[Federal Register Volume 71, Number 148 (Wednesday, August 2, 2006)]
[Notices]
[Pages 43780-43784]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-12397]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration


Prescription Drug User Fee Rates for Fiscal Year 2007

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) 2007. The Federal 
Food, Drug, and Cosmetic Act, as amended by the Prescription Drug User 
Fee Amendments of 2002 (Title 5 of the Public Health Security and 
Bioterrorism Preparedness and Response Act 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 2007 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 revenue levels established in the 
statute, after those amounts have been first adjusted for inflation and 
workload. This notice establishes fee rates for FY 2007 for application 
fees for an application requiring clinical data ($896,200), for an 
application not requiring clinical data or a supplement requiring 
clinical data ($448,100), for establishment fees ($313,100), and for 
product fees ($49,750). These fees are effective on October 1, 2006, 
and will remain in effect through September 30, 2007. For applications 
and supplements that are submitted on or after October 1, 2006, the new 
fee schedule must be used. Invoices for establishment and product fees 
for FY 2007 will be issued in August 2006, 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

    The FFDCA, sections 735 and 736 (21 U.S.C. 379g and h), establishes 
three different kinds of user fees. Fees are assessed on the following: 
(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 FY 2007, base revenue amounts for application 
fees, establishment fees, and product fees are established by PDUFA 
III. 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 
revenue 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 2007 for application, 
establishment, and product fees. These fees are effective on October 1, 
2006, and will remain in effect through September 30, 2007.

II. Revenue Amounts for FY 2007, and Adjustments for Inflation and 
Workload

A. Statutory Fee Revenue Amounts

    PDUFA III specifies that the fee revenue amount for FY 2007 for 
application fees is $86,434,000 and for both product and establishment 
fees is $86,433,000, for a total of $259,300,000 from all three 
categories of fees (21 U.S.C. 379h(b), before any adjustments are made.

[[Page 43781]]

B. Inflation Adjustment to Fee Revenue Amount

    PDUFA III provides that fee revenue amounts for each FY after 2003 
shall be adjusted for inflation. The adjustment must reflect the 
greater of the following amounts: (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. 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 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 in 
this case) for Federal employees stationed in the Washington, DC 
metropolitan area (4.27 percent).
    The inflation increase for FY 2005 was 4.42 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, 2004--which 
was 3.27 percent) or the increase in pay for the previous FY (2004 in 
this case) for Federal employees stationed in the Washington, DC 
metropolitan area (4.42 percent).
    The inflation adjustment for FY 2006 was 3.71 percent. This is the 
greater of the CPI increase during the 12-month period ending June 30 
preceding the FY for which fees are being set (June 30, 2005--which was 
2.53 percent) or the increase in pay for FY 2005 for Federal employees 
stationed in Washington, DC (3.71 percent).
    The inflation adjustment for FY 2007 is 4.32 percent. This is the 
greater of the CPI increase during the 12-month period ending June 30 
preceding the FY for which fees are being set (June 30, 2006--which is 
4.32 percent) or the increase in pay for FY 2006 for Federal employees 
stationed in Washington, DC (3.44 percent).
    Compounding these amounts (1.0427 x 1.0442 x 1.0371 x 1.0432) 
yields a total compounded inflation adjustment of 17.80 percent for FY 
2007.
    The inflation adjustment for each category of fees for FY 2007 is 
the statutory fee amount increased by 17.80 percent, the inflation 
adjuster for FY 2007. The FY 2007 inflation-adjusted revenue amount for 
application fees is $101,819,252 ($86,434,000 x 1.1780). For both 
product and establishment fees the inflation-adjusted revenue amount is 
$101,818,074 each ($86,433,000 x 1.1780). The total inflation-adjusted 
fee revenue amount for all three fee categories combined is 
$305,455,400 in FY 2007.

C. Workload Adjustment to Inflation Adjusted Fee Revenue Amount

    For each FY 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 guidance on how the 
workload adjustment provision of PDUFA III is to be implemented. 
Following that guidance, FDA calculated the average number of each of 
the four types of applications specified in the workload adjustment 
provision (human drug applications, commercial investigational new drug 
applications, 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, 2006.
    The results of these calculations are presented in the first two 
columns of table 1 of this document. Column 3 reflects the average 
percent change in workload over the two 5-year periods. Column 4 shows 
the weighting factor for each type of application, estimating 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. Column 5 of 
table 1 is the weighted percent change in each category of workload. 
This 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 the table the sum of the values in column 5 is added, 
reflecting a total increase in workload of 6.3 percent for FY 2007 when 
compared to the base years.

                                                Table 1.--Summary Workload Adjuster Calculation--FY 2007
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                                                      Column 1  5-Year   Column 2  Latest 5-  Column 3  Percent       Column 4        Column 5  Weighted
                  Application Type                   Average Base Years     Year Average           Change         Weighting Factor      Percent Change
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NDAs/BLAs                                                       119.6               120.4                 0.7%               36.6%                0.25%
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Commercial INDs                                                 629.8               676.8                 7.5%               44.0%                3.28%
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Efficacy supplements                                            159.2               167.4                 5.2%                7.5%                0.38%
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Manufacturing supplements                                      2100.6              2522.4                20.1%               11.9%                2.39%
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FY 2007 workload adjuster                                                                                                                         6.30%
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    Increasing the inflation-adjusted revenue amount for application 
fees of $101,819,252 by the FY 2007 workload adjuster (6.3 percent) 
results in an increase of $6,414,613, for a total inflation and 
workload adjusted application fee revenue amount of $108,233,865. 
Increasing the inflation-adjusted revenue amount for establishment and 
product fees, each of which is $101,818,074, by the FY 2007 workload 
adjuster (6.3 percent) results in an increase of $6,414,539, for a 
total inflation and workload adjusted application fee revenue amount of 
$108,232,613 for each category. The total FY 2007 inflation and 
workload adjusted fee revenue target for all three fee categories 
combined is $324,699,091.

III. 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

[[Page 43782]]

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. As of September 30, 2005, collections for FY 1998 
totaled $117,849,016--or $727,016 in excess of the appropriation limit. 
Also, in FY 2004 Congress appropriated a total of $249,825,000 to FDA 
in PDUFA fee revenue, and FDA collected a total of $257,055,606 as of 
September 30, 2005. This is $7,230,906 in excess of appropriations. The 
total in excess collections for the 2 years is $7,957,922. These are 
the only fiscal years since 1997 in which FDA has collected more in 
PDUFA fees than Congress appropriated.
    The total of $7,957,922 will be offset against FY 2007 revenue 
collections, lowering the net amount that would otherwise be collected. 
One-third of this amount, or $1,985,974, will be subtracted from the FY 
2007 adjusted revenue amount for each fee category in the previous 
section. Thus, after adjustment for prior-year excess collections, the 
adjusted FY 2007 revenue target for each fee category is as follows:
     Application fee revenue amount: $105,581,224 ($108,233,865 
- $2,652,641)
     Establishment fee revenue amount: $105,579,972 
($108,232,613 - $2,652,641)
     Product fee revenue amount: $105,579,973 ($108,232,613 - 
$2,652,640)
Thus, the adjusted revenue amount from all three categories after this 
adjustment totals $316,741,167.

IV. Final Year Adjustment

    Under the provisions of PDUFA, as amended, the Secretary may, in 
addition to the inflation and workload adjustments, further increase 
the fees and fee revenues if such an adjustment is necessary to provide 
for not more than 3 months of operating reserves of carryover user fees 
for the process for the review of human drug applications for the first 
3 months of FY 2008. The rationale for the amount of this increase 
shall be contained in the annual notice establishing fee revenues and 
fees for FY 2007 (21 U.S.C. 379h(c)(3)).
    As of June 30, 2006, FDA has unallocated cash carryover balances of 
$42,777,720. In addition, the agency is estimating that application 
fees over the final 3 months of FY 2006 will add another $18,500,000 to 
this balance, for an estimated cash carryover of $61,277,720 on 
September 20, 2006.
    In FY 2007, FDA expects to collect a total of $316,741,167 after 
adjustments, as noted at the end of section III of this document. To 
sustain current operations in FY 2007, FDA expects to obligate a total 
of $327 million (compared with anticipated obligations in FY 2006 of 
about $314,500,000). The anticipated obligations of $327 million will 
be about $10,259,000 more than anticipated collections. This will 
reduce the estimated carry-over balance over the course of FY 2007 from 
$61,278,000 to an estimated $51,019,000 ($61,278,000 - $10,259,000).
    To sustain operations supported from user fees for the first 3 
months of FY 2008, FDA estimates that it will need one-fourth of the 
$327 million it expects to spend in FY 2007, or $81,750,000. However, 
this amount will need to be increased for inflation by an estimated 5.8 
percent (the average amount by which FDA's costs per FTE have increased 
over the past 5 years). The amount needed to sustain operations for the 
first 3 months of FY 2008 is thus estimated at $86,491,500, while the 
estimated carry-over balance at the beginning of FY 2008 is estimated 
at only $51,019,000. Thus, FDA will need an additional $35,472,500 as 
the final year adjustment to assure sufficient operating reserves for 
the first 3 months of FY 2008. One-third of this amount, rounded to the 
nearest thousand, or $11,824,000, will be added to the FY 2007 adjusted 
revenue amount for each fee category in the previous section. Thus, 
after the final-year adjustment, the adjusted FY 2007 revenue target 
for each fee category is as follows:
     Application fee revenue amount: $117,405,224 ($105,581,224 
+ $11,824,000)
     Establishment fee revenue amount: $117,403,972 
($105,579,972 + $11,824,000)
     Product fee revenue amount: $117,403,973 ($105,579,973 + 
$11,824,000)
Thus, after the final year adjustment, the adjusted FY 2007 revenue 
target from all fee types combined totals $352,141,167.

V. Application Fee Calculations

    PDUFA III provides that the rates for application, product, and 
establishment fees be established 60 days before the beginning of each 
FY (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 2007 is $117,381,224, 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 FY 2007, FDA will estimate the total number of 
fee-paying full application equivalents (FAEs) it expects to receive 
the next FY by averaging the number of fee-paying FAEs received in the 
five most recent FYs. This use of the rolling average of the five most 
recent FYs 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 2007, the 5-year rolling average for the most recent 5 years will 
be based on actual counts of fee-paying FAEs received for FY 2002 
through FY 2006. For FY 2006, 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 of this document shows, in column 1, the total number of 
each type of FAE received in the first 9 months of FY 2006, whether 
fees were paid or not. Column 2 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, 2006. Column 4 
estimates the 12-month total fee-paying FAEs for FY 2006 based on the 
applications received through June 30, 2006. All of the counts are in 
FAEs. A full application requiring clinical data counts as one FAE. An 
application not requiring clinical data counts as 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.

[[Page 43783]]



 Table 2.--FY 2006 Full Application Equivalents Received through June 30, 2006, and Projected Through September
                                                    30, 2006
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                                                           Column 2  Fee     Column 3  Total
                                       Column 1  Total    Exempt or Waived      Fee Paying       Column 4  12-
        Application or Action          Received Through   Through June 30,   Through June 30,   Month Fee-Paying
                                        June 30, 2006           2006               2006            Projection
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Applications requiring clinical data              72.25              21.25               51                68
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Applications not requiring clinical                7.5                3.5                 4                 5.33
 data
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Supplements requiring clinical data               60.25              13.75               46.5              62
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Withdrawn or refused to file                       1                  0                   1                 1.33
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Total                                            141                 38.5               102.5             136.7
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    In the first 9 months of FY 2006, FDA received 141 FAEs, of which 
102.5 were fee-paying. Based on data from the last 7 FYs, on average, 
25 percent of the applications submitted each year come in the final 3 
months. Dividing 102.5 by 3 and multiplying by 4 extrapolates the 
amount to the full 12 months of the FY and projects the number of fee-
paying FAEs in FY 2006 at 136.7.
    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 2006 fee-paying 
receipts we must include in our calculations all the pediatric 
supplements submitted in the past 5 years that were previously exempt 
from fees prior to January 4, 2002. The exempted number of FAEs for 
pediatric supplements for FY 2002 was 4.5. Because fees on these 
supplements are paid for pediatric applications submitted in FY 2003 
and beyond, the number of pediatric supplement FAEs exempted from fees 
in FY 2002 (the last year 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 
2006, is 131 FAEs. FDA will set fees for FY 2007 based on this estimate 
as the number of full application equivalents that will pay fees.

                        Table 3.--Fee-Paying Full Application Equivalent--5-Year Average
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                                                                                                       5-Year
         Year                2002           2003           2004           2005           2006         Average
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Fee-paying FAEs                 127.6          119.5          145.1          121.5          136.7          130.1
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Exempt pediatric                  4.5            0              0              0              0              0.9
 supplement FAEs
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Total                           132.1          119.5          145.1          121.5          136.7          131.0
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    The FY 2007 application fee is estimated by dividing the average 
number of full applications that paid fees over the latest 5 years, 
131, into the fee revenue amount to be derived from application fees in 
FY 2007, $117,405,224. The result, rounded to the nearest $100, is a 
fee of $896,200 per full application requiring clinical data, and 
$448,100 per application not requiring clinical data or per supplement 
requiring clinical data.

VI. Fee Calculations for Establishment and Product Fees

A. Establishment Fees

    At the beginning of FY 2006, the establishment fee was based on an 
estimate that 375 establishments would be subject to, and would pay, 
fees. By the end of FY 2006, FDA estimates that applicants have been 
billed for 400 establishment fees, before all decisions on requests for 
waivers or reductions are made. As in previous years, FDA again 
estimates that a total of 25 establishment fee waivers or reductions 
will be made for FY 2006, for a net of 375 fee-paying establishments. 
FDA will use this same number again, 375, for its FY 2007 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 
($117,403,972) by the estimated 375 establishments, for an 
establishment fee rate for FY 2006 of $313,100 (rounded to the nearest 
$100).

B. Product Fees

    At the beginning of FY 2006, the product fee was based on an 
estimate that 2,350 products would be subject to and pay product fees. 
By the end of FY 2006, FDA estimates that 2,400 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 40 waivers 
and reductions granted, FDA estimates that 2,360 products will qualify 
for product fees in FY 2006, after allowing for waivers and reductions, 
and will use this number for its FY 2007 estimate. Accordingly, the FY 
2007 product fee rate is determined by dividing the adjusted total fee 
revenue to be derived from product fees ($117,403,973) by the estimated 
2,360 products for a FY 2007 product fee of $49,750 (rounded to the 
nearest $10).

VII. Fee Schedule for FY 2007

    The fee rates for FY 2007 are set out in table 4 of this document:

[[Page 43784]]



                                Table 4.
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               FEE CATEGORY                     FEE RATES FOR FY 2007
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APPLICATIONS............................................................
  Requiring clinical data.................                      $896,200
  Not requiring clinical data.............                      $448,100
  Supplements requiring clinical data.....                      $448,100
ESTABLISHMENTS............................                      $313,100
PRODUCTS..................................                       $49,750
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VIII. 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, 2006. Payment must be made 
in U.S. currency by check, bank draft, or U.S. postal money order 
payable to the order of the Food and Drug Administration. Please 
include the user fee ID number on your check. Your payment can be 
mailed to: Food and Drug Administration, P.O. Box 360909, Mellon Client 
Service Center, 500 Ross St., rm. 670, 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, 500 Ross St., 
rm. 670, 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 identification number of the 
Food and Drug Administration is 530 19 6965.

B. Establishment and Product Fees

    By August 31, 2006, FDA will issue invoices for establishment and 
product fees for FY 2007 under the new fee schedule. Payment will be 
due on October 1, 2006. FDA will issue invoices in October 2007 for any 
products and establishments subject to fees for FY 2007 that qualify 
for fees after the August 2006 billing.

    Dated: July 26, 2006.
Jeffrey Shuren,
Assistant Commissioner for Policy.
[FR Doc. E6-12397 Filed 8-1-06; 8:45 am]
BILLING CODE 4160-01-S