[Senate Report 109-107]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 173
109th Congress                                                   Report
                                 SENATE
 1st Session                                                    109-107

======================================================================
 
           MEDICAL DEVICE USER FEE STABILIZATION ACT OF 2005

                                _______
                                

                 July 25, 2005.--Ordered to be printed

                                _______
                                

Mr. Enzi, from the Committee on Health, Education, Labor, and Pensions, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany S. 1420]

    The Committee on Health, Education, Labor, and Pensions, to 
which was referred the bill (S. 1420) to amend the Federal 
Food, Drug, and Cosmetic Act with respect to medical device 
user fees, having considered the same, reports favorably 
thereon with an amendment in the nature of a substitute and 
recommends that the bill (as amended) do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and summary..............................................1
 II. Background and need for legislation..............................2
III. Legislative history and committee action.........................3
 IV. Explanation of bill and committee views..........................3
  V. Cost estimate....................................................8
 VI. Application of law to the legislative branch.....................8
VII. Regulatory impact statement......................................8
VIII.Section-by-section analysis......................................9

 IX. Additional views................................................11
  X. Changes in existing law.........................................13

                         I. Purpose and Summary

    The purpose of S. 1420, the ``Medical Device User Fee 
Stabilization Act of 2005,'' is to ensure that the medical 
device user fee program at the Food and Drug Administration 
(FDA) continues in fiscal years 2006 and 2007; to moderate the 
rate of increase of device user fees and lessen the burden of 
user fees on smaller device companies; and to ensure the 
marking of reprocessed single-use devices so that users can 
more easily identify whether the devices have been reprocessed 
and who has reprocessed them.
    In particular, the bill amends provisions in current law 
that require that a certain sum be appropriated for devices at 
the FDA over the course of fiscal years 2003 to 2006. Without 
such a change, FDA would be unable to collect device user fees 
in fiscal year 2006 and 2007. The bill modifies the way user 
fees are set in current law to establish user fees in fiscal 
year 2006 at 8.5 percent more than 2005 user fees and user fees 
in 2007 at 8.5 percent more than 2006 fees. The bill also 
increases the revenue threshold below which a device company is 
considered to be a small business and therefore eligible for 
reduced user fees from $30 million to $100 million with respect 
to most marketing applications. Finally, the bill amends 
current law to clarify that in nearly all instances, the 
reprocessor of a reprocessed single-use medical device must be 
identified through markings on the device or an attachment 
thereto.

                II. Background and Need for Legislation

    On October 26, 2002, the Medical Device User Fee and 
Modernization Act (MDUFMA) (P.L. 107-250, 116 Stat. 1616) was 
signed into law. MDUFMA amended the Federal Food, Drug and 
Cosmetic Act (FFDCA) to authorize FDA to collect user fees from 
manufacturers who submit certain applications to market medical 
devices. The premise behind initiating a user fee program for 
medical devices was to provide for more timely and predictable 
review of medical device applications, as well as to make the 
necessary infrastructure investments required to conduct review 
of increasingly complex medical device applications in a timely 
and predictable fashion. In exchange for this authority, FDA 
has committed to pursue a comprehensive set of performance 
goals and commitments. MDUFMA also included enhanced regulatory 
requirements for reprocessed single-use devices.
    The FFDCA, as amended by MDUFMA, authorizes FDA to collect 
user fees for certain medical device applications in fiscal 
year 2006 and fiscal year 2007 only if certain conditions are 
met. However, MDUFMA specifies that for fiscal year 2006, fees 
may not be assessed if the total amounts appropriated for 
fiscal year 2003 through fiscal year 2005 for FDA's device and 
radiological health program are less than levels specified in 
MDUFMA (section 738(g)(1)(C) of the FFDCA).
    Appropriations for fiscal year 2003 through fiscal year 
2005 for FDA's device and radiological health program were 
below the amount specified in MDUFMA. This amendment modifies 
those minimum appropriation levels for fiscal years 2003 and 
2004 to allow FDA to continue to collect user fees until 
October 1, 2007, thus preventing the program's premature 
termination on September 30, 2005.
    The committee believes it is important to provide industry 
with predictable annual increases in application fees. Since 
the inception of MDUFMA, user fees for certain application 
types have increased much faster than had been expected. These 
increases have imposed unanticipated costs on companies in the 
medical technology industry. To address these concerns, this 
amendment will set specific fee increases in fiscal year 2006 
and fiscal year 2007 until MDUFMA's authorization expires on 
October 1, 2007.
    Under MDUFMA, device user fees were structured to provide 
lower fees for companies with revenues of less than $30 million 
a year. In reviewing the impact of MDUFMA, the committee is 
concerned that this fee structure imposes barriers to marketing 
a new device on small device companies with annual revenues 
above $30 million.
    User fees make possible FDA's investments in information 
technology infrastructure and human capital, more comprehensive 
training for device reviewers, greater use of experts in 
academia and the private sector, enhanced project management, 
increased guidance development, expanded participation in 
globalization and standards setting activities, and increased 
interaction with industry both before and during the 
application review process. As medical device applications 
become progressively more complex, this investment will become 
ever more necessary to keep up with performance goals that FDA 
has thus far been successful in meeting--performance goals 
intended to speed promising new technologies to patients. 
Keeping the device review program on sound financial footing is 
essential to ensure timely and predictable review of medical 
device applications. The committee believes that FDA has made 
good progress in implementing MDUFMA and is making satisfactory 
progress towards achieving the performance goals set under 
MDUFMA.
    Finally, reprocessed single-use devices are not generally 
marked to identify their reprocessor. Adverse events associated 
with a reprocessed device may therefore be misattributed to the 
original manufacturer, and not to the reprocessor. In addition, 
when reporting adverse events, health care providers may 
mistakenly believe that the device is a new, unused product 
from the original manufacturer of the device, and not from a 
reprocessor. In 2002, the provisions in Section 301 of MDUFMA, 
which were intended to lead to the marking of reprocessed 
single-use medical devices, created concerns regarding both the 
feasibility and timing of implementation.

             III. Legislative History and Committee Action

    On July 18, 2005, Senators Enzi, Kennedy, Burr, DeWine, 
Mikulski, Dodd and Murray introduced S. 1420, the ``Medical 
Device User Fee Stabilization Act of 2005.'' On July 20, 2005, 
the committee held an executive session to consider S. 1420. 
After accepting an amendment in the nature of a substitute 
offered by Senator Enzi, and adding Senator Hatch as a 
cosponsor, the committee approved S. 1420, as amended, by 
unanimous voice vote.

              IV. Explanation of Bill and Committee Views


                               USER FEES

    Whether used to diagnose a disease or condition or to treat 
it, medical devices are used daily to improve the quality of 
care and quality of life of patients all around the country. 
Device manufacturers continually improve their products to 
improve safety or effectiveness, and totally new devices offer 
breakthroughs to patients that will change how diseases are 
diagnosed or treated.
    The committee believes it is imperative that FDA review 
medical devices promptly and quickly to speed both incremental 
and breakthrough innovations to patients. The medical device 
user fee program has already resulted in improvements in the 
speed with which FDA reviews medical device submissions, 
including pre-market applications for Class III devices and 
supplements to those applications under section 515 of the 
FFDCA, and pre-market notifications, or 510(k)s, under section 
510(k) of the FFDCA.
    The committee believes the device user fee program offers 
great promise for improving the speed of device reviews, and 
that the program cannot be allowed to terminate on September 
30, 2005. For this reason, S. 1420 eliminates the ``trigger'' 
provision that would prohibit FDA from collecting user fees in 
fiscal years 2006 and 2007 because appropriations to FDA for 
devices did not meet specified amounts in fiscal years 2003 and 
2004. However, a comprehensive review of all aspects of MDUFMA 
is warranted prior to its reauthorization in 2007 to ensure 
that the program is operating as intended.
    In addition, because of concerns about the rate at which 
device user fees have been growing over the past few years, S. 
1420 locks in a rate of increase for individual user fees of 
8.5 percent in both fiscal years 2006 and 2007. The user fee 
for a pre-market approval application in fiscal year 2005 is 
$239,237. Under S. 1420, this fee will increase to $259,600 in 
2006 and to $281,600 in 2007. The reduced pre-market approval 
application fee for small businesses is $90,910 in fiscal year 
2005, and will increase to $98,700 in 2006 and $107,000 in 
2007. This fixed 8.5 percent rate of increase in fees requires 
that the ``guaranteed'' fee revenue amounts to FDA, as well as 
the inflation, workload, and compensating adjustments in 
current law, be eliminated.
    Small businesses will receive additional financial relief 
because S. 1420 changes the definition of ``small business'' 
for the purpose of paying a reduced user fee (but not for 
receiving a first-time user fee waiver) from $30 million in 
annual gross receipts or sales to $100 million. The committee 
notes that setting the small business threshold at $100 million 
is estimated to result in 723 firms qualifying, versus 570 
firms at the current level of $30 million. This estimate is 
based on data suggesting that an additional 3.8 percent of 
device firms qualify as small businesses for every $10 million 
increase in the threshold. FDA will report to Congress on the 
number of different applications and notifications, and the 
total amount of fees paid for each type, from businesses with 
gross receipts or sales at or below $100 million for fiscal 
years 2006 and 2007.
    The committee expects that the 8.5 percent increase in fees 
will result in an average annual increase to FDA of device user 
fee revenues of 6 percent, and that this level of revenues is 
sufficient to keep the device review program running at a pace 
that will maintain the speed of reviews without compromising 
safety. To provide FDA with a measure of financial security 
should fee revenues fall short of current projections, S. 1420 
permits FDA to use unobligated carryover balances of user fees 
collected in previous years to supplement user fee collections 
in fiscal years 2006 and 2007, provided the FDA maintains a 
balance of such carryover funds to allow for operations in the 
first month of fiscal year 2008. In addition, the agency must 
send a notice to the Senate Committee on Health, Education, 
Labor, and Pensions, the House Committee on Energy and 
Commerce, and both Committees on Appropriations at least 14 
days prior to using these funds. To ensure that funds are not 
directed away from device safety activities, FDA must certify 
that the amounts spent by the agency for salaries and expenses 
to perform device-related activities not pertaining to the 
review of applications are no less than the amounts spent on 
those functions in fiscal year 2002 multiplied by the 
compounded rate of inflation.
    The committee recognizes that eliminating the adjustment 
factors in the user fee calculations puts the full risk of any 
shortfalls in anticipated fees on the FDA. While the potential 
use of the unobligated carryover funds protects the agency 
against adverse consequences that may occur during the 2-year 
period covered by the bill, the committee recognizes that 
adjustments may need to be made in the program in the future to 
assure greater stability in the revenues received from user 
fees.
    The committee notes that Congress met the statutory 
appropriations figure for fiscal year 2005 after a full request 
for funding in the budget for that year. The 2006 budget 
request included the full amount needed for 2006, and 
legislation appropriating the full amount for the device user 
fee program for fiscal year 2006 has been reported out of both 
the House and Senate Appropriations Committees. The committee 
notes further the commitment letter from the Office of 
Management and Budget regarding the Administration's intention 
that the fiscal year 2006 and 2007 budget requests will include 
the full amount authorized for devices at FDA under the user 
fee program.

                   REPROCESSING OF SINGLE-USE DEVICES

    Original manufacturers typically label or imprint the 
company's name and logos directly on their medical devices. 
This branding, together with product familiarity, allows 
physicians, hospital staff, and patients to associate a 
particular device with a particular original manufacturer, and 
is especially important in the event of a recall, warning, 
patient injury, or product malfunction. The committee believes 
it is essential to require the specific identification of 
reprocessed versions of single-use devices to ensure that 
physicians, nurses, users, and hospital administrators know 
that a device they have used was reprocessed.
    In 2002, section 301 of MDUFMA added a new subsection (u) 
to section 502 of the FFDCA to require devices (both new and 
reprocessed) to prominently and conspicuously bear the name of 
the manufacturer, a generally recognized abbreviation of the 
name, or a unique and generally recognized symbol identifying 
the manufacturer. Under this provision, FDA could waive this 
requirement if compliance is not feasible or compromises the 
reasonable assurance of safety or effectiveness of the device.
    The committee is aware that FDA chose to exercise its 
enforcement discretion with respect to section 502(u) of the 
FFDCA, rather than implement it. There were significant and 
legitimate concerns about the provision as initially passed in 
MDUFMA--it applied to all devices, and it included a 
potentially burdensome waiver provision that could have 
consumed resources at FDA. Congress subsequently ratified FDA's 
concerns and delayed the effective date of section 301 of 
MDUFMA by 18 months, to October 26, 2005, in the Medical Device 
Technical Corrections Act (P.L. 108-214, 118 Stat. 575).
    Section 519 of the FFDCA, and FDA's Medical Device 
Reporting (MDR) regulations, require manufacturers to report 
patient injuries and product malfunctions to FDA, and device 
user facilities to report these adverse events to FDA or the 
manufacturer. This reporting requirement is the cornerstone of 
FDA's post-marketing surveillance system for medical devices, 
and it cannot work as intended unless health care providers, 
original manufacturers, device reprocessors, and FDA can 
readily and accurately identify when a single-use device has 
been reprocessed. However, unless marked, once a medical device 
is removed from its packaging, health care providers may not be 
able to determine whether it is an original device or one that 
has been reprocessed. Moreover, there is evidence to indicate 
that the lack of specific labeling to identify reprocessed 
devices may lead to inadequate reporting of patient injuries 
and product malfunctions involving reprocessed single-use 
devices, particularly where a reprocessed device bears only the 
mark of the original manufacturer. This undermines the purpose 
and effectiveness of section 519 of the FFDCA and FDA's MDR 
regulations, leaving FDA with a less accurate picture of the 
post-market safety and effectiveness of these devices.
    In 2000, the Government Accounting Office (GAO) conducted 
an audit of the MDR system as it relates to reprocessed single-
use devices. GAO concluded that the current surveillance 
systems for medical errors and adverse events do not detect all 
infections and injuries associated with the use of medical 
devices. See GAO Report: Single Use Medical Devices (June 
2000). Section 502(u), as redrafted in S. 1420, is designed to 
address this concern as it relates to reprocessed single-use 
devices, and can only be effective if the provision is promptly 
implemented by reprocessors and strictly enforced by FDA.
    The committee has carefully considered the concerns about 
section 502(u) as originally adopted and has amended it to 
provide a far more narrow provision that should be essentially 
self-effectuating. Section 502(u) now focuses on reprocessed 
single-use devices. Any single-use device reprocessed from an 
original device that the original manufacturer has prominently 
and conspicuously marked (which may be accomplished through 
marking an attachment to the device) with its name, a generally 
recognized abbreviation of its name, or a unique and generally 
recognized symbol for it, must be prominently and conspicuously 
marked (which may be accomplished through marking an attachment 
to the device) with the reprocessor's name, a generally 
recognized abbreviation of its name, or a unique and generally 
recognized symbol for it.
    There is no possibility of a waiver of the 502(u) 
requirements under the statute as amended by S. 1420, and FDA 
will not be confronted with a resource-intensive waiver 
process. Moreover, the committee is convinced that reprocessors 
will be able to comply completely with the requirements of 
section 502(u): if the original manufacturer is able to mark 
its product, the reprocessor should be able to as well, 
especially since section 502(u) permits the marking of an 
attachment to the device. When the original manufacturer has 
not marked its device, the reprocessor still must identify the 
device as reprocessed, but may do so through the use of a 
technology that some already use, a detachable label 
identifying the reprocessor that is placed on the package 
containing the device. Where the original manufacturer has 
marked its product in such a way that there is little or no 
usable space for a reprocessor to prominently and conspicuously 
mark the device, the reprocessor may satisfy section 502(u) 
through the use of an attachment to the device.
    The committee therefore believes there is no reason for FDA 
to delay implementation of section 502(u) or to elect to 
exercise enforcement discretion in the face of non-compliance 
with its requirements. Although section 502(u) will first 
become effective 12 months after the legislation is enacted, 
the committee believes that it is clear how this section 
applies to the vast majority of reprocessed devices, and the 
committee expects reprocessors to implement its requirements as 
soon as possible for the devices they reprocess, in the best 
interest of post-market surveillance and the public health.
    With respect to the marking requirement on single-use 
devices that the original manufacturer has not marked, the 
committee understands that some reprocessors should be able to 
implement this provision immediately. With respect to devices 
the original manufacturer has marked, the committee expects 
reprocessors to begin marking at least some of the devices they 
reprocess as soon as is feasible and to work expeditiously to 
mark all other reprocessed devices well before the 12-month 
deadline but in no case later than that deadline, in the best 
interest of post-market surveillance and the public health.
    The committee wishes to emphasize that section 502(u)(2) of 
the FFDCA, which permits the identification of reprocessors 
through use of a detachable label on the packaging rather than 
directly on the device or an attachment thereto, applies only 
when the original manufacturer has not prominently and 
conspicuously marked its device. This package label is intended 
to be placed in the medical record of the patient on whom the 
device is then used. The committee recognizes that a detachable 
label facilitates reporting of adverse events under section 
519(b) of the FFDCA only if the label is actually placed in the 
patient's medical record. The FDA should work with device user 
facilities, including hospitals, to assure that detachable 
labels are used as intended so that facilities can accurately 
identify the manufacturer of a single-use device implicated in 
an adverse event.
    Although the committee encourages the use of these 
detachable labels on all reprocessed devices, the use of such a 
detachable label on a reprocessed single-use device that is 
prominently and conspicuously marked by the original 
manufacturer is not a legitimate substitute for the requirement 
of section 502(u)(1) that the reprocessor directly mark the 
reprocessed device or an attachment to it. In order to avoid 
erroneous identification of the original manufacturer as the 
source of a reprocessed device and to ensure that the MDR 
system provides FDA with the information it needs with respect 
to reprocessed devices to adequately protect patients, the 
identification of the reprocessor by means of a detachable 
package label is strictly limited to those circumstances where 
the device itself, or an attachment thereto, does not 
prominently and conspicuously reflect the identity of the 
original manufacturer.
    The legislation requires FDA to issue a guidance document 
to identify circumstances under which the original device is 
not considered to be ``prominently and conspicuously'' marked 
with the name, a generally recognized abbreviation of the name, 
or a unique and generally recognized symbol for the original 
manufacturer. Section 502(c) of the FFDCA requires that 
information that must appear on the label or in the labeling of 
a device must appear prominently and conspicuously and in such 
terms ``as to render it likely to be read and understood by the 
ordinary individual under customary conditions of purchase and 
use.'' The committee believes that this definition will be 
instructive in determining how section 502(u) applies, but it 
notes that there are aspects of device marking that are not 
parallel to labeling, and intends that those aspects will be 
addressed by the guidance document.
    The committee believes there are only two circumstances in 
which an original device would not be considered to be 
prominently and conspicuously marked: devices that the original 
manufacturer has not marked at all, and devices on which the 
mark is very small or the device itself is very small. It is 
clear when a device has not been marked by the original 
manufacturer at all, and thus the committee does not expect the 
FDA to address those devices in the guidance. The committee 
believes it is unlikely that original manufacturers would by 
choice mark a product without making its mark prominent and 
conspicuous. For a very small device, by contrast, a mark on 
the device itself--in contrast to a mark on an attachment to 
the device--would not likely be prominent and conspicuous. The 
mark itself would of necessity be extremely small. It is these 
devices that the FDA should address in the guidance.
    Section 519 of the FFDCA, and FDA's Medical Device 
Reporting (MDR) regulations, require manufacturers to report 
patient injuries and product malfunctions to FDA, and device 
user facilities to report these adverse events to FDA or the 
manufacturer. The committee believes that the requirements of 
section 502(u), as amended, will operate to improve this post-
market surveillance system, and thus patient safety.

                            V. Cost Estimate

    Due to time constraints the Congressional Budget Office 
estimate was not included in the report. When received by the 
committee, it will appear in the Congressional Record at a 
later time.

            VI. Application of Law to the 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.

                    VII. Regulatory Impact Statement

    Pursuant to the requirements of paragraph 11(b) of Rule 
XXVI of the Standing Rules of the Senate, the committee has 
determined that the bill will not have a significant regulatory 
impact.

          VIII. Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides the short title of the bill, the 
Medical Device User Fee Stabilization Act of 2005.

Section 2. Amendments to the Federal Food, Drug and Cosmetic Act

    This section amends section 738 of the FFDCA (Authority to 
Assess and Use Device Fees), section 103 of MDUFMA, section 
502(u) of the FFDCA (Misbranded Devices), and section 301(b) of 
MDUFMA.
    Subsection (a) addresses amendments to the device user fee 
program authorized in section 738 of the FFDCA. Subsection 
(a)(1) eliminates the statutory fee revenue targets for device 
user fees in fiscal years 2006 and 2007 in section 738(b).
    Subsection (a)(2) eliminates the inflationary, workload, 
compensating, and final year adjustments previously used in 
annual fee-setting calculations, as provided for in section 
738(c). Subsection (a)(2) also sets the pre-market application 
user fee at $259,600 for fiscal year 2006 and $281,600 for 
fiscal year 2007, which is an 8.5 percent increase each year 
(fees for other device submissions are then determined as a 
percentage of the pre-market application fee, as provided 
generally in section 738(a)(2)(A)). Finally, subsection (a)(2) 
also amends section 738(c) to permit FDA to use up to two-
thirds of fees carried over from previous years to supplement 
fee revenues in fiscal years 2006 and 2007. FDA must notify 
Congress if it intends to use these carryover balances.
    Subsection (a)(3) amends section 738(d) to clarify that the 
small business threshold for the purposes of a first-time 
waiver of the fee on a pre-market approval application or a 
pre-market report remains at $30 million, as under current law. 
It raises the small business threshold from $30 million to $100 
million for the purposes of fee reductions on all other 
applications, reports, and supplements. Subsection (a)(3) also 
eliminates the ability of the FDA to reset this new small 
business threshold if user fee revenues are reduced by 16 
percent because of the small business fee reduction. Subsection 
(a)(4) amends section 738(e) to raise the small business 
threshold from $30 million to $100 million for the purposes of 
fee reductions on pre-market notifications.
    Subsection (a)(5) amends section 738(g) to eliminate the 
``trigger'' requirement of additional appropriations in the 
fiscal years 2003 and 2004 for FDA to be able to collect user 
fees in fiscal year 2006 and 2007. It also builds in a 1 
percent tolerance on the appropriations trigger for 2006 and 
2007, to cushion against possible across-the-board rescission 
in the appropriations process for those years, which would lead 
to accidental termination of the program.
    Subsection (a)(6) eliminates the statutory authorization 
targets for fiscal years 2006 and 2007, and subsection (a)(7) 
makes a conforming amendment throughout section 738.
    Subsection (b) amends section 103 of MDUFMA to require 
additional information in FDA's medical device user fee program 
annual reports for fiscal years 2006 and 2007 on the number and 
types of applications received by the size of small business up 
to the new small business threshold of $100 million, and to 
require a certification by the Secretary of Health and Human 
Services in the annual report that appropriated funds obligated 
for other purposes relating to medical devices are not diverted 
for device review.
    Subsection (c)(1) amends section 502(u) of the FFDCA to 
address the marking and tracking of reprocessed medical devices 
intended for single-use by the original manufacturer. Section 
502(u) as amended requires reprocessors to mark a reprocessed 
device if the original manufacturer has marked the device. If 
the original manufacturer does not mark the device, the 
reprocessor must still mark the device, but has more 
flexibility in how to mark the device, such as by using a 
detachable label on the package of the device that is intended 
to be placed in the medical record of the patient on whom the 
device is used.
    Subsection (c)(2) requires FDA to issue a guidance document 
no later than 180 days after the act becomes effective to 
address compliance with section 502(u) in circumstances where 
an original manufacturer has not marked the original device 
prominently and conspicuously.
    Subsection (d) amends section 301(b) of MDUFMA to make the 
amendment made by subsection (c)(1) to section 502(u) of the 
FFDCA effective 12 months after the date of enactment of the 
act, or 12 months after the original manufacturer has first 
marked its device, if that is later.

                          IX. Additional Views

                   ADDITIONAL VIEWS OF SENATOR HATCH

    When Congress passed the Medical Device User Fee and 
Modernization Act (MDUFMA) in 2002, it made several important 
findings, noting that prompt approval and clearance of safe and 
effective devices is critical to the improvement of public 
health and that public health is served by augmenting the funds 
available to the Food and Drug Administration (FDA) for the 
review of devices and assurance of their safety and 
effectiveness. A key element of MDUFMA was that the FDA would 
be able to meet performance goals for device review with the 
additional resources provided by the new law.
    There is no question that FDA review times for medical 
devices have improved in some areas since the law's enactment. 
For example, according to information provided by the FDA, 
review times for 510(k)s have improved with the average 
percentage of final decisions made within 90 FDA review days 
increasing from 77 percent in fiscal year 2002 to 84 percent in 
fiscal year 2004. During that same period, preliminary data 
show that FDA's time to approval for original PMAs also 
improved. The average FDA time to PMA approval decreased from 
260 days in fiscal year 2002 to fewer than 220 days in fiscal 
year 2004.
    Even so, that progress is not as dramatic as many had hoped 
when the user fee bill was originally considered. And, relying 
on statistical averages masks a significant number of outliers 
whose review times fall nowhere near the average. Indeed, FDA's 
ability to review products in a timely fashion still falls far 
short of the optimum. That inability to meet deadlines cannot 
be solely attributed to resources.
    The Federal Government has an important role in assuring 
the safety and efficacy of products such as medical devices in 
order to fulfill its mandate of protecting the public health. 
Not as often noted, however, is the equally important role of 
government in fostering the incredible innovation that has made 
America's medical device industry world-renowned.
    Indeed, many of us have been concerned that Food and Drug 
Administration (FDA) user fees can serve as a tax on 
innovation, hindering the development of life-sustaining 
products that do so much to help our citizens lead healthier, 
happier lives. This is especially true for smaller device 
companies, who recognize user fees as a substantial barrier to 
entry. That is why this bill's provision to set a small 
business threshold of $100 million is particularly important.
    Despite concerns about the equity of user fees, we 
recognize that without the resources provided through user 
fees, the FDA's tightly-constrained budget does not allow the 
progress on product reviews that is necessary to maintain the 
government's critical review function. The questions then 
become how best to construct those fees so that they are fair, 
promote innovation, and improve productivity at the agency.
    Those questions will not be answered through enactment of 
this legislation, but they must be answered nonetheless. I look 
forward to working with Chairman Enzi, Ranking Democrat Kennedy 
and other members of the committee to develop ways to implement 
more measurable performance goals and increase the agency's 
productivity when the law is reauthorized in 2007. In the 
interim, the Medical Device User Fee Stabilization Act (MDUFSA) 
is an important measure that is worthy of support.

                       X. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

FEDERAL FOOD, DRUG, AND COSMETIC ACT

           *       *       *       *       *       *       *


SEC. 738. AUTHORITY TO ASSESS AND USE DEVICE FEES.

    (a) Types of Fees.--
          (1) In general.-- * * *
          (2) Premarket application, premarket report, 
        supplement, and submission fee.--
                  (A) In general.--Except as provided in 
                subparagraph (B) and subsections (d) and (e), 
                each person who submits any of the following, 
                on or after October 1, 2002, shall be subject 
                to a fee established under [subsection (c)(5)] 
                subsection (c)(1) for the fiscal year involved 
                in accordance with the following:
                        (i) * * *

           *       *       *       *       *       *       *

    (b) Fee Revenue Amounts.--Except as provided in subsections 
(c), (d), (e), (g), and (h), the fees under subsection (a) 
shall be established to generate the following revenue amounts: 
$25,125,000 in fiscal year 2003; $27,255,000 in fiscal year 
2004; and $29,785,000 in fiscal year [2005; $32,615,000 in 
fiscal year 2006, and $35,000,000 in fiscal year 2007] 2005. If 
legislation is enacted after the date of the enactment of the 
Medical Device User Fee and Modernization Act of 2002 requiring 
the Secretary to fund additional costs of the retirement of 
Federal personnel, fee revenue amounts under this subsection 
shall be increased in each year by the amount necessary to 
fully fund the portion of such additional costs that are 
attributable to the process for the review of device 
applications.
    (c) [Adjustments.--] Annual Fee Setting.--
          [(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; U.S. 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 
                of Columbia.
The adjustment made each fiscal year by this subsection shall 
be added on a compounded basis to the sum of all adjustments 
made each fiscal year after fiscal year 2003 under this 
subsection.
          [(2) Workload adjustment.--After the fee revenues 
        established in subsection (b) are adjusted for a fiscal 
        year for inflation in accordance with paragraph (1), 
        the fee revenues shall, beginning with fiscal year 
        2004, be adjusted further each fiscal year to reflect 
        changes in the workload of the Secretary for the 
        process for the review of device applications. With 
        respect to such adjustment:
                  [(A) The adjustment shall be determined by 
                the Secretary based on a weighted average of 
                the change in the total number of premarket 
                applications, investigational new device 
                applications, premarket reports, supplements, 
                and premarket notification submissions 
                submitted to the Secretary. The Secretary shall 
                publish in the Federal Register the fee 
                revenues and fees resulting from the adjustment 
                and the supporting methodologies.
                  [(B) Under no circumstances shall the 
                adjustment result in fee revenues for a fiscal 
                year that are less than the fee revenues for 
                the fiscal year established in subsection (b), 
                as adjusted for inflation under paragraph (1).
          [(3) Compensating adjustment.--After the fee revenues 
        established in subsection (b) are adjusted for a fiscal 
        year for inflation in accordance with paragraph (1), 
        and for workload in accordance with paragraph (2), the 
        fee revenues shall, beginning with fiscal year 2004, be 
        adjusted further each fiscal year, if necessary, to 
        reflect the cumulative amount by which collections for 
        previous fiscal years, beginning with fiscal year 2003, 
        fee below the cumulative revenue amounts for such 
        fiscal years specified in subsection (b), adjusted for 
        such fiscal years for inflation in accordance with 
        paragraph (1), and for workload in accordance with 
        paragraph (2).
          [(4) Final year adjustment.--For fiscal year 2007, 
        the Secretary may, in addition to adjustments under 
        paragraphs (1) and (2), further increase the fees and 
        fee revenues established in subsection (b) if such 
        adjustment is necessary to provide for not more than 
        three months of operating reserves of carryover user 
        fees for the process for the review of device 
        applications for the first three months of fiscal year 
        2008. If such an adjustment is necessary, the rationale 
        for the amount of the increase shall be contained in 
        the annual notice establishing fee revenues and fees 
        for fiscal year 2007. If the Secretary has carryover 
        user fee balances for such process in excess of three 
        months of such operating reserves, the adjustment under 
        this paragraph shall not be made.]
          [(5)] (1) [Annual fee setting.--] In general.--The 
        Secretary shall, 60 days before the start of each 
        fiscal year after September 30, 2002, [establish, for 
        the next fiscal year, and publish in the Federal 
        Register, fees under subsection (a), based on the 
        revenue amounts established under subsection (b) and 
        the adjustment provided under this subsection and 
        subsection (e)(2)(C)(ii), except that the fees] publish 
        in the Federal Register fees under subsection (a). The 
        fees established for fiscal year [2003] 2006 shall be 
        based on a premarket application fee of [$154,000.] 
        $259,600, and the fees established for fiscal year 2007 
        shall be based on a premarket application fee of 
        $281,600.
          [(6)] (2) 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 device applications.
          (3) Supplement.--
                  (A) In general.--For fiscal years 2006 and 
                2007, the Secretary may use unobligated 
                carryover balances from fees collected in 
                previous fiscal years to ensure that sufficient 
                fee revenues are available in that fiscal year, 
                so long as the Secretary maintains unobligated 
                carryover balances of not less than 1 month of 
                operating reserves for the first month of 
                fiscal year 2008.
                  (B) Notice to congress.--Not later than 14 
                days before the Secretary anticipates the use 
                of funds described in subparagraph (A), the 
                Secretary shall provide notice to the Committee 
                on Health, Education, Labor, and Pensions and 
                the Committee on Appropriations of the Senate 
                and the Committee on Energy and Commerce and 
                the Committee on Appropriations of the House of 
                Representatives.
    (d) Small Businesses; Fee Waiver and Fee Reduction 
Regarding Premarket Approval Fees.--
          (1) In general.--The Secretary shall grant a waiver 
        of the fee required under subsection (a) for one 
        premarket application, or one premarket report, where 
        the Secretary finds that the applicant involved is a 
        small business submitting its first premarket 
        application to the Secretary, or its first premarket 
        report, respectively, for review. For the purposes of 
        this paragraph, the term ``small business'' means an 
        entity that reported $30,000,000 or less of gross 
        receipts or sales in its most recent Federal income tax 
        return for a taxable year, including such returns of 
        all of its affiliates, partners, and parent firms. In 
        addition, for subsequent premarket applications, 
        premarket reports, and supplements where the Secretary 
        finds that the applicant involved is a small business, 
        the fees specified in clauses (i) through (vi) of 
        subsection (a)(2)(A) may be paid at a reduced rate in 
        accordance with paragraph (2)(C).
          (2) Rules relating to premarket approval fees.--
                  (A) Definition.--
                          [(i) In general.--] For purposes of 
                        this [subsection,] paragraph, the term 
                        ``small business'' means an entity that 
                        reported [$30,000,000] $100,000,000 or 
                        less of gross receipts or sales in its 
                        most recent Federal income tax return 
                        for a taxable year, including such 
                        returns of all of its affiliates, 
                        partners, and parent firms.
                          [(ii) Adjustment.--The Secretary may 
                        adjust the $30,000,000 threshold 
                        established in clause (i) if the 
                        Secretary has evidence from actual 
                        experience that this threshold results 
                        in a reduction in revenues from 
                        premarket applications, premarket 
                        reports, and supplements that is 16 
                        percent or more than would occur 
                        without small business exemptions and 
                        lower fee rates. To adjust this 
                        threshold, the Secretary shall publish 
                        a notice in the Federal Register 
                        setting out the rationale for the 
                        adjustment, and the new threshold.]
                  (B) * * *
                  (C) Reduced fees.--Where the Secretary finds 
                that the applicant involved meets the 
                definition under subparagraph (A), the fees 
                established under [subsection (c)(5)] 
                subsection (c)(1) may be paid at a reduced rate 
                of 38 percent of the fee established under such 
                subsection for a premarket application, a 
                premarket report, or a supplement.

           *       *       *       *       *       *       *

    (e) Small Businesses; Fee Reduction Regarding Premarket 
Notification Submissions.--
          (1) In general.--* * *
          (2) Rules relating to premarket notification 
        submissions.--
                  (A) Definition.--For purposes of this 
                subsection, the term ``small business'' means 
                an entity that reported [$30,000,000] 
                $100,000,000 or less of gross receipts or sales 
                in its most recent Federal income tax return 
                for a taxable year, including such returns of 
                all of its affiliates, partners, and parent 
                firms.
                  (B) * * *
                  (C) Reduced fees.--
                          (i) In general.--For fiscal year 2004 
                        and each subsequent fiscal year, where 
                        the Secretary finds that the applicant 
                        involved meets the definition under 
                        subparagraph (A), the fee for a 
                        premarket notification submission may 
                        be paid at 80 percent of the fee that 
                        applies under subsection 
                        (a)(2)(A)(vii), as adjusted under 
                        clause (ii) and as established under 
                        [subsection (c)(5)] subsection (c)(1).
                          (ii) Adjustment per fee revenue 
                        amount.--For fiscal year 2004 and each 
                        subsequent fiscal year, the Secretary, 
                        in setting the revenue amount under 
                        [subsection (c)(5)] subsection (c)(1) 
                        for premarket notification submissions, 
                        shall determine the revenue amount that 
                        would apply if all such submissions for 
                        the fiscal year involved paid a fee 
                        equal to 1.42 percent of the amount 
                        that applies under subsection 
                        (a)(2)(A)(i) for premarket 
                        applications, and shall adjust the fee 
                        under subsection (a)(2)(A)(vii) for 
                        premarket notification submissions such 
                        that the reduced fees collected under 
                        clause (i) of this subparagraph, when 
                        added to fees for such submissions that 
                        are not paid at the reduced rate, will 
                        equal such revenue amount for the 
                        fiscal year.

           *       *       *       *       *       *       *

    (g) Conditions.--
          (1) Performance goals through fiscal year 2005; 
        termination of program after fiscal year 2005.--* * *
                  (A)(i) * * *

           *       *       *       *       *       *       *

                  (B)[(i) For fiscal year 2005, the Secretary 
                is expected to meet all of the performance 
                goals identified for the fiscal year if the 
                total of the amounts so appropriated for fiscal 
                years 2003 through 2005, excluding the amount 
                of fees appropriated for such fiscal years, is 
                equal to or greater than the sum of--
                          [(I) $205,720,000 multiplied by the 
                        adjustment factor applicable to fiscal 
                        year 2003;
                          [(II) $205,720,000 multiplied by the 
                        adjustment factor applicable to fiscal 
                        year 2004; and
                          [(III) $205,720,000 multiplied by the 
                        adjustment factor applicable to fiscal 
                        year 2005.] (i) For fiscal year 2005, 
                        the Secretary is expected to meet all 
                        of the performance goals identified for 
                        the fiscal year if the amount so 
                        appropriated for such fiscal year, 
                        excluding the amount of fees 
                        appropriated for such fiscal year, is 
                        equal to or greater than $205,720,000 
                        multiplied by the adjustment factor 
                        applicable to the fiscal year.
                  [(ii) For fiscal year 2005, if the total of 
                the amounts so appropriated for fiscal years 
                2003 through 2005, excluding the amount of fees 
                appropriated for such fiscal years, is less 
                than the sum that applies under clause (i) for 
                fiscal year 2005, the following applies:] (ii) 
                For fiscal year 2005, if the amount so 
                appropriated for such fiscal year, excluding 
                the amount of fees appropriated for such fiscal 
                year, is more than 1 percent less than the 
                amount that applies under clause (i), the 
                following applies:

           *       *       *       *       *       *       *

                  (C) For fiscal year 2006, fees may not be 
                assessed under subsection (a) for the fiscal 
                year, and the Secretary is not expected to meet 
                any performance goals identified for the fiscal 
                year, if the total of the amounts so 
                appropriated for fiscal years [2003 through] 
                2005 and 2006, excluding the amount of fees 
                appropriated for such fiscal years, is more 
                than 1 percent less than the sum of--
                          (i) * * *
                          (ii) an amount equal to the [sum] 
                        amount that applies for purposes of 
                        subparagraph (B)(i).
                  (D) For fiscal year 2007, fees may not be 
                assessed under subsection (a) for the fiscal 
                year, and the Secretary is not expected to meet 
                any performance goals identified for the fiscal 
                year, if--
                          (i) the amount so appropriated for 
                        the fiscal year, excluding the amount 
                        of fees appropriated for the fiscal 
                        year, is more than 1 percent less than 
                        $205,720,000 multiplied by the 
                        adjustment factor applicable to fiscal 
                        year 2007; or

           *       *       *       *       *       *       *

    (h) Crediting and Availability of Fees.--
          (1) In general.--* * *

           *       *       *       *       *       *       *

          (3) Authorization of appropriations.--There are 
        authorized to be appropriated for fees under this 
        section--
                  (A) $25,125,000 for fiscal year 2003;
                  (B) $27,225,000 for fiscal year 2004;
                  (C) $29,785,000 for fiscal year 2005[;]; and
                  [(D) $32,615,000 for fiscal year 2006; and
                  [(E) $35,000,000 for fiscal year 2007,
as adjusted to reflect adjustments in the total fee revenues 
made under this section and changes in the total amounts 
collected by application fees.] (D) such sums as may be 
necessary for each of fiscal years 2006 and 2007.

                      MISBRANDED DRUGS AND DEVICES

    Sec. 502. A drug or device shall be deemed to be 
misbranded--
    (a) * * *

           *       *       *       *       *       *       *

    [(u) If it is a device, unless it, or an attachment 
thereto, prominently and conspicuously bears the name of the 
manufacturer of the device, a generally recognized abbreviation 
of such name, or a unique and generally recognized symbol 
identifying such manufacturer, except that the Secretary may 
waive any requirement under this paragraph for the device if 
the Secretary determines that compliance with the requirement 
is not feasible for the device or would compromise the 
provision of reasonable assurance of the safety or 
effectiveness of the device.]
    (u)(1) Subject to paragraph (2), if it is a reprocessed 
single-use device, unless it, or an attachment thereto, 
prominently and conspicuously bears the name of the 
manufacturer of the reprocessed device, a generally recognized 
abbreviation of such name, or a unique and generally recognized 
symbol identifying such manufacturer.
    (2) If the original device or an attachment thereto does 
not prominently and conspicuously bear the name of the 
manufacturer of the original device, a generally recognized 
abbreviation of such name, or a unique and generally recognized 
symbol identifying such manufacturer, a reprocessed device may 
satisfy the requirements of paragraph (1) through the use of a 
detachable label on the packaging that identifies the 
manufacturer and is intended to be affixed to the medical 
record of a patient.

           *       *       *       *       *       *       *


         MEDICAL DEVICE USER FEE AND MODERNIZATION ACT OF 2002

SEC. 103. ANNUAL REPORTS.

    [Beginning with] (a) In General.--Beginning with fiscal 
year 2003, the Secretary shall prepare and submit to the 
Committee on Energy and Commerce of the House of 
Representatives and the Committee on Health, Education, Labor 
and Pensions of the Senate a report concerning--
          (1) * * *

           *       *       *       *       *       *       *

    (b) Additional Information.--For fiscal years 2006 and 
2007, the report described under subsection (a)(2) shall 
include--
          (1) information on the number of different types of 
        applications and notifications, and the total amount of 
        fees paid for each such type of application or 
        notification, from businesses with gross receipts or 
        sales from $0 to $100,000,000, with such businesses 
        categorized in $10,000,000 intervals; and
          (2) a certification by the Secretary that the amounts 
        appropriated for salaries and expenses of the Food and 
        Drug Administration for such fiscal year and obligated 
        by the Secretary for the performance of any function 
        relating to devices that is not for the process for the 
        review of device applications, as defined in paragraph 
        (5) of section 737 of the Federal Food, Drug, and 
        Cosmetic Act (21 U.S.C. 379i), are not less than such 
        amounts for fiscal year 2002 multiplied by the 
        adjustment factor, as defined in paragraph (7) of such 
        section 737.

           *       *       *       *       *       *       *


PUBLIC LAW 108-214

           *       *       *       *       *       *       *


SEC. 2. TECHNICAL CORRECTIONS REGARDING PUBLIC LAW 107-250.

    (a) * * *

           *       *       *       *       *       *       *

    [(c) Title III; Additional Amendments--
          [(1) Effective date.--Section 301(b) of Public Law 
        107-250 (116 Stat. 1616), is amended by striking ``18 
        months'' and inserting ``38 months''.]
    (b) Effective Date.--Section 502(u) of the Federal Food, 
Drug, and Cosmetic Act (as amended by section 2(c) of the 
Medical Device User Fee Stabilization Act of 2005)--
          (1) shall be effective--
                  (A) with respect to devices described under 
                paragraph (1) of such section, 12 months after 
                the date of enactment of the Medical Device 
                User Fee Stabilization Act of 2005, or the date 
                on which the original device first bears the 
                name of the manufacturer of the original 
                device, a generally recognized abbreviation of 
                such name, or a unique and generally recognized 
                symbol identifying such manufacturer, whichever 
                is later; and
                  (B) with respect to devices described under 
                paragraph (2) of such section 502(u), 12 months 
                after such date of enactment; and
          (2) shall apply only to devices reprocessed and 
        introduced or delivered for introduction in interstate 
        commerce after such applicable effective date.

           *       *       *       *       *       *       *


                                  
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