[Federal Register Volume 69, Number 147 (Monday, August 2, 2004)]
[Notices]
[Pages 46165-46168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17442]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration


Establishment of Prescription Drug User Fee Rates for Fiscal Year 
2005

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) 2005. The Federal 
Food, Drug, and Cosmetic Act (the Act), as amended by the Prescription 
Drug User Fee Amendments of 2002 (PDUFA III), 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. Base revenue amounts for application fees, establishment 
fees, and product fees for FY 2005 were established by PDUFA III. Fees 
for applications, establishments, and products are to be established 
each year by FDA so that revenues from each category will approximate 
the levels established in the statute, after those amounts have been 
first adjusted for inflation and workload. This notice establishes fee 
rates for FY 2005 for application fees ($672,000 for an application 
requiring clinical data, and $336,000 for an application not requiring 
clinical data or a supplement requiring clinical data), establishment 
fees ($262,200), and product fees ($41,710). These fees are effective 
on October 1, 2004, and will remain in effect through September 30, 
2005. For applications and supplements that are submitted on or after 
October 1, 2004, the new fee schedule must be used. Invoices for 
establishment and product fees for FY 2005 will be issued in August 
2004, using the new fee schedule.

FOR FURTHER INFORMATION CONTACT: Frank Claunts, Office of Management 
(HFA-20), Food and Drug Administration, 5600 Fishers Lane, Rockville, 
MD 20857, 301-827-4427.

SUPPLEMENTARY INFORMATION:

I. Background

    Sections 735 and 736 of the act (21 U.S.C. 379g and h), establish 
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 FY 2003 through 2007 base revenue amounts for application fees, 
establishment fees, and product fees are established by PDUFA III 
(title 5 of the Public Health Security and Bioterrorism Preparedness 
and Response Act of 2002). Base revenue amounts established for years 
after FY 2003 are subject to adjustment for inflation and workload. 
Fees for applications, establishments, and products are to be 
established each year by FDA so that revenues from each category will 
approximate the levels established in the statute, after those amounts 
have been first adjusted for inflation and workload. The revenue levels 
established by PDUFA III continue 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 2005 for application, 
establishment, and product fees. 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 and 
Workload

A. Statutory Fee Revenue Amounts

    PDUFA III specifies that the fee revenue amount for fiscal year 
2005 for each category of fees (application, product, and 
establishment) is $84,000,000, for a total of $252,000,000 from all 
three categories of fees (21 U.S.C. 379h(b), before any adjustments are 
made.

B. Inflation Adjustment to Fee Revenue Amount

    PDUFA III provides that fee revenue amounts for each fiscal year 
after 2003 shall be adjusted for inflation. The adjustment must reflect 
the greater of: (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 fiscal year for which fees 
are being set, or (2) the total percentage pay change for the previous 
fiscal year for Federal employees stationed in the Washington, DC, 
metropolitan area. PDUFA III provides for this annual adjustment to be 
cumulative and compounded annually after FY 2003 (see 21 U.S.C. 
379h(c)(1)).
    The inflation increase 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 fiscal year for which fees are being set (June 30, 2003--
which was 2.11 percent) or the increase in pay for the previous fiscal 
year (2003 in this case) 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 during the 12-month period ending June 30 
preceding the fiscal year for which fees are being set (June 30, 2004--
which was 3.27 percent) or the increase in pay for the previous fiscal 
year (2004 in this case) 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 adjustment for each category of fees for FY 2005 is 
the statutory fee amount ($84,000,000) increased by 8.88 percent, the 
inflation adjuster for FY 2005. The FY 2005 inflation-adjusted revenue 
amount is $91,459,200 for each category of fee, for a total inflation-
adjusted fee revenue amount of $274,377,600 in FY 2005.

C. Workload Adjustment to Inflation Adjusted Fee Revenue Amount

    For each fiscal year beginning in FY 2004, PDUFA III provides that 
fee revenue amounts, after they have been adjusted for inflation, shall 
be further adjusted to reflect changes in workload for the process for 
the review of human drug applications (see 21 U.S.C. 379h(c)(2)).
    The conference report accompanying PDUFA III, House of 
Representatives report number 107-481, provides additional instructions 
on how the workload adjustment provision of PDUFA III is to be 
implemented. Following that guidance, FDA calculated the average number 
each of the four types of applications specified in the workload 
adjustment provision (human drug applications, commercial 
investigational new drug applications (INDs), efficacy supplements, and 
manufacturing supplements) received over the 5-year period that ended 
on June 30, 2002 (base years), and the average number of each of these 
types of applications over the most recent 5-year period that ended 
June 30, 2004.
    The results of these calculations are presented in the first 2 
columns of table 1 of this document. Table 1, column 3 of this 
document, reflects the percent

[[Page 46166]]

change in workload over the two 5-year periods and column 4 shows the 
weighting factor for each type of application, reflecting how much of 
the total FDA drug review workload was accounted for by each type of 
application in the table during the most recent 5 years. This weighting 
factor was developed by averaging data generated in a 2002 KPMG study 
of FDA's drug review workload and data from FDA's time reporting 
systems to submission data for the most recent 5-year period. Column 5 
of table 1 of this document, is the weighted percent change in each 
category of workload, and was derived by multiplying the weighting 
factor in each line in column 4 by the percent change from the base 
years in column 3. At the bottom right of table 1 of this document, the 
sum of the values in column 5 is added, reflecting a total change in 
workload of 1.47 percent for FY 2005.

                                     Table 1.--Workload Adjuster Calculation
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                                                    Summary of Workload Adjustment Calculations
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        Application Type             Column 15-        Column          Column          Column          Column
                                   year Average   2Latest 5-year     3Percent       4Weighting      5Weighted %
                                    Base Years        Average         Change          Factor          Change
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New drug application/biological       119.6           120.4             0.7%           42.5%            0.28%
 licence application
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Commercial INDs                       629.8           626.6            -0.5%           41.7%           -0.21%
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Efficacy supplements                  159.2           166.8             4.8%            5.9%            0.28%
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Manufacturing supplements            2100.6          2336.8            11.2%            9.9%            1.12%
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FY 2005 workload adjuster         ..............  ..............  ..............  ..............        1.47%
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    Increasing the inflation-adjusted revenue amount of $91,459,200 for 
each category of fee by the FY 2005 workload adjuster (1.47 percent) 
results in an increase of $1,344,450, for a total inflation and 
workload adjusted revenue amount for each fee category of $92,803,650. 
The total FY 2005 inflation and workload adjusted fee revenue target 
for all three fee categories combined is $278,410,950.

III. Application Fee Calculations

    PDUFA III provides that the rates for application, product, and 
establishment fees be established 60 days before the beginning of each 
fiscal year (21 U.S.C. 379h(c)(4)). The fees are to be established so 
that they will generate the fee revenue amounts specified in the 
statute, as adjusted for inflation and workload.

A. Application Fee Revenues and Application Fees

    The application fee revenue amount that PDUFA III established for 
FY 2005 is $92,803,650, as calculated in the previous section. 
Application fees will be set to generate this amount.

B. Estimate of Number of Fee-Paying Applications and Establishment of 
Application Fees

    For FY 2003 through 2007, FDA will estimate the total number of 
fee-paying full application equivalents (FAEs) it expects to receive 
the next fiscal year by averaging the number of fee-paying FAEs 
received in the 5 most recent fiscal years. This use of the rolling 
average of the 5 most recent fiscal years is the same method that was 
applied in making the workload adjustment.
    In estimating the number of fee-paying FAEs that FDA will receive 
in FY 2005, the 5-year rolling average for the most recent 5 years will 
be based on actual counts of fee-paying FAEs received for FYs 2000 
through 2004. For FY 2004, FDA is estimating the number of fee-paying 
FAEs for the full year based on the actual count for the first 9 months 
and estimating the number for the final 3 months.
    Table 2, column 1 of this document, shows the total number of each 
type of FAE received in the first 9 months of FY 2004, whether fees 
were paid or not. Table 2, column 2 of this document shows the number 
of FAEs for which fees were waived or exempted during this period, and 
column 3 shows the number of fee-paying FAEs received through June 30, 
2004. Column 4 estimates the 12-month total fee-paying FAEs for FY 2004 
based on the applications received through June 30, 2004. All of the 
counts are in FAEs. A full application requiring clinical data counts 
as one FAE. An application not requiring clinical data counts one-half 
an FAE, as does a supplement requiring clinical data. An application 
that is withdrawn or refused for filing counts as one-fourth of an FAE 
if it initially paid a full application fee, or one-eighth of an FAE if 
it initially paid one-half of the full application fee amount.

         Table 2.--FY 2004 FAEs Received through June 30, 2004, and Projected Through September 30, 2004
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                                                   Column 1Total    Column 2Fee    Column 3Total
                                                     Received        Exempt or      Fee Paying       Column 412
              Application or Action                Through June   Waived Through   Through June        Month
                                                     30, 2004      June 30, 2004     30, 2004       Projection
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Applications requiring clinical data                   78.0            24.0            54.0            72.0
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Applications not requiring clinical data               11.5             4.0             7.5            10.0
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Supplements requiring clinical data                    53.5             5.0            48.5            64.7
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[[Page 46167]]

 
Withdrawn or refused to file                            0.25            0.0             0.25            0.3
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Total                                                 143.25           33.0           110.25          147.0
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    In the first 9 months of FY 2004 FDA received 143.25 FAEs, of which 
110.25 were fee-paying. Based on data from the last seven FYs, on 
average, 25 percent of the applications submitted each year come in the 
final 3 months. Dividing 110.25 by 3 and multiplying by 4 extrapolates 
the amount to the full 12 months of the fiscal year and projects the 
number of fee-paying FAEs in FY 2004 at 147.
    All pediatric supplements, which had been exempt from fees prior to 
January 4, 2002, were required to pay fees effective January 4, 2002. 
This is the result of section 5 of the Best Pharmaceuticals for 
Children Act that repealed the fee exemption for pediatric supplements 
effective January 4, 2002. Thus, in estimating FY 2004 fee-paying 
receipts, we must add all the pediatric supplements that were 
previously exempt from fees prior to January 4, 2002. The exempted 
number of FAEs for pediatric supplements for FY 2000, FY 2001, and FY 
2002, respectively, were 12.5, 19, and 4.5. Since fees on these 
supplements are paid for pediatric applications submitted in FY 2004 
and beyond, the number of pediatric supplement FAEs exempted from fees 
each year from FY 2000 through 2002 (the years in table 3 of this 
document when fees were exempted) are added to the total of fee-paying 
FAEs received each year.
    As table 3 of this document shows, the average number of fee-paying 
FAEs received annually in the most recent 5-year period, assuming all 
pediatric supplements had paid fees, and including our estimate for FY 
2004, is 138.1 FAEs. FDA will set fees for FY 2005 based on this 
estimate as the number of FAEs that will pay fees.

                                    Table 3.--Fee-Paying FAE--5-Year Average
Year                             2000          2001          2002          2003          2004        5-year
                                                                                                    Average
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Fee-paying FAEs                   153.0         107.6         127.6         119.5         147.0         130.9
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Exempt pediatric supplement        12.5          19.0           4.5           0.0           0.0           7.2
 FAEs
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Total                             165.9         126.6         132.1         119.5         147.0         138.1
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    The FY 2005 application fee is estimated by dividing the average 
number of full applications that paid fees over the latest 5 years, 
138.1, into the fee revenue amount to be derived from application fees 
in FY 2005, $92,803,650. The result, rounded to the nearest one hundred 
dollars, is a fee of $672,000 per full application requiring clinical 
data, and $336,000 per application not requiring clinical data or per 
supplement requiring clinical data.

IV. Adjustment for Excess Collections in Previous Years

    Under the provisions of PDUFA, as amended, if the agency collects 
more fees than were provided for in appropriations in any year after 
1997, FDA is required to reduce its anticipated fee collections in a 
subsequent year by that amount (21 U.S.C. 379h(g)(4)). In FY 1998, 
Congress appropriated a total of $117,122,000 to FDA in PDUFA fee 
revenue. To date, collections for FY 1998 total $117,737,470--a total 
of $615,470 in excess of the appropriation limit. This is the only 
fiscal year since 1997 in which FDA has collected more in PDUFA fees 
than Congress appropriated.
    FDA also has some requests for waivers or reductions of FY 1998 
fees that have been decided but that are pending appeals. For this 
reason, FDA is not reducing its FY 2005 fees to offset excess 
collections at this time. An offset will be considered in a future 
year, if FDA still has collections in excess of appropriations for FY 
1998 after the pending appeals for FY 1998 waivers and reductions have 
been resolved.

V. Fee Calculations for Establishment and Product Fees

A. Establishment Fees

    At the beginning of FY 2004, the establishment fee was based on an 
estimate that 354 establishments would be subject to and would pay 
fees. By the end of FY 2004, FDA estimates that 379 establishments will 
have been billed for establishment fees, before all decisions on 
requests for waivers or reductions are made. FDA again estimates that a 
total of 25 establishment fee waivers or reductions will be made for FY 
2004, for a net of 354 fee-paying establishments. FDA will use this 
same number again, 354, for its FY 2005 estimate of establishments 
paying fees, after taking waivers and reductions into account. The fee 
per establishment is determined by dividing the adjusted total fee 
revenue to be derived from establishments ($92,803,650) by the 
estimated 354 establishments, for an establishment fee rate for FY 2005 
of $262,200 (rounded to the nearest one hundred dollars).

B. Product Fees

    At the beginning of FY 2004, the product fee was based on an 
estimate that 2,225 products would be subject to and pay product fees. 
By the end of FY 2004, FDA estimates that 2,260 products will have been 
billed for product fees, before all decisions on requests for waivers 
or reductions are made. Assuming that there will be about 35

[[Page 46168]]

waivers and reductions granted, FDA estimates that 2,225 products will 
qualify for product fees in FY 2004, after allowing for waivers and 
reductions, and will use this number for its FY 2005 estimate. 
Accordingly, the FY 2005 product fee rate is determined by dividing the 
adjusted total fee revenue to be derived from product fees 
($92,803,650) by the estimated 2,225 products for a FY 2005 product fee 
of $41,710 (rounded to the nearest ten dollars).

VI. Fee Schedule for FY 2005

    The fee rates for FY 2005 are set out in table 4 of this document:

                                                                        Table 4.
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                                                       Fee Category                                                             Fee Rates for FY 2005
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Applications                                                                                                               .............................
  Requiring clinical data                                                                                                                      $672,000
  Not requiring clinical data                                                                                                                  $336,000
  Supplements requiring clinical data                                                                                                          $336,000
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Establishments                                                                                                                                 $262,200
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Products                                                                                                                                        $41,710
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VII. Implementation of Adjusted Fee Schedule

A. Application Fees

    The appropriate application fee established in the new fee schedule 
must be paid for any application or supplement subject to fees under 
PDUFA that is received after September 30, 2004. Payment must be made 
in U.S. currency by check, bank draft, or U.S. postal money order 
payable to the Food and Drug Administration. Please include the user 
fee identification (ID) number on your check. Your payment 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, the courier can deliver the checks to: Food and Drug 
Administration (360909), Mellon Client Service Center, rm. 670, 500 
Ross St., Pittsburgh, PA 15262-0001. (Note: This Mellon Bank address is 
for courier delivery only.)
    Please make sure that the FDA post office box number (P.O. Box 
360909) is written on the check. The tax ID number of the FDA is 530 19 
6965.

B. Establishment and Product Fees

    By August 31, 2004, FDA will issue invoices for establishment and 
product fees for FY 2005 under the new fee schedule. Payment will be 
due on October 1, 2004. FDA will issue invoices in October 2005 for any 
products and
establishments subject to fees for FY 2005 that qualify for fees after 
the August 2004 billing.

    Dated: July 27, 2004.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. 04-17442 Filed 7-30-04; 8:45 am]
BILLING CODE 4160-01-S