[Federal Register Volume 63, Number 245 (Tuesday, December 22, 1998)]
[Notices]
[Pages 70777-70781]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33831]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration


Establishment of Prescription Drug User Fee Rates for Fiscal Year 
1999

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the rates 
for prescription drug user fees for fiscal year (FY) 1999. The 
Prescription Drug User Fee Act of 1992 (the PDUFA), as amended by the 
Food and Drug Administration Modernization Act of 1997 (the FDAMA), 
authorizes FDA to collect user fees for certain applications for 
approval of drug and biological products, on establishments where the 
products are made, and on such products. Fees for applications for FY 
1999 were set by the FDAMA, subject to adjustment for inflation. Total 
application fee revenues fluctuate with the number of fee-paying 
applications FDA receives. Fees for establishments and products are 
calculated so that total revenues from each category will approximate 
FDA's estimate of the revenues to be derived from applications.

FOR FURTHER INFORMATION CONTACT: Michael E. Roosevelt, Office of 
Financial Management (HFA-120), Food and Drug Administration, 5600 
Fishers Lane, Rockville, MD 20857, 301-827-5088.

SUPPLEMENTARY INFORMATION:

I. Background

    The PDUFA (Pub. L. 102-571), as amended by the FDAMA (Pub. L. 105-
115), establishes three different kinds of user fees. Fees are assessed 
on: (1) Certain types of applications and supplements for approval of 
drug and biological products, (2) certain establishments where such 
products are made, and (3) certain products (21 U.S.C. 379h(a)). When 
certain conditions are met, FDA may waive or reduce fees (21 U.S.C. 
379h(d)).
    For 1998 through 2002, under the amendments enacted in the FDAMA, 
the application fee rates are set in the statute, but are to be 
adjusted annually for cumulative inflation since 1997. Total 
application fee revenues are structured to increase or decrease each 
year as the number of fee-paying applications submitted to FDA 
increases or decreases (workload adjustment).
    For 1998 through 2002, FDA is required to set fee rates for 
establishment and product categories each year, so that the total fee 
revenue from each of these two categories are projected to be equal to 
the total revenue FDA expects to collect from application fees that 
year. This procedure continues the arrangement under which one-third of 
the total user fee revenue is projected to come from each of the three 
types of fees--application fees, establishment fees, and product fees.
    This notice establishes fee rates for FY 1999 for application, 
establishment, and product fees. These fees are retroactive to October 
1, 1998, and will remain in effect through September 30, 1999. For fees 
already paid on applications and supplements submitted on or after

[[Page 70778]]

October 1, 1998, FDA will bill applicants for the difference between 
fees paid and fees due under the new fee schedule. For applications and 
supplements submitted after December 31, 1998, the new fee schedule 
must be used. Invoices for establishment and product fees for FY 1999 
will be issued in December 1999, using the new fee schedules.

II. Inflation and Workload Adjustment Process

    The PDUFA, as amended by the FDAMA, provides that fee rates for 
each FY shall be adjusted by notice in the Federal Register. The 
adjustment must reflect the greater of: (1) The total percentage change 
that occurred during the preceding FY in the Consumer Price Index 
(CPI), or (2) the total percentage pay change for that FY for Federal 
employees stationed in the Washington, DC metropolitan area. The FDAMA 
provides for this annual adjustment to be cumulative and compounded 
annually after 1997 (see 21 U.S.C. 379h(c)(1)).
    The FDAMA also structures the total application fee revenue to 
increase or decrease each year as the number of fee-paying applications 
submitted to FDA increases or decreases. This provision allows revenues 
to rise or fall as this portion of FDA's workload rises or falls. To 
implement this provision each year, FDA will estimate the number of 
fee-paying applications it anticipates receiving. The number of 
applications estimated will then be multiplied by the inflation-
adjusted statutory application fee. This calculation will produce the 
FDA estimate of total application fee revenues to be received.
    The PDUFA also provides that FDA shall adjust the rates for 
establishment and product fees so that the total revenues from each of 
these categories is projected to equal the revenues FDA expects to 
collect from application fees that year. The FDAMA provides that the 
new fee rates based on these calculations be adjusted within 60 days 
after the end of each FY (21 U.S.C. 379h(c)(2)).

III. Inflation Adjustment and Estimate of Total Application Fee 
Revenue

    The FDAMA provides that the application fee rates set out in the 
statute be adjusted each year for cumulative inflation since 1997. It 
also provides for total application fee revenues to increase or 
decrease based on increases or decreases in the number of fee-paying 
applications submitted.

A. Inflation Adjustment to Application Fees

    Application fees are assessed at different rates for qualifying 
applications depending on whether the applications require clinical 
data on safety or effectiveness (other than bioavailability or 
bioequivalence studies) (21 U.S.C. 379h(a)(1)(A) and (b)). Applications 
that require clinical data are subject to the full application fee. 
Applications that do not require clinical data and supplements that 
require clinical data are assessed one-half the fee of applications 
that require clinical data. If FDA refuses to file an application or 
supplement, 75 percent of the application fee is refunded to the 
applicant (21 U.S.C. 379h(a)(1)(D)).
    The application fees described previously are set out in the FDAMA 
for 1999 ($256,338 for applications requiring clinical data, and 
$128,169 for applications not requiring clinical data or supplements 
requiring clinical data) (21 U.S.C. 379h(b)(1)), but must be adjusted 
for cumulative inflation since 1997. That adjustment each year is to be 
the greater of: (1) The total percentage change that occurred during 
the preceding FY in the CPI (all items; U.S. city average); or (2) the 
total percentage pay change for that FY for Federal employees, as 
adjusted for any locality-based payment applicable to employees 
stationed in the District of Columbia. The FDAMA provides for this 
annual adjustment to be cumulative and compounded annually after 1997 
(see 21 U.S.C. 379h(c)).
    The adjustment for FY 1998 was 2.45 percent (62 FR 64849, December 
9, 1997). This was the greater of the CPI increase for FY 1997 (2.15 
percent) and the increase in applicable Federal salaries (2.45 
percent).
    The adjustment for FY 1999 is 3.68 percent. This is the greater of 
the CPI increase for FY 1998 (1.49 percent) and the increase in 
applicable Federal salaries (3.68 percent).
    Compounding these amounts (1.0245 times 1.0368) yields a total 
compounded inflation of 6.22 percent for FY 1999. The adjusted 
application fee rates are computed by applying the inflation percentage 
for FY 1999 (106.22 percent) to the FY 1999 statutory application fee 
rates stated previously. For FY 1999 the adjusted application fee rates 
are $272,282 for applications requiring clinical data, and $136,141 for 
applications not requiring clinical data or supplements requiring 
clinical data. These amounts must be submitted with all applications 
during FY 1999.

B. Estimate of Total Application Fee Revenue

    Total application fee revenues for 1999 will be determined by the 
number of fee-paying applications FDA receives in FY 1999 (from October 
1, 1998, through September 30, 1999) multiplied by the fee rates 
calculated in the preceding paragraph. Before fees can be set for 
establishment and product fee categories, each of which are projected 
to be equal to total revenues FDA collects from application fees, FDA 
must first estimate its total 1999 application fee revenues. To do this 
FDA has traditionally calculated the number of full application fees 
FDA received in the preceding fiscal year, made an allowance for 
waivers and exemptions, and used that figure as a basis for estimating 
the next year's application volume.
    For FY 1998, FDA received and filed 101 human drug applications 
that require clinical data for approval, 23 that did not require 
clinical data for approval, and 93 supplements to human drug 
applications that require clinical data for approval. Because 
applications that do not require clinical data and supplements that 
require clinical data are assessed only one-half the full fee, the 
equivalent number of these applications subject to the full fee is 
determined by summing these categories and dividing by 2. This amount 
is then added to the number of applications that require clinical data 
to arrive at the equivalent number of applications that may be subject 
to full application fees.
    In addition, as of September 30, 1998, FDA assessed fees for three 
applications that required clinical data, one application that did not 
require clinical data, and one supplement, all of which were refused 
filing or withdrawn before filing. After refunds, the full application 
paid one-fourth the full application fee and is counted as one-fourth 
of an application, and the application that did not require clinical 
data and the supplement each paid one-eighth of the full application 
fee and are each counted as one-eighth of an application.
    Using this methodology, the approximate equivalent number of 
applications that required clinical data and were subject to fees in FY 
1998 was 160, before any exemptions, waivers or reductions. Under the 
FDAMA, FDA may waive fees for certain small businesses submitting their 
first application and certain orphan products are exempted from 
application fees. In addition, the FDAMA excludes from fees bulk 
biological products that are further manufactured, and provides

[[Page 70779]]

exceptions for certain supplements for pediatric indications. In FY 
1998 waivers or exemptions applied to 41.5 equivalents of full 
applications. Therefore, based solely on 1998 data, FDA estimates that 
approximately 118.5 (160 minus 41.5) equivalent applications that 
require clinical data will qualify for fees in FY 1999, after allowing 
for exemptions, waivers, or reductions.
    This estimate based on the data from 1998 alone predicts a 
substantial drop in applications, and represents a substantial 
departure from FDA experience over the past 5 years. Over that period 
the estimated number of fee-paying applications increased fairly 
consistently at a rate of about 7 percent each year, as set out in 
Table 1 of this document.

                                                                        Table 1.
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                                    Year                                             Estimated Number of Fee-Paying Full Application Equivalents
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1993.......................................................................                                                                116
1994.......................................................................                                                                124
1995.......................................................................                                                                131
1996.......................................................................                                                                141
1997.......................................................................                                                                169
1998.......................................................................                                                              118.5
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    Since the volume of fee-paying applications FDA received in 1998 
represents such a substantial departure from the trend experienced over 
the previous 5 years, and since sharp changes produce disruptive 
volatility in both fees and revenues, FDA reexamined the process to be 
used in estimating the next year's application volume. FDA considered 
several different approaches (continuation of current method, using a 
2- or 3-year rolling average, and linear regression) and chose the 
linear regression projection method as the best alternative for this 
estimate.
    Linear regression is well suited to situations like this where 
there are several years of historical data, the potential exists for 
shifts from year-to-year, and there is no obvious causative rationale 
to reasonably predict the year-to-year fluctuations. It also provides a 
damping effect on year-to-year fee and revenue fluctuations and allows 
for more stability in both fee levels paid by industry and in agency 
resource planning. Under this approach, the analysis takes into account 
the number of fee-paying PDUFA submissions each year since PDUFA began 
in 1993, adjusts those numbers conservatively to reflect additional 
exemptions/waivers that would have been granted between 1993 and 1997 
if the current law governing exemptions and waivers had been in effect 
then, and fits the best line to those data points. The extension of 
that line to the next year estimates the number of submissions for that 
year. Beginning now for FY 1999, FDA will make this annual estimate 
based on a linear regression analysis of data on all fee-paying full 
application equivalent submissions from 1993 through the latest year 
(1998 in this case).
    This will mean that our estimated number of applications will be 
higher in 1998 than it would have been under our previous estimating 
method. It will also mean that in future years, if there is a sudden 
rise in application volume, the regression analysis process will dampen 
the effect of such year-to-year increases as well. We believe that this 
is a fair and reasonable approach, and that it will insulate fees and 
revenues from significant fluctuations that may occur in any single 
year.
    Using this approach, a linear regression line based on the adjusted 
number of fee-paying full application equivalent submissions since 1993 
projects the receipt of 150 fee-paying full application equivalent 
submissions in 1999, as reflected in Table 2 and the graphic of this 
document.

                                                                        Table 2.
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                  Year                         1993            1994            1995            1996            1997            1998            1999
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Adjusted Fee-Paying Full Application
 Equivalents                                  101.0           108.9           112.5           136.3           161.5           118.5
Regression Line                               103.9           111.6           119.3           127.0           134.6           142.3           150.0
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[GRAPHIC] [TIFF OMITTED] TN22DE98.022



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    The total FY 1999 application fee revenue is estimated by 
multiplying the adjusted application fee rate ($272,282) by the 
equivalent number of applications projected to qualify for fees in FY 
1999 (150), for a total estimated application fee revenue in 1999 of 
$40,842,300. This is the amount of revenue that FDA is also expected to 
derive both from establishment fees and from product fees.

IV. Fee Calculations for Establishment and Product Fees

A. Establishment Fees

    At the beginning of FY 1998 the establishment fee was based on an 
estimate of 275 establishments subject to fees. By the end of FY 1998, 
343 establishments qualified for and were billed for establishment 
fees, before all decisions on requests for waivers or reductions were 
made. We estimate that a total of 25 establishment fee waivers will be 
granted in 1998, for a net of 318 fee-paying establishments. In FY 1999 
fees will be based on an estimate of 318 establishments paying fees 
after taking waivers into account. The fee per establishment is 
determined by dividing the adjusted total fee revenue to be derived 
from establishments ($40,842,300), by the estimated 318 establishments, 
for an establishment fee rate for FY 1999 of $128,435 (rounded to the 
nearest dollar).

B. Product Fees

    At the beginning of FY 1998 the product fee was based on an 
estimate that 2,100 products would be subject to product fees. By the 
end of FY 1998, 2,279 products qualified and were billed for product 
fees before all decisions on requests for waivers or reductions were 
made. Assuming that there will be about 55 waivers granted, FDA 
estimates that 2,224 products will qualify for product fees in FY 1999, 
after allowing for waivers and exemptions. Accordingly, the FY 1999 
product fee rate is determined by dividing the adjusted total fee 
revenue to be derived from product fees ($40,842,300) by the estimated 
2,224 products for a product fee rate of $18,364 (rounded to the 
nearest dollar).

V. Adjusted Fee Schedules for FY 1999

    The fee rates for FY 1999 are set out in Table 3 of this document.

                                                    Table 3.
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                                      Fee Category                                        Fee Rates For FY 1999
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Applications
  Requiring clinical data..............................................................        $272,282
  Not requiring clinical data..........................................................        $136,141
  Supplements requiring clinical data..................................................        $136,141
Establishments.........................................................................        $128,435
Products...............................................................................         $18,364
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VI. Implementation of Adjusted Fee Schedule

A. Application Fees

    Any application or supplement subject to fees under the PDUFA that 
is submitted after December 31, 1998, must be accompanied by the 
appropriate application fee established in the new fee schedule. 
Payment must be made in United States currency by check, bank draft, or 
U.S. postal money order payable to the order of the U.S. Food and Drug 
Administration. Please include the user fee ID number on your check.
    Your check can be mailed to: Food and Drug Administration, P.O. Box 
360909, Pittsburgh, PA 15251-6909.
    If checks are to be sent by a courier that requests a street 
address, they can be sent to: Mellon Bank, Three Mellon Bank Center, 
27th Floor (FDA 360909), Pittsburgh, PA 15259-0001. (Note: This Mellon 
Bank Address is for courier delivery only.) Please make sure that the 
FDA P.O. Box number (P.O. Box 360909) is on the enclosed check.
    FDA will bill applicants who submitted application fees between 
October 1, 1998, and December 31, 1998, based on the adjusted rate 
schedule.

B. Establishment and Product Fees

    By December 31, 1998, FDA will issue invoices for establishments 
and product fees for FY 1999 under the new fee schedules. Payment will 
be due by January 31, 1999. FDA will issue invoices in October 1999 for 
any products and establishments subject to fees for FY 1999 that 
qualify for fees after the December 1998 billing.

    Dated: December 15, 1998.
William K. Hubbard,
Associate Commissioner for Policy Coordination.
[FR Doc. 98-33831 Filed 12-21-98; 8:45 am]
BILLING CODE 4160-01-F