[Federal Register Volume 69, Number 147 (Monday, August 2, 2004)]
[Notices]
[Pages 46153-46156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17440]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration


Establishment of Medical Device User Fee Rates for Fiscal Year 
2005

AGENCY: Food and Drug Administration

ACTION: Notice

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SUMMARY: The Food and Drug Administration (FDA) is announcing the fee 
rates and payment procedures for medical device user fees for fiscal 
year (FY) 2005. The Federal Food, Drug, and Cosmetic Act (the act), as 
amended by the Medical Device User Fee and Modernization Act of 2002 
(MDUFMA), authorizes FDA to collect user fees for certain medical 
device applications. The FY 2005 fee rates are provided in this 
document. For all applications submitted on or after October 1, 2004, 
and through September 30, 2005, fees must be paid at the FY 2005 rates 
at the time that applications are submitted to FDA. The later of the 
date that the application is received by FDA or the date that the check 
is received governs the fee that must be paid. This document provides 
details on how fees for FY 2005 were determined and payment procedures 
for medical device applications subject to user fees.

FOR FURTHER INFORMATION CONTACT:
    For further information on MDUFMA: Visit the FDA Web site http://www.fda.gov/oc/mdufma.
    For questions relating to this document: Frank Claunts, Office of 
Management (HFA-20), Food and Drug Administration, 5600 Fishers Lane, 
Rockville, MD 20857, 301-827-4427.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 738 of the act (21 U.S.C. 379j) establishes fees for 
certain medical device applications and supplements. Under statutorily 
defined conditions, FDA may waive or reduce fees (21 U.S.C. 379j(d) and 
(e)).
    For FY 2003 through 2007, MDUFMA (Public Law 107-250) establishes 
base revenue amounts for the aggregate of all application fee revenues. 
Base revenue amounts established for each year after FY 2003 are 
subject to adjustment for inflation, workload, and compensation for 
revenue shortfalls from previous years. Fees for applications are to be 
established each year by FDA so that revenues will approximate the 
levels established in the statute, after those amounts have been first 
adjusted for inflation, workload and, if required, revenue shortfalls 
from previous years.
    This document establishes fee rates for FY 2005. These fees are 
effective on October 1, 2004, and will remain in effect through 
September 30, 2005.

II. Revenue Amount for FY 2005, and Adjustments for Inflation, 
Workload, and Compensation for Revenue Shortfalls from Previous Fiscal 
Years

A. Statutory Fee Revenue Amount

    MDUFMA specifies that the fee revenue amount for FY 2005 is 
$29,785,000, before any adjustments are made (21 U.S.C. 379j(b)).

B. Inflation Adjustment to Fee Revenue Amount

    MDUFMA provides that fee revenue amounts for each fiscal year after 
2003 shall be adjusted for inflation. The adjustment must reflect the 
greater of the following factors: (1) The total percentage change that 
occurred in the Consumer Price Index (CPI) (all items; U.S. city 
average) during the 12-month period ending June 30 preceding the FY for 
which fees are being set, or (2) the total percentage pay change for 
the previous FY for Federal employees stationed in the Washington, DC 
metropolitan area. MDUFMA provides for this annual adjustment to be 
cumulative and compounded annually after 2003 (21 U.S.C. 379j(c)(1)).
    The inflation adjustment for FY 2004 was 4.27 percent. This was the 
greater of the CPI increase during the 12-month period ending June 30 
preceding the FY for which fees were being set (June 30, 2003--which 
was 2.11 percent) or the increase in pay for the previous FY (2003) for 
Federal employees stationed in the Washington, DC metropolitan area 
(4.27 percent).
    The inflation increase for FY 2005 is 4.42 percent. This is the 
greater of the CPI increase for the 12-month period ending June 30, 
2004, (3.27 percent) or the increase in pay for FY 2004 for Federal 
employees stationed in the Washington, DC metropolitan area (4.42 
percent).
    Compounding these amounts (1.0427 times 1.0442) yields a total 
compounded inflation adjustment of 8.88 percent for FY 2005.
    The inflation-adjusted revenue amount for FY 2005 is the statutory 
fee amount ($29,785,000) increased by 8.88 percent, the inflation 
adjuster for FY

[[Page 46154]]

2005. The FY 2005 inflation-adjusted revenue amount is $32,429,908.

C. Workload Adjustment to Inflation Adjusted Fee Revenue Amount

    For each fiscal year beginning in FY 2004, MDUFMA provides that fee 
revenue amounts, after they have been adjusted for inflation, shall be 
further adjusted to reflect increases in workload for the process for 
the review of medical device applications (see 21 U.S.C. 379j(c)(2)). 
FDA is developing a methodology to determine the extent of workload 
changes for the device program, but has not completed the data 
gathering and analysis necessary to accurately account for differences 
in how the Center for Biologics Evaluation and Research and the Center 
for Devices and Radiological Health (CBER and CDRH) define and manage 
their device review processes. Until FDA develops a sound methodology, 
we will not invoke the workload adjustment to further increase 
inflation-adjusted MDUFMA fees and will not be applying a workload 
adjustment to the FY 2005 inflation-adjusted revenue amount of 
$32,429,908. The need for workload adjustment will be assessed anew 
next year when FY 2006 fees are established.

D. Compensating Adjustment to Fee Revenue Amount Once Adjustments for 
Inflation and Workload Have Been Made

    For each fiscal year beginning in FY 2004, MDUFMA provides that fee 
revenue amounts, after they have been adjusted for inflation and 
workload, shall be further adjusted, if necessary, to compensate for 
the cumulative shortfall in fee revenue from previous years (see 21 
U.S.C. 379j(c)(3)).
    In FY 2003, FDA had expected to collect a total of $25,125,000 in 
MDUFMA fees. This was the fee revenue amount stated in the statute (see 
21 U.S.C. 379j(b)). As of June 30, 2003, just before fees for FY 2004 
had to be published, for the first 9 months of the fiscal year, total 
fee collections were only $14,360,304. If fee collections in the last 3 
months had remained proportional to collections in the first 9 months, 
FDA would have collected another $4,786,768 million--for a total of 
about $19,647,000 million for the year--still $5,478,000 million less 
than the statutory revenue amount for FY 2003. Accordingly, FDA used 
this amount ($5,478,000) as the compensating adjustment when fees for 
FY 2004 were set a year ago. However, collections in the final quarter 
were higher than expected, and the compensating adjustment should only 
have been $3,235,211.
    Because experience has shown that it is difficult to predict the 
amount by which revenues may fall short of the revenue target before 
the end of the fiscal year, FDA has decided not to assess a 
compensating adjustment in setting fees for FY 2005. However a year 
from now when fees for FY 2006 are set, FDA will know with certainty 
the extent to which fees for FY 2004 fell short of the revised FY 2004 
revenue target of $31,654,000. The shortfall, if any, will be applied, 
in part or in total, as the compensating adjuster in FY 2006.

III. Fee Calculations for FY 2005

A. Estimating Numbers of Applications That Will Pay Fees

    Under MDUFMA, the amount of fee revenue collected is a function of 
two factors--the fee rate for the application and the number of 
applications that will pay each type of fee.
    To set fees for FY 2005, FDA must first estimate the number of 
applications that will pay each type of fee. Before MDUFMA was enacted, 
FDA estimated the number of applications that would pay each type of 
fee. That estimate was based on the average number of each category of 
application over the 5-year period, FY 1997 through 2001. Those 
estimates took into account FDA's estimates of the number of 
applications that would qualify for a small business reduction or 
exemption. The original FY 2003 estimates are shown in the ``Original 
Estimate'' column of table 1 of this document.
    The reason that MDUFMA fee revenues fell short of the revenue 
target in FY 2003 by $3,235,211 is that FDA collected fewer full fees 
than projected for original premarket approval applications (PMAs) and 
biologic license applications (BLAs) and their full-fee supplements, 
and fewer fees for 180-day supplements, as shown in the ``2003 
Actuals'' column of table 1 of this document.
    FDA is expecting that the numbers of fee-paying applications that 
will be received in FY 2004 will again be less than the amounts 
expected when MDUFMA was enacted. The ``2004 Estimate'' column of table 
1 of this document shows the current estimate of each type of 
application that will pay fees, based on all fees received through June 
30, 2004, the first 9 months of the fiscal year, and assuming that fee-
paying applications for the remaining 3 months of the fiscal year will 
come in at the same rate as they were received in the first 9 months.
    There are several reasons for last year's shortfall and the 
expected shortfall in FY 2004. The number of original PMA applications 
that did not pay a fee in FY 2003 because they were the first 
applications from a qualifying small business was much higher than 
expected. In addition, the number of applications submitted as 180-day 
supplements (paying about 3 times the fee of a real-time supplement) 
has been declining markedly since the enactment of MDUFMA, and the 
number of supplements submitted as real-time supplements has been 
increasing correspondingly. While the workload has remained about the 
same for the two categories combined, the result is substantially less 
fee revenue. Finally, a number of the applications in each category 
have been ``bundled'' and did not have to pay separate fees.
    Because of the receipt of fewer than expected fee-paying 
applications in FY 2003, FDA considered basing fees for FY 2004 on 
lower estimates of the number of full PMA/BLA fees and 180-day 
supplement fees. The agency did not revise the estimated numbers of 
fee-paying applications in setting the FY 2004 fees, however, because 
such a revision would have been based on data from too brief a period--
the 3 months from April 1 through June 30, 2003. A year ago, however, 
the agency stated its intention to reassess whether it should adjust 
its original estimates of the number of each type of fee-paying 
application when it sets fees for FY 2005, when the agency would have 
almost 2 years of data to determine whether its original estimates for 
annual numbers of applications were too high.
    FDA has determined that it needs to revise the numbers of fee-
paying applications it expects to receive each year based on the 
experience of FY 2003 and the first 9 months of FY 2004. The last 
column of table 1 of this document provides the more realistic 
estimates of numbers of fee-paying applications upon which FDA will 
base its fee calculations for FY 2005. Recognizing that industry also 
needs predictability in fee assessments, the agency is committing to 
using these same estimates of numbers of each type of fee-paying 
application when fees are set for FY 2006 and 2007.

[[Page 46155]]



                               Table 1.--Numbers of Fee-Paying Device Applications
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                                                                                 FY 2004            FY 2005
   Type of Fee-Paying Application     Original Estimate   FY 2003  Actuals      Estimates          Projection
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Original premarket applications                      58                 46                 42                 51
 (PMAs), product development
 protocols (PDPs), premarket reports
 (PMRs), and biologic license
 applications (BLAs) and supplements
 paying full fees
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PMAs, PDPs, PMRs, BLAs and full fee                  10                  6                  5                  6
 supplements paying reduced small
 business (SB) fees
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180-Day PMA/PDP supplements paying                  171                118                 80                 86
 full fees
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180-Day PMA/PDP supplements paying                   24                 22                 11                  9
 reduced SB fees
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Real time PMA supplements paying                     86                136                152                160
 full fees
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Real time PMA supplements paying                     14                 19                 19                 15
 reduced SB fees
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Premarket notifications (510(k)s)     .................  .................              2,855              3,060
 paying full fees
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Premarket notifications (510(k)s)     .................  .................                487                540
 paying reduced SB fees
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Premarket notifications (510(k)s--                4,000              4,001              3,341              3,600
 total
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B. Determining the Fee Rates

    Under MDUFMA, all fees are set as a percent of the full fee for a 
PMA (see 21 U.S.C. 379j(a)(1)(A)). In order to generate $32,429,908 in 
FY 2005, using the estimates of the numbers of each type of application 
that will pay a fee at each rate in the column entitled ``FY 2005 
Projections'' of table 1 of this document, the rate for a full PMA will 
be $239,237 for FY 2005. For all applications other than premarket 
notification submissions, the small business rate is 38 percent of the 
full fee rate (see 21 U.S.C. 379j(d)(2)(C)). For premarket notification 
submissions (510(k)s), the small business rate is 80 percent of the 
full rate for premarket notification submissions (see 21 U.S.C. 
379j(e)(2)(C)(i)). The FY 2005 fee rates for all application categories 
are set out in table 2 of this document.

     Table 2.--Fee Types, Percent of PMA Fee, and FY 2005 Fee Rates
------------------------------------------------------------------------
                         Full Fee
                       Amount as a                       FY 2005 Small
 Application Fee Type   Percent of   FY 2005 Full Fee     Business Fee
                         PMA Fee
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PMA (submitted under   ...........           $239,237            $90,910
 section 515(c)(1) or
 515(f) of the act or
 section 351 of the
 Public Health
 Service (PHS) Act)
------------------------------------------------------------------------
PMR (submitted under   100%                  $239,237            $90,910
 section 515(c)(2) of
 the act)
------------------------------------------------------------------------
Panel track            100%                  $239,237            $90,910
 supplement
------------------------------------------------------------------------
Efficacy supplement    100%                  $239,237            $90,910
 (to an approved
 premarket
 application under
 section 351 of the
 PHS Act)
------------------------------------------------------------------------
180-Day supplement     21.5%                  $51,436            $19,546
------------------------------------------------------------------------
Real time supplement   7.2%                   $17,225             $6,546
------------------------------------------------------------------------
510(k)                 1.42% in                $3,502             $2,802
                        aggregate
------------------------------------------------------------------------

    Under MDUFMA, the statutory fee revenue levels each year by about 9 
percent, and the inflation adjusted increase in revenue levels is 
estimated at about 13 to 14 percent each year. The fees being 
established for FY 2005, in aggregate, represent an increase of about 
10 percent (the weighted combination of an increase of 0.6 percent for 
510(k) premarket notification submissions and about 15.7 percent for 
premarket application submissions. This combined 10 percent increase is 
well under the norms that should be expected under the provisions of 
the MDUFMA statute.

IV. Adjustment for Excess Collections in Previous Years

    Under the provisions of MDUFMA, if the agency collects more fees 
than were provided for in appropriations in any year, FDA is required 
to reduce its anticipated fee collections in a subsequent year by that 
amount (21 U.S.C. 379j(h)(4)). No adjustments under this provision are 
required for fees assessed in FY 2005, since collections to date have 
been less than the amounts provided in appropriations. If fees assessed 
in FY 2005 inadvertently result in excess collections, FDA will reduce 
rates when fees are set for FY 2006 or 2007.

V. Small Business Qualification for Purposes of MDUFMA Fees

    Firms with annual gross sales and revenues of $30 million or less, 
including gross sales and revenues of all

[[Page 46156]]

affiliates, partners, and parent firms, may qualify for a fee waiver 
for their first PMA, and for lower rates for subsequent PMAs, PMRs, 
supplements, and 510(k)s.
    Even if a firm qualified under MDUFMA as a small business in FY 
2004, it must obtain a new small business certification and decision 
number for FY 2005 and for each subsequent fiscal year. This can be 
initiated any time after the publication of this document. For FY 2005, 
firms that have not received an FY 2005 small business qualification 
decision number from FDA will not be permitted to submit the reduced 
small business fees. FDA urges firms to apply for this qualification at 
least 60 days before they intend to submit their application and fee.
    To qualify, you are required to submit the following:
    (1) Certified copies of your Federal Income Tax Return for the most 
recent taxable year (2003 or later), including certified copies of the 
income tax returns of your affiliates, partners, and parent firms.
    (2) A certified list of all parents, partners, and affiliate firms 
since October 1, 2002.
    You can find information for determining if an applicant qualifies 
for a small business first-time PMA waiver and lower rates for 
subsequent applications on the FDA Web site at http://www.fda.gov/oc/mdufma. At that Web site, under the heading ``Guidance Documents,'' 
click on the link ``Qualifying as a Small Business.'' This Web site 
provides detailed instructions and the address for mailing 
documentation to support qualification as a small business under 
MDUFMA.

VI. Procedures for Paying Application Fees

    Any application or supplement subject to fees under MDUFMA that is 
received on or after October 1, 2004, through September 30, 2005, is 
subject to the FY 2005 fee rate. The later of the date that the 
application is received in the reviewing center's document room or the 
date that the check is received by the US Bank determines whether the 
fee rates for FY 2004 or 2005 apply. FDA must receive the correct fee 
at the time that an application is submitted, or the application will 
not be accepted for filing or review.
    FDA requests that you follow the steps in the following paragraphs 
before submitting a medical device application subject to a fee. Please 
pay close attention to these procedures to ensure that FDA links the 
fee with the correct application. (Note: In no case should the check 
for the fee be submitted to FDA with the application.)

A. Step One--Secure a Payment Identification Number and Medical Device 
User Fee Cover Sheet From FDA Before Submitting Either the Application 
or the Payment. Note: FY 2005 Fee Rates Will be Available on the Cover 
Sheet Web Site Beginning on August 25, 2004

    Log onto the MDUFMA Web site at http://www.fda.gov/oc/mdufma and, 
under the forms heading, click on the link ``User Fee Cover Sheet.'' 
Complete the Medical Device User Fee Cover Sheet. Be sure you chose the 
correct application submission date range. (Two choices will be offered 
from August 25 until the middle of October 2004. One choice is for 
applications that will be received on or before September 30, 2004, 
which will be subject to FY 2004 fee rates. A second choice is for 
applications that will be received on or after October 1, 2004, which 
will be subject to FY 2005 fee rates.) After completing data entry, 
print a copy of the Medical Device User Fee Cover Sheet and note the 
unique Payment Identification Number located in the upper right-hand 
corner of the printed cover sheet.

B. Step Two--Electronically Transmit a Copy of the Printed Cover Sheet 
With the Payment Identification Number to FDA's Office of Financial 
Management

    Once you are satisfied that the data on the cover sheet is 
accurate, electronically transmit that data to FDA according to 
instructions on the screen. Since electronic transmission is possible, 
applicants are required to set up a user account and use passwords to 
assure data security in the creation and electronic submission of cover 
sheets.

C. Step Three--Mail Payment and a Copy of the Completed Medical Device 
User Fee Cover Sheet to the St. Louis Address Specified Below

     Make the payment in U.S. currency by check, bank draft, or 
U.S. Postal money order payable to the Food and Drug Administration. 
(The tax identification number of the Food and Drug Administration is 
53-0196965, should your accounting department need this information.)
     Please write your application's unique Payment 
Identification Number, from the upper right-hand corner of your 
completed Medical Device User Fee Cover Sheet, on your check, bank 
draft, or U.S. Postal money order.
     Mail the payment and a copy of the completed Medical 
Device User Fee Cover Sheet to: Food and Drug Administration, P.O. Box 
956733, St. Louis, MO 63195-6733.
    If you prefer to send a check by a courier such as FEDEX or UPS, 
the courier may deliver the checks to: US Bank, Attn: Government 
Lockbox 956733, 1005 Convention Plaza, St. Louis, MO 63101.
    (Note: This address is for courier delivery only. Contact the US 
Bank at 314-418-4821 if you have any questions concerning courier 
delivery.)
    It is helpful if the fee arrives at the bank at least 1 day before 
the application arrives at FDA. FDA records the official application 
receipt date as the later of the following:
     The date the application was received by FDA.
     The date US Bank receives the payment. US Bank is required 
to notify FDA within 1-working day, using the Payment Identification 
Number described previously.

D. Step Four--Submit your Application to FDA With a Copy of the 
Completed Medical Device User Fee Cover Sheet

    Please submit your application and a copy of the completed Medical 
Device User Fee Cover Sheet to one of the following addresses:
     Medical device applications should be submitted to: Food 
and Drug Administration, Center for Devices and Radiological Health, 
Document Mail Center (HFZ-401), 9200 Corporate Blvd., Rockville, MD 
20850.
     Biologic applications should be sent to: Food and Drug 
Administration, Center for Biologics Evaluation and Research, Document 
Control Center (HFM-99), suite 200N, 1401 Rockville Pike, Rockville, MD 
20852-1448.

    Dated: July 21, 2004.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. 04-17440 Filed 7-30-04; 8:45 am]
BILLING CODE 4160-01-S