drug 
                application was submitted by a person that paid 
                the fee for such application or supplement, was 
                accepted for filing, and was not approved or 
                was withdrawn (without a waiver or refund), the 
                submission of an animal drug application or a 
                supplemental animal drug application for the 
                same product by the same person (or the 
                person's licensee, assignee, or successor) 
                shall not be subject to a fee under 
                subparagraph (A).
                  (D) Refund of fee if application refused for 
                filing.--The Secretary shall refund 75 percent 
                of the fee paid under subparagraph (B) for any 
                animal drug application or supplemental animal 
                drug application which is refused for filing.
                  (E) Refund of fee if application withdrawn.--
                If an animal drug application or a supplemental 
                animal drug application is withdrawn after the 
                application or supplement was filed, the 
                Secretary may refund the fee or portion of the 
                fee paid under subparagraph B if no substantial 
                work was performed on the application or 
                supplement after the application or supplement 
                was filed. The Secretary shall have the sole 
                discretion to refund the fee under this 
                paragraph. A determination by the Secretary 
                concerning a refund under this paragraph shall 
                not be reviewable.
          (2) Animal drug product fee.--Each person--
                  (A) who is named as the applicant in an 
                animal drug application or supplemental animal 
                drug application for an animal drug product 
                which has been submitted for listing under 
                section 510, and
                  (B) who, after September 1, 2003, had pending 
                before the Secretary an animal drug application 
                or supplemental animal drug application;
        shall pay for each such animal drug product the annual 
        fee established in subsection (b). Such fee shall be 
        payable for the fiscal year in which the animal drug 
        product is first submitted for listing under section 
        510, or is submitted for relisting under section 510 if 
        the animal drug product has been withdrawn from listing 
        and relisted. After such fee is paid for that fiscal 
        year, such fee shall be payable on or before January 31 
        of each year. Such fee shall be paid only once for each 
        animal drug product for a fiscal year in which the fee 
        is payable.
          (3) Animal drug establishment fee.--Each person--
                  (A) who owns or operates, directly or through 
                an affiliate, an animal drug establishment, and
                  (B) who is named as the applicant in an 
                animal drug application or supplemental animal 
                drug application for an animal drug product 
                which has been submitted for listing under 
                section 510, and
                  (C) who, after September 1, 2003, had pending 
                before the Secretary an animal drug application 
                or supplemental animal drug application,
        shall be assessed an annual fee established in 
        subsection (b) for each animal drug establishment 
        listed in its approved animal drug application as an 
        establishment that manufactures the animal drug product 
        named in the application. The annual establishment fee 
        shall be assessed in each fiscal year in which the 
        animal drug product named in the application is 
        assessed a fee under paragraph (2) unless the animal 
        drug establishment listed in the application does not 
        engage in the manufacture of the animal drug product 
        during the fiscal year. The fee shall be paid on or 
        before January 31 of each year. The establishment shall 
        be assessed only one fee per fiscal year under this 
        section, provided, however, that where a single 
        establishment manufactures both animal drug products 
        and prescription drug products, as defined in section 
        735(3), such establishment shall be assessed both the 
        animal drug establishment fee and the prescription drug 
        establishment fee, as set forth in section 736(a)(2), 
        within a single fiscal year.
          (4) Animal drug sponsor fee.--Each person--
                  (A) who meets the definition of an animal 
                drug sponsor within a fiscal year; and
                  (B) who, after September 1, 2003, had pending 
                before the Secretary an animal drug 
                application, a supplemental animal drug 
                application, or an investigational animal drug 
                submission,
        shall be assessed an annual fee established under 
        subsection (b). The fee shall be paid on or before 
        January 31 of each year. Each animal drug sponsor shall 
        pay only one such fee each fiscal year.
  (b) Fee Amounts.--Except as provided in subsection (a)(1) and 
subsections (c), (d), (f), and (g), the fees required under 
subsection (a) shall be established to generate fee revenue 
amounts as follows:
          (1) Total fee revenues for application and supplement 
        fees.--The total fee revenues to be collected in animal 
        drug application fees under subsection (a)(1)(A)(i) and 
        supplemental animal drug application fees under 
        subsection (a)(1)(A)(ii) shall be $1,250,000 in fiscal 
        year 2004, $2,000,000 in fiscal year 2005, and 
        $2,500,000 in fiscal years 2006, 2007, and 2008.
          (2) Total fee revenues for product fees.--The total 
        fee revenues to be collected in product fees under 
        subsection (a)(2) shall be $1,250,000 in fiscal year 
        2004, $2,000,000 in fiscal year 2005, and $2,500,000 in 
        fiscal years 2006, 2007, and 2008.
          (3) Total fee revenues for establishment fees.--The 
        total fee revenues to be collected in establishment 
        fees under subsection (a)(3) shall be $1,250,000 in 
        fiscal year 2004, $2,000,000 in fiscal year 2005, and 
        $2,500,000 in fiscal years 2006, 2007, and 2008.
          (4) Total fee revenues for sponsor fees.--The total 
        fee revenues to be collected in sponsor fees under 
        subsection (a)(4) shall be $1,250,000 in fiscal year 
        2004, $2,000,000 in fiscal year 2005, and $2,500,000 in 
        fiscal years 2006, 2007, and 2008.
  (c) Adjustments.--
          (1) Inflation adjustment.--The revenues established 
        in subsection (b) shall be adjusted by the Secretary by 
        notice, published in the Federal Register, for a fiscal 
        year to reflect the greater of--
                  (A) the total percentage change that occurred 
                in the Consumer Price Index for all urban 
                consumers (all items; United States city 
                average) for the 12-month period ending June 30 
                preceding the fiscal year for which fees are 
                being established; or
                  (B) the total percentage change for the 
                previous fiscal year in basic pay under the 
                General Schedule in accordance with section 
                5332 of title 5, United States Code, as 
                adjusted by any locality-based comparability 
                payment pursuant to section 5304 of such title 
                for Federal employees stationed in the District 
                Columbia.
        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 
        2004 under this subsection.
          (2) Workload adjustment.--After the fee revenues are 
        adjusted for inflation in accordance with subparagraph 
        (1), the fee revenues shall be further adjusted each 
        fiscal year after fiscal year 2004 to reflect changes 
        in review workload. With respect to such adjustment:
                  (A) This adjustment shall be determined by 
                the Secretary based on a weighted average of 
                the change in the total number of animal drug 
                applications, supplemental animal drug 
                applications for which data with respect to 
                safety or effectiveness are required, 
                manufacturing supplemental animal drug 
                applications, investigational animal drug study 
                submissions, and investigational animal drug 
                protocol submissions submitted to the 
                Secretary. The Secretary shall publish in the 
                Federal Register the fees resulting from this 
                adjustment and the supporting methodologies.
                  (B) Under no circumstances shall this 
                workload adjustment result in fee revenues for 
                a fiscal year that are less than the fee 
                revenues for that fiscal year established in 
                subsection (b), as adjusted for inflation under 
                subparagraph (c)(1).
          (3) Final year adjustment.--For fiscal year 2008, the 
        Secretary may further increase the fees to provide for 
        up to 3 months of operating reserves of carryover user 
        fees for the process for the review of animal drug 
        applications for the first 3 months of fiscal year 
        2009. If the Food and Drug Administration has carryover 
        balances for the process for the review of animal drug 
        applications in excess of 3 months of such operating 
        reserves, then this adjustment will not be made. If 
        this adjustment is necessary, then the rationale for 
        the amount of the increase shall be contained in the 
        annual notice setting fees for fiscal year 2008.
          (4) Annual fee setting.--The Secretary shall 
        establish, 60 days before the start of each fiscal year 
        beginning after September 30, 2003, for that fiscal 
        year, animal drug application fees, supplemental animal 
        drug application fees, animal drug sponsor fees, animal 
        drug establishment fees, and animal drug product fees 
        based on the revenue amounts established under 
        subsection (b) and the adjustments provided under this 
        subsection.
          (5) Limit.--The total amount of fees charged, as 
        adjusted under this subsection, for a fiscal year may 
        not exceed the total costs for such fiscal year for the 
        resources allocated for the process for the review of 
        animal drug applications.
  (d) Fee Waiver or Reduction.--
          (1) In general.--The Secretary shall grant a waiver 
        from or a reduction of 1 or more fees assessed under 
        subsection (a) where the Secretary finds that--
                  (A) the assessment of the fee would present a 
                significant barrier to innovation because of 
                limited resources available to such person or 
                other circumstances,
                  (B) the fees to be paid by such person will 
                exceed the anticipated present and future costs 
                incurred by the Secretary in conducting the 
                process for the review of animal drug 
                applications for such person,
                  (C) the animal drug application or 
                supplemental animal drug application is 
                intended solely to provide for use of the 
                animal drug in--
                          (i) a Type B medicated feed (as 
                        defined in section 558.3(b)(3) of title 
                        21, Code of Federal Regulations (or any 
                        successor regulation)) intended for use 
                        in the manufacture of Type C free-
                        choice medicated feeds, or
                          (ii) a Type C free-choice medicated 
                        feed (as defined in section 558.3(b)(4) 
                        of title 21, Code of Federal 
                        Regulations (or any successor 
                        regulation)),
                  (D) the animal drug application or 
                supplemental animal drug application is 
                intended solely to provide for a minor use or 
                minor species indication, or
                  (E) the sponsor involved is a small business 
                submitting its first animal drug application to 
                the Secretary for review.
          (2) Use of standard costs.--In making the finding in 
        paragraph (1)(B), the Secretary may use standard costs.
          (3) Rules for small businesses.--
                  (A) Definition.--In paragraph (1)(E), the 
                term ``small business'' means an entity that 
                has fewer than 500 employees, including 
                employees of affiliates.
                  (B) Waiver of application fee.--The Secretary 
                shall waive under paragraph (1)(E) the 
                application fee for the first animal drug 
                application that a small business or its 
                affiliate submits to the Secretary for review. 
                After a small business or its affiliate is 
                granted such a waiver, the small business or 
                its affiliate shall pay application fees for 
                all subsequent animal drug applications and 
                supplemental animal drug applications for which 
                safety or effectiveness data are required in 
                the same manner as an entity that does not 
                qualify as a small business.
                  (C) Certification.--The Secretary shall 
                require any person who applies for a waiver 
                under paragraph (1)(E) to certify their 
                qualification for the waiver. The Secretary 
                shall periodically publish in the Federal 
                Register a list of persons making such 
                certifications.
  (e) Effect of Failure To Pay Fees.--An animal drug 
application or supplemental animal drug application submitted 
by a person subject to fees under subsection (a) shall be 
considered incomplete and shall not be accepted for filing by 
the Secretary until all fees owed by suchperson have been paid. 
An investigational animal drug submission under section 739(5)(B) that 
is submitted by a person subject to fees under subsection (a) shall be 
considered incomplete and shall not be accepted for review by the 
Secretary until all fees owed by such person have been paid. The 
Secretary may discontinue review of any animal drug application, 
supplemental animal drug application or investigational animal drug 
submission from a person if such person has not submitted for payment 
all fees owed under this section by 30 days after the date upon which 
they are due.
  (f) Assessment of Fees.--
          (1) Limitation.--Fees may not be assessed under 
        subsection (a) for a fiscal year beginning after fiscal 
        year 2003 unless appropriations for salaries and 
        expenses of the Food and Drug Administration for such 
        fiscal year (excluding the amount of fees appropriated 
        for such fiscal year) are equal to or greater than the 
        amount of appropriations for the salaries and expenses 
        of the Food and Drug Administration for the fiscal year 
        2003 (excluding the amount of fees appropriated for 
        such fiscal year) multiplied by the adjustment factor 
        applicable to the fiscal year involved.
          (2) Authority.--If the Secretary does not assess fees 
        under subsection (a) during any portion of a fiscal 
        year because of paragraph (1) and if at a later date in 
        such fiscal year the Secretary may assess such fees, 
        the Secretary may assess and collect such fees, without 
        any modification in the rate, for animal drug 
        applications, supplemental animal drug applications, 
        investigational animal drug submissions, sponsors, 
        animal drug establishments and animal drug products at 
        any time in such fiscal year notwithstanding the 
        provisions of subsection (a) relating to the date fees 
        are to be paid.
  (g) Crediting and Availability of Fees.--
          (1) In general.--Fees authorized under subsection (a) 
        shall be collected and available for obligation only to 
        the extent and in the amount provided in advance in 
        appropriations Acts. Such fees are authorized to be 
        appropriated to remain available until expended. Such 
        sums as may be necessary may be transferred from the 
        Food and Drug Administration salaries and expenses 
        appropriation account without fiscal year limitation to 
        such appropriation account for salary and expenses with 
        such fiscal year limitation. The sums transferred shall 
        be available solely for the process for the review of 
        animal drug applications.
          (2) Collections and appropriation acts.--
                  (A) In general.--The fees authorized by this 
                section--
                          (i) shall be retained in each fiscal 
                        year in an amount not to exceed the 
                        amount specified in appropriation Acts, 
                        or otherwise made available for 
                        obligation for such fiscal year, and
                          (ii) shall only be collected and 
                        available to defray increases in the 
                        costs of the resources allocated for 
                        the process for the review of animal 
                        drug applications (including increases 
                        in such costs for an additional number 
                        of full-time equivalent positions in 
                        the Department of Health and Human 
                        Services to be engaged in such process) 
                        over such costs, excluding costs paid 
                        from fees collected under this section, 
                        for fiscal year 2003 multiplied by the 
                        adjustment factor.
                  (B) Compliance.--The Secretary shall be 
                considered to have met the requirements of 
                subparagraph (A)(ii) in any fiscal year if the 
                costs funded by appropriations and allocated 
                for the process for the review of animal drug 
                applications--
                          (i) are not more than 3 percent below 
                        the level specified in subparagraph 
                        (A)(ii); or
                          (ii)(I) are more than 3 percent below 
                        the level specified in subparagraph 
                        (A)(ii), and fees assessed for the 
                        fiscal year following the subsequent 
                        fiscal year are decreased by the amount 
                        in excess of 3 percent by which such 
                        costs fell below the level specified in 
                        subparagraph (A)(ii); and
                          (II) such costs are not more than 5 
                        percent below the level specified in 
                        subparagraph (A)(ii).
          (3) Authorization of appropriations.--There are 
        authorized to be appropriated for fees under this 
        section--
                  (A) $5,000,000 for fiscal year 2004;
                  (B) $8,000,000 for fiscal year 2005;
                  (C) $10,000,000 for fiscal year 2006;
                  (D) $10,000,000 for fiscal year 2007; and
                  (E) $10,000,000 for fiscal year 2008;
        as adjusted to reflect adjustments in the total fee 
        revenues made under this section and changes in the 
        total amounts collected by animal drug application 
        fees, supplemental animal drug application fees, animal 
        drug sponsor fees, animal drug establishment fees, and 
        animal drug product fees.
          (4) Offset.--Any amount of fees collected for a 
        fiscal year under this section that exceeds the amount 
        of fees specified in appropriations Acts for such 
        fiscal year shall be credited to the appropriation 
        account of the Food and Drug Administration as provided 
        in paragraph (1), and shall be subtracted from the 
        amount of fees that would otherwise be authorized to be 
        collected under this section pursuant to appropriation 
        Acts for a subsequent fiscal year.
  (h) Collection of Unpaid Fees.--In any case where the 
Secretary does not receive payment of a fee assessed under 
subsection (a) within 30 days after it is due, such fee shall 
be treated as a claim of the United States Government subject 
to subchapter II of chapter 37 of title 31, United States Code.
  (i) Written Requests for Waivers, Reductions, and Refunds.--
To qualify for consideration for a waiver or reduction under 
subsection (d), or for a refund of any fee collected in 
accordance with subsection (a), a person shall submit to the 
Secretary a written request forsuch waiver, reduction, or 
refund not later than 180 days after such fee is due.
  (j) Construction.--This section may not be construed to 
require that the number of full-time equivalent positions in 
the Department of Health and Human Services, for officers, 
employees, and advisory committees not engaged in the process 
of the review of animal drug applications, be reduced to offset 
the number of officers, employees, and advisory committees so 
engaged.
  (k) Abbreviated New Animal Drug Applications.--The Secretary 
shall--
          (1) to the extent practicable, segregate the review 
        of abbreviated new animal drug applications from the 
        process for the review of animal drug applications, and
          (2) adopt other administrative procedures to ensure 
        that review times of abbreviated new animal drug 
        applications do not increase from their current level 
        due to activities under the user fee program.

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