[Federal Register Volume 74, Number 164 (Wednesday, August 26, 2009)]
[Rules and Regulations]
[Pages 43043-43050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-20553]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 516

[Docket No. FDA-2008-N-0176; Formerly Docket No. 2008N-0011]
RIN 0910-AG03


Defining ``Small Number of Animals'' for Minor Use Designation

AGENCY: Food and Drug Administration, HHS.

ACTION: Final rule.

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SUMMARY: The designation provision of the Minor Use and Minor Species 
Animal Health Act of 2004 (MUMS Act) provides incentives to animal drug 
sponsors to encourage drug development and approval for minor species 
and for minor uses in major animal species. Congress provided a 
statutory definition of ``minor use'' that relied on the phrase ``small 
number of animals'' to characterize such use. At this time, the Food 
and Drug Administration (FDA) is amending the implementing regulations 
of the MUMS Act. In response to Congress' charge to the agency to 
further define minor use, this amendment establishes a specific ``small 
number of animals'' for each of the seven major animal species to be 
used in determining whether any particular intended use in a major 
species is a minor use.

DATES:  This rule is effective November 9, 2009.

FOR FURTHER INFORMATION CONTACT: Meg Oeller, Center for Veterinary 
Medicine (HFV-50), Food and Drug Administration, 7500 Standish Pl., 
Rockville, MD 20855, 240-276-9005, e-mail: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    In the Federal Register of March 18, 2008 (73 FR 14411), FDA issued 
a proposed rule (the March 2008 proposed rule) intended to define the 
term ``small number of animals'' for each of the seven major animal 
species to be used in determining whether any particular intended use 
in a major species is a minor use. As noted in that proposed rule, the 
MUMS Act (Public Law 108-282) amended the Federal Food, Drug, and 
Cosmetic Act (the FD&C Act) to provide incentives for the development 
of new animal drugs for use in minor animal species and for minor uses 
in major animal species. The MUMS Act defines ``minor use'' as ``the 
intended use of a drug in a major species for an indication that occurs 
infrequently and in only a small number of animals or in limited 
geographical areas and in only a small number of animals annually'' 
(section 201(pp) of the FD&C Act (21 U.S.C. 321(pp))). The major 
species are cattle, horses, swine, chickens, turkeys, dogs, and cats 
(section 201(nn) of the FD&C Act (21 U.S.C. 321(nn))).
    Prior to enactment of the MUMS Act, FDA defined by regulation minor 
use to mean ``the use of: * * * (b) new animal drugs in any animal 
species for the control of a disease that (1) occurs infrequently or 
(2) occurs in limited geographical areas'' (formerly 21 CFR 
514.1(d)(1)). The MUMS Act narrowed this definition by restricting it 
to uses ``in only a small number of animals annually'' (section 201(pp) 
of the FD&C Act).
    The legislative history of the MUMS Act indicates that Congress 
intended that FDA further define by regulation minor use in a major 
species and that it do so ``by evaluating, in the context of the drug 
development process, whether the incidence of a disease or condition 
occurs so infrequently that the sponsor of a drug intended for such use 
has no reasonable expectation of its sales generating sufficient 
revenues to offset the cost of development'' (see S. Rept. 108-226 at 
12-13). The legislative history also notes that the new statutory 
definition for minor use ``incorporates the existing definition in the 
Code of Federal Regulations (21 CFR 514.1(d)(1)) with a further 
limitation to small numbers to assure that such intended uses will not 
be extended to a wider use'' (see S. Rept. 108-226 at 12-13).
    Therefore, while the MUMS Act establishes incentives for animal 
drug development for minor uses, it also limits the availability of 
those incentives in order to prevent them from stimulating ``wider 
use'' of new animal drugs marketed under MUMS Act provisions.
    Consistent with these dual aims of stimulating animal drug 
development for minor uses in major species and at the same time 
preventing ``wider use'' of such new animal drugs, the agency is now 
defining the term ``small number of animals'' by establishing for each 
major species a number that would constitute the upper limit of a 
``minor use'' under the MUMS Act. In keeping with the goal of creating 
a drug development incentive, this definition establishes the number of 
animals eligible to be treated annually based on the number of animals 
that represents a drug market value that (relative to drug development 
costs) would not be likely to be pursued

[[Page 43044]]

in the absence of the MUMS Act incentives.

II. Comments

    The agency received comments from seven organizations or 
individuals on the March 2008 proposed rule. Comments were received 
from a trade organization representing new animal drug manufacturers, a 
trade organization representing turkey producers, a professional 
association representing veterinarians, an organization concerned with 
the ethical treatment of animals, an animal pharmaceutical 
manufacturer, a law firm representing an unidentified client, and a 
consumer.
    (Comment 1) One comment indicated unqualified support for the March 
2008 proposed rule and three additional comments stated appreciation 
for the agency's attempt to establish what was variously described as a 
``quantitative,'' ``reasonable,'' ``bright-line,'' ``understandable,'' 
or ``easy to use'' approach for determining whether an intended use of 
an animal drug in a major species is a minor use. However, all of the 
latter comments went on to note various concerns with the proposed 
approach which are addressed in the following paragraphs.
    (Response) FDA appreciates the characterization of its attempted 
approach as ``quantitative,'' ``reasonable,'' ``bright-line,'' 
``understandable,'' and ``easy to use.''
    (Comment 2) Three comments indicated that the agency should not 
establish ``fixed'' or ``static'' small numbers, but instead should 
establish the small numbers as a percentage of each major species 
population. Also, three comments stated that, if the agency did elect 
to use fixed or static numbers, the small numbers (or the entire 
approach) should be reevaluated at least every 5 years--preferably, 
more frequently. The comments stated or implied that the suggested 
reevaluation was associated with the potential for increasing 
populations of a major species. An additional comment suggested 
periodic reevaluation of the small numbers based on the potential for 
an increase in the cost of drug development.
    (Response) FDA agrees that there is a need to periodically 
reevaluate the definition of ``small number of animals.'' Because 
Congress did not establish by statute what a ``small number'' is, it 
affords FDA the opportunity to periodically reevaluate and update the 
definition of ``small number of animals'' as necessary. We further 
agree that such a reevaluation should take into account the potential 
for increases in the development cost of new animal drugs, but note 
that it also should take into account potential increases in the cost 
that animal owners are willing to pay to treat affected animals as well 
as other factors involved in establishing ``small numbers,'' such as 
changes in the total population of major animal species.
    As Congress noted in the legislative history of the MUMS Act, it is 
the relationship between the development cost of an animal drug and the 
potential market value of an animal drug that determines the need for 
the minor use drug development incentives provided by the MUMS Act (see 
S. Rept. 108-226 at 12-13). If the number of animals affected by a 
given disease is great enough to produce a market potential sufficient 
to support the development cost of an animal drug in the absence of the 
minor use incentives of the MUMS Act, then the incentives should not be 
provided. The incentives should be reserved for cases in which the 
number of animals affected by a disease is not great enough to produce 
a market potential sufficient to support the development costs of an 
animal drug in the absence of the minor use incentives of the MUMS Act.
    With respect to population increase as a basis for reevaluation of 
``small numbers,'' if the number of animals affected by a disease 
increases over time due to increasing rate of occurrence of the disease 
in the population, or simply due to an increase in the total population 
of animals with a steady rate of disease occurrence, the market value 
of a drug intended to treat the disease would also tend to increase and 
the need for minor use incentives to support drug development for that 
disease would tend to decrease--unless animal drug development cost or 
other factors change to a greater extent over the same period of time. 
Therefore, the effects of population change need to be evaluated in the 
context of periodically reevaluating other factors affecting the 
establishment of ``small numbers.''
    If the relationship between drug development cost and drug market 
value changes sufficiently over time, the ``small number of animals'' 
should change as well. Note, however, that once a particular new animal 
drug has been designated for a particular intended use that has been 
determined to be a minor use, the designation and associated incentives 
will not be affected by subsequent changes in drug market value or 
published ``small numbers'' (see Sec.  516.29(h) (21 CFR 516.29(h))).
    Further reason for periodic reevaluation of the ``small numbers'' 
is that either the agency may have misperceived the current 
relationship between development cost, market value, and the value of 
the MUMS minor use incentives, or the animal pharmaceutical industry's 
perception of the relationship between these factors sufficient to 
support drug development could change over time.
    In any event, as noted previously, FDA agrees that the ``small 
numbers'' should be periodically reevaluated and intends to do so. FDA 
will update the numbers through proposed rulemaking, as warranted, 
based on the results of the reevaluation.
    (Comment 3) Two comments suggested that FDA not implement the 
proposal at all and that the agency make minor use determinations on a 
case-by-case basis.
    (Response) The agency began making minor use determinations ``on a 
case-by-case basis'' in the absence of published ``small numbers'' over 
3 years ago, but found that it could not equitably do so without 
establishing a standard against which to assess the individual cases.
    The agency had no reasonable basis to establish different small 
numbers for the same intended use depending upon the relative 
efficiency of each sponsor's drug development processes. Nor could it 
determine any practical basis to equitably establish a different small 
number for every intended use based on perceived potential drug market 
value for each of those uses.
    As explained in the preamble to the March 2008 proposed rule, the 
agency determined that the most equitable means of establishing the 
small number for each major companion animal species was to use the 
best available information regarding the relationships between the 
number of animals eligible to be treated, the potential value of drug 
treatment for those animals, and the cost of animal drug development to 
establish a single small number for each major species that would apply 
for all new animal drugs. Evaluating the relationship between these 
factors on a case-by-case basis would require sponsors to divulge, and 
the agency to assess, information regarding the cost of development of 
specific animal drugs. Sponsors are reluctant to share such information 
with the agency.
    Small numbers for major food animal species were established on a 
different basis and this process is discussed in response to comment 11 
of this document.
    Additionally, making one small number for each major species 
publicly available permits sponsors to independently assess, early in 
the drug development process, the likelihood that particular potential 
intended uses

[[Page 43045]]

will qualify as minor uses and plan drug development accordingly.
    (Comment 4) Two comments indicated that obtaining epidemiological 
data on animal disease prevalence is ``difficult to impossible'' or 
``almost impossible'' to obtain. One comment was apparently made as a 
basis for arguing against the establishment of small numbers, and the 
other for the purpose of requesting information regarding how such 
information might be obtained.
    (Response) The agency indicated in the preamble to the 2005 
proposed designation regulation that, in order to document minor use 
status, sponsors needed to provide an estimate of the number of animals 
eligible to be treated for a particular intended use per year (70 FR 
56394 at 56400, September 27, 2005). We acknowledged at that time that 
such information ``is not readily available for uncommon animal 
diseases or conditions.'' Nevertheless, there is clearly no way to 
determine whether the population of animals eligible to be treated for 
a given disease or condition meets the statutory standard of a small 
number of animals without determining the number of animals eligible to 
be treated in the first place.
    Whether the agency determines that the population of animals 
eligible to be treated is a small number by means of applying the 
objective standard used in this regulation, or by means of some 
undefined subjective process applied on a case-by-case basis, it does 
not alter the need to know, in the first place, the number of animals 
subject to the intended use under consideration.
    Fortunately, based on our experience in reviewing requests for 
minor use determination up to this point, it has not been as difficult 
as expected to obtain sufficient information to determine whether an 
indication qualifies as a minor use. In fact, of the designation 
requests involving non-aquatic species, most have involved minor use in 
major species. Of these designation requests, more have been granted 
for minor use in major species than for minor species. Thus, it has 
routinely proven possible to gather the needed information regarding 
animal disease occurrence, and this information has been sufficient to 
support determinations that an intended use actually is a minor use. 
FDA, therefore, does not agree with the comments that it is ``almost 
impossible'' to obtain such information.
    With respect to the comment that requested information on how to 
obtain such information, most of the determinations of minor use made 
by FDA to this point have been based on a compilation of information 
available in the veterinary literature. In some cases, this information 
was augmented with unpublished information available from databases 
containing information on the rate of occurrence of animal diseases, or 
the results of surveys of appropriate veterinary experts conducted by 
sponsors or other (third) parties. In at least one case, the 
determination was based almost exclusively on a sponsor-initiated 
survey of veterinary experts conducted in accordance with sound 
statistical practices.
    (Comment 5) One comment suggested that FDA should support 
conditional approval and exclusivity to the greatest extent possible 
even when the number of animals involved exceeds a small number.
    (Response) While we appreciate the commenter's position with 
respect to the maximization of the minor use incentives, the MUMS Act 
limits the incentives associated with the development of drugs intended 
for minor use in major species to intended uses involving a ``small 
number of animals.'' This statutory restriction prevents FDA from 
extending MUMS Act provisions to indications in major species that 
exceed the ``small number'' restriction.
    (Comment 6) One comment stated that FDA should not provide an 
incentive to develop any animal drug product intended for use in 
industrial aquaculture or agribusiness.
    (Response) The MUMS Act does not contain any language excluding 
``agribusiness'' from the incentives of the MUMS Act. The incentives 
are available to all minor uses in major species, including food-
producing animals, with the exception of genetically engineered 
animals. Industrial aquaculture, referred to by the commenter, deals 
entirely with minor species and minor species are outside the scope of 
this regulation.
    Just as the agency could not ignore a statutory restriction in 
response to the previous comment, FDA cannot exclude ``agribusiness'' 
from the MUMS Act provisions in response to this comment when such a 
restriction does not appear in the statutory language.
    (Comment 7) One comment stated that the preamble to the March 2008 
proposed rule implies that the purpose of the limitation of minor use 
to a small number of animals is to prevent wider use and that this 
contradicts a statement made in the response to a comment on the 2005 
proposed designation regulation, which the commenter summarized as 
``the purpose (of defining a subset of a major species which may have a 
particular disease or condition) is not to prevent a drug with MUMS 
approval for disease A from being used in disease B or C.''
    (Response) When Congress expressed concern regarding the prevention 
of ``wider use'' of minor use animal drugs it was in the context of 
defining the ``small number of animals'' for which a minor use new 
animal drug may be intended if such drug were to qualify for MUMS Act 
incentives (see S. Rept. 108-226 at 12-13). The intended use of a new 
animal drug is the particular use for which an animal drug sponsor 
intends that it be used as determined through various means, including 
statements in the labels and labeling. The cited response to a comment 
on the 2005 proposed designation regulation dealt with the provision to 
permit sponsors to decrease the number of animals eligible to be 
treated by a given drug by the subset of animals for which treatment 
would be medically inappropriate. In trying to clarify this provision, 
the agency stated what the provision did not do. FDA did not intend to 
require a sponsor to demonstrate that the drug at issue could not be 
administered for a use other than the intended use for which a minor 
use determination was being sought. FDA's intent was for the MUMS 
incentives to be available for drug products for labeled intended uses 
involving a small number of animals.
    In the agency's judgment, because neither the ``wider use'' concept 
articulated by Congress nor the specific provision of the 2005 proposed 
designation regulation just discussed were intended to involve any use 
of an animal drug beyond the scope of its intended use, the agency's 
statements in the recent preamble to the March 2008 proposed rule and 
in the cited response to a comment on the 2005 proposed designation 
regulation are consistent.
    (Comment 8) One comment noted that the 2007 final designation 
regulation (72 FR 41010, July 26, 2007) uses the phrase ``* * * total 
number of animals to which the drug could potentially be administered 
on an annual basis'' whereas the preamble to the March 2008 proposed 
rule on ``small numbers'' uses the phrase ``* * * eligible to be 
treated on an annual basis.'' The comment requested clarification of 
the meaning of the phrases and suggested that something along the lines 
of ``* * * number of cases * * *'' rather than ``* * * number of 
animals likely to be treated * * *'' would be more appropriate.
    (Response) FDA did not intend any difference in meaning between the 
phrases ``* * * eligible to be treated on

[[Page 43046]]

an annual basis'' and ``total number of animals to which the drug could 
potentially be administered on an annual basis.''
    As noted in the preamble to the 2005 proposed designation 
regulation, there is a special circumstance involving drug use in food-
producing major species in which drugs are administered on a herd or 
flock basis so that the drug is administered to animals that do not 
have the disease or condition. The 2005 proposed designation regulation 
takes note of this special circumstance, because the phrase ``* * * 
number of animals to which the drug could potentially be administered 
on an annual basis * * *'' is followed by the phrase ``* * * including 
animals administered the drug as part of herd or flock treatment * * 
*.''
    The 2005 proposed designation regulation needed to capture the 
special case of herd or flock treatment as well as the general 
principle involved in establishing the population of animals to which a 
drug might be administered for a particular intended use. As previously 
noted, it is this total population of animals that the agency relied 
upon to establish the market potential on an annual basis for the drug 
under consideration and this market potential, in turn, was a primary 
factor in establishing the ``small numbers'' in this final rule.
    (Comment 9) A related comment requested clarification of the phrase 
``on an annual basis'' and suggested that the phrase should be 
interpreted to mean that the small number of animals would include only 
new cases of a disease or condition appearing each year, that is, what 
is typically referred to as the ``incidence'' of a disease or condition 
in any given year rather than the total number of cases of the disease 
or condition existing during the year, that is, what is typically 
referred to as the ``prevalence'' of the disease or condition over the 
course of the year.
    (Response) The agency devoted considerable discussion to this issue 
in the preamble to the 2005 proposed designation regulation. We 
concluded that it is the total number of animals, on an annual basis, 
eligible to be treated or, in some circumstances (in accordance with 
the previous discussion), the total number of animals that could 
potentially be administered a drug for a particular intended use (i.e., 
including whole herds or flocks that might be treated) that represents 
the annual market potential for an animal drug and, therefore, it is 
this population of animals that is of concern to the agency. Also, as 
noted in the preamble to the 2005 proposed designation regulation, 
because of the variability in the time course of diseases and the 
variability in life-span of the seven major species of animals, general 
application of either of the terms ``prevalence'' or ``incidence'' 
would not be particularly helpful (70 FR 56394 at 56397).
    Experience gained in reviewing the veterinary literature in support 
of requests for minor use determination has led to the understanding 
that there is considerable inconsistency in how the terms ``incidence'' 
and ``prevalence'' are used with respect to the reporting of estimates 
of animal disease occurrence. Therefore, the agency is less concerned 
with the formal definitions of ``incidence'' and ``prevalence'' 
relative to the way the terms are used in the context of describing any 
particular study or body of information, and more concerned with the 
manner in which a study is performed or information is captured 
relative to its ability to contribute to an estimate of the total 
population of animals eligible to be treated for a given disease or 
condition over the course of a year. As a result, FDA relied upon the 
total number of animals ``eligible to be treated on an annual basis'' 
to define ``small numbers'' rather than relying on ``incidence'' or 
``prevalence'' of disease.
    (Comment 10) Another related comment requested clarification of 
whether the ``small numbers'' refer to the number of ``animals'' or the 
number of ``treatments'' on an annual basis.
    (Response) The small numbers refer to the number of animals, not 
the number of treatments, on an annual basis.
    Depending on the nature of the disease or condition involved, the 
treatment of a given animal could consist of a single short course of 
treatment or could require repeated administration of a drug over a 
significant period of time, potentially for the entire life of the 
animal subsequent to the initiation of treatment. Each year that an 
animal with such a disease or condition lives after the initiation of 
treatment, it constitutes part of the population of animals eligible 
for treatment in that year and, therefore, it is part of the market 
potential for the drug (or drugs) with which it is being treated for 
that year.
    (Comment 11) One comment stated that the agency should consider 
turkeys to be a quasi-minor species, and that in setting the small 
number for turkeys the agency should consider that a much higher 
percentage of turkeys are treated by feed or water on a flock basis 
than sheep, which are more commonly treated on an individual animal 
basis.
    (Response) The MUMS Act defines turkeys as a major species (section 
201(nn) of the FD&C Act). FDA cannot change that definition without a 
statutory change.
    With respect to factoring the method of drug administration into 
the comparison between turkeys and sheep that was utilized to establish 
the small number for turkeys, we note that the agency operated on the 
assumption that all of the sheep existing in the United States in 2004 
were eligible to be treated and further assumed that all of the sheep 
going to slaughter in that year had been treated. Because the 
assumption was that 100 percent of sheep going to slaughter were 
treated that year, regardless of the method of drug administration, the 
treatment rate could not have been any higher if the sheep were treated 
on a flock basis rather than an individual basis. As a result, the 
method of drug administration does not affect the small number FDA 
established for turkeys.
    (Comment 12) One comment stated that many compounds that could be 
developed for a small number of companion animals are likely to be 
``specialty compounds'' and/or new classes of drugs that are likely to 
have substantially higher development costs than the estimate provided 
in the March 2008 proposed rule, and that, therefore, the agency should 
utilize an estimated development cost for minor use new animal drugs of 
$25 million rather than $15 million.
    (Response) While development costs for some minor use new animal 
drugs could exceed the $15 million estimate utilized by the agency in 
the process of establishing small numbers, we note that the estimates 
of development costs for companion animal drugs provided by the animal 
pharmaceutical industry itself generally fall in the range of $10 
million to $20 million with a number of estimates as low as $5 million 
(Ref. 1). There is no evidence to show that the development of 
``specialty compounds and/or new classes of drugs'' is unique to minor 
uses. Moreover, the industry's estimate of its development costs for 
companion animal drugs did not capture an estimate as high as $25 
million even in its overall range of development costs. This indicates 
that a development cost for a companion animal drug as high as $25 
million would be unusual.
    In addition, we note that drugs that could be developed for 
relatively rare conditions in animals are often also under development, 
or have already been developed, for similar or related conditions in 
humans so that the relative infrequency of an intended drug use in 
animals may not correlate with a higher than usual development cost.

[[Page 43047]]

    Therefore, the agency determines that there is currently no 
convincing information available to support increasing its estimate of 
companion animal drug development cost, but will periodically reexamine 
this estimate along with others supporting the establishment of small 
numbers for major companion animal species to determine whether the 
small numbers need to be revised.
    (Comment 13) One comment stated that the agency's estimate of $10 
million for third-year sales of a companion animal drug was too high 
for a minor use drug, and that the figure should be lowered to $3 
million.
    (Response) The agency determined the $10 million figure on the 
basis of animal drug marketing principles provided by outside experts 
in the development of animal drugs (Ref. 1). As noted in the preamble 
to the March 2008 proposed rule, one of those basic principles was 
that, taking into consideration the current animal drug development 
incentives associated with exclusivity under the Generic Animal Drug 
and Patent Term Restoration Act, a sponsor would need to perceive a 
potential third-year market value for an animal drug equivalent to the 
development cost of the drug in order to pursue development (73 FR 
14411 at 14413). The agency received no comments that contradicted the 
validity of this basic principle.
    The agency also relied on the principle that the 7 years of 
exclusive marketing rights provided to MUMS drugs ``provides a sponsor 
an opportunity to lower its perception of an acceptable `going' market 
value to support drug development because the sponsor has longer to 
recoup development costs without competition'' (73 FR 14411 at 14413). 
Again, the agency received no comments opposing the validity of this 
basic principle.
    The agency then applied these two principles to estimate that the 
quantitative effect of the additional 2 years of exclusivity associated 
with the approval of a designated minor use drug was to lower the 
perceived third-year drug market value needed to support a decision to 
develop a drug by about one-third (73 FR 14411 at 14413). The agency 
received no comments opposing the validity of the general conclusion 
drawn from the application of the basic principles noted in the 
previous paragraphs.
    The figure of $10 million as the perceived third-year market 
necessary to support the development of a drug with a $15 million 
development cost is simply the result of applying the general 
conclusion to a reasonable estimate of the development cost of a 
companion animal drug.
    The implication in the comment that many companion animal drugs 
have been developed in the past for intended uses whose third-year 
market values were less than the agency's $10 million estimate could be 
interpreted in a number of ways, including the following: That the 
development cost for the drugs was less than $10 million; that the 
sponsors involved were willing to accept a return on investment lower 
than a third-year market equal to development costs when they made the 
decision to develop the drugs; and/or that actual market values 
routinely fail to achieve the potential market value perceived by 
sponsors, on the basis of which sponsors decide to develop drugs.
    Of these possible interpretations, the latter appears the most 
improbable, because it is unlikely that animal drug sponsors could 
survive the economic consequences of routinely failing to accurately 
predict potential markets. The other two possibilities appear to 
support a conclusion that the agency may have overestimated drug 
development cost and/or the perceived return on investment needed to 
support animal drug development.
    Therefore, the implication that third-year market values less than 
$10 million have routinely supported animal drug development in the 
past (in the absence of the MUMS incentives), argues in favor of 
decreasing estimated drug development cost or decreasing the estimated 
1:1 relationship between development cost and perceived third-year 
market value (absent the value of MUMS exclusivity) that the agency 
assumed was needed to support animal drug development. This would lead 
to a decrease in the estimated size of the population of animals 
eligible to be treated that is needed in order to provide a market 
value sufficient to support drug development.
    The agency notes in passing that the comment stating that the 
agency's estimate of third-year market value needed to support 
companion animal drug development was too high tends to contradict the 
preceding comment (comment 12 of this document) which argued that the 
agency's proposed estimate of companion animal drug development cost 
for a minor use was too low. More significantly, no comments provided 
evidence to support decreasing either the proposed estimate of 
companion animal drug development cost or of the 1:1 relationship 
between development cost and perceived market value (absent the value 
of MUMS exclusivity) that the agency assumed was needed to support 
animal drug development. However, the agency will periodically 
reexamine these estimates along with others supporting the 
establishment of small numbers for major companion animal species based 
on newly available information regarding drug development costs and 
other factors to determine whether the small numbers need to be 
revised.
    (Comment 14) One comment stated that production costs would be 
relatively higher for drugs intended for the small number of animals 
associated with minor use because such drugs lack the economy of scale 
associated with the production of drugs intended for larger numbers of 
animals.
    (Response) While it is possible that production costs could be a 
determining factor in the decision to develop a particular drug product 
for a particular minor use, it appears that many other factors are 
considerably more important in determining the price of a drug product 
and, therefore, its market value, and that differences in cost 
associated with scale of production would rarely be the determining 
factor in the decision to develop a drug for a minor use (Ref. 2).
    Thus far, sponsors seeking minor use determinations have not 
expressed concern to FDA regarding the effect of limited market size on 
the cost of drug production.
    Therefore, the agency is not convinced that, in general, the 
potential impact of this factor is sufficient in itself to prevent the 
development of animal drugs for minor uses in accordance with the small 
numbers of animals established by this regulation.
    (Comment 15) One comment stated that, for a variety of reasons, the 
agency should consider the drug treatment rate for minor uses in 
companion animals to be 25 percent rather than 50 percent.
    (Response) A number of independent sources appear to agree that a 
reasonable estimation of the treatment rate for companion animals is on 
the order of 50 percent (Ref. 3). The comment does not appear to take 
exception to this as a general estimate of companion animal treatment 
rate, but argues that it is too high for ``a rare condition * * * 
especially in the first years of a new drug's availability'' because 
``many of these conditions have a poor prognosis or occur in older pets 
for which the owner is more likely to do nothing or consider 
euthanasia'' and that the utilization of a drug for a minor use is 
``likely to be slower due to higher cost, limited distribution, and 
less promotion'' than for a major use.

[[Page 43048]]

    The agency believes that a companion animal owner's decision to 
treat has a great deal to do with the seriousness of the disease or 
condition involved, the cost of treatment, and the emotional value of a 
pet, and has relatively little to do with the rarity of the disease or 
condition warranting treatment. There is no reliable information to 
conclude that the treatment rate of a rare disease would be routinely 
lower than the treatment rate of a common disease, simply on the basis 
that it is rare.
    Based on FDA's experience with minor use determinations thus far, 
the agency believes that a primary characteristic of the drugs pursued 
for minor uses in animals under the incentives provided by the MUMS Act 
will be for uses where there is a long-established need for treatment 
and no legally available, practical, or affordable treatment option. 
Because these intended uses most often involve diseases or conditions 
that are relatively serious and that result in considerable animal 
suffering, in the absence of legal, practical, safe and effective 
treatment options an animal owner might turn to euthanasia. However, if 
an effective treatment were available these are the kinds of diseases 
and conditions that animal owners would be inclined to treat once a 
definitive diagnosis was made, irrespective of the frequency of 
occurrence of the disease or condition in the population (see the 
results of the surveys cited in the following paragraphs).
    Under these circumstances, the factors most likely to affect an 
animal owner's decision to treat are the pet's perceived value, the 
cost of treatment, and the potential effects, positive and negative, of 
treatment. In any particular case in which a veterinarian concludes 
that the risks associated with treatment outweigh the benefits, the 
appropriate course of action would be a recommendation of no treatment 
or euthanasia (depending on the prognosis for an untreated animal). 
This would be true regardless of the cost of the treatment or whether 
the disease or condition is rare or common. When a veterinarian 
concludes that the benefits of treatment outweigh the risks, depending 
upon the nature of the treatment recommended, the animal owner is faced 
with a decision that could very well depend upon the cost of treatment 
relative to the prognosis.
    Therefore, the agency gathered considerable information relating to 
the willingness of companion animal owners to treat serious 
(significantly debilitating or life-threatening, if untreated) diseases 
or conditions in their pets in the process of estimating both practical 
drug treatment values and the likelihood of treatment. The agency found 
the following:
    A 1999 report commissioned by the American Veterinary Medical 
Association, the American Animal Hospital Association, and the 
Association of American Veterinary Medical Colleges (Ref. 4) states 
that:
     Pet owners say they would pay $688 for a 75 percent chance 
of successfully treating their pet and $356 for only a 10 percent 
chance of a successful treatment.
     Pet owners say they would pay an average of $1,042 to keep 
their favorite pet (dog) from dying and $657 to keep their favorite pet 
(cat) from dying.
     Horse owners would pay an average of $1,827 for a 75 
percent chance of successfully treating their horse and $828 for a 10 
percent chance.
     Horse owners say they would pay an average of $3,314 to 
keep their favorite horse from dying and $2,010 for their least 
favorite horse.
    A 2002 survey of pet owners by the American Animal Hospital 
Association found that 73 percent of pet owners would go into debt to 
provide for their pet's well-being and 73 percent would spend from 
$1,000 up to any amount in a life-threatening situation (Ref. 1).
    A 2003 survey of veterinarians by DVM Magazine found that, among 
companion animal practitioners, the cost at which a majority of pet 
owners would refuse treatment was just under $1,100, and that 26 
percent of pet owners would treat regardless of price and an additional 
34 percent would treat in accordance with all of the veterinarian's 
recommendations (Ref. 5).
    A 2005 survey of pet owners by Hartz Mountain found that 32 percent 
said that money was no object when it came to their pet's health (Ref. 
6).
    These surveys demonstrate that companion animal owner willingness 
to care for their animals regardless of cost has increased over time, 
and may have continued to increase since the surveys noted in the 
previous paragraphs. Given this information, it is difficult to 
conclude that cost alone would decrease treatment rates for serious 
diseases or conditions below the estimate of 50 percent proposed by the 
agency.
    With respect to the comment that treatment rate would be negatively 
influenced by the lack of awareness of, or simply the lack of 
availability of, a drug once it was developed, approved, and marketed, 
due to limited promotion or distribution, we note again that many minor 
uses involve conditions or diseases for which no practical and legal 
treatment options exist and for which effective treatments may have 
been desired by veterinarians for years. Under such circumstances, it 
should not take a significant effort to either inform veterinarians of 
the availability of a drug for such a disease or condition or to 
convince them of the need for it.
    Therefore, the agency determines that there is currently no 
reliable evidence to support decreasing the proposed estimate of drug 
treatment rate for minor uses in companion animals, but will 
periodically reexamine this estimate along with others supporting the 
establishment of small numbers for major companion animal species to 
determine whether the small numbers need to be revised.
    (Comment 16) One comment stated that a manufacturer receives 
approximately 25 percent of the actual cost paid by an animal owner for 
drug treatment, that the rest goes to those involved in drug 
distribution up to the point of treatment, and, therefore, that a more 
appropriate drug treatment value for dogs would be $100 rather than 
$350.
    (Response) The $350 referenced by the comment represents the 
agency's estimate of the drug treatment value to the manufacturer for a 
product intended for use in dogs in order to justify drug development 
for an uncommon, but serious condition--with the understanding that the 
price to the animal owner would be significantly higher.
    While there may be circumstances under which a manufacturer would 
receive only 25 percent of the actual cost paid by an animal owner for 
drug treatment, the agency does not agree that 25 percent represents 
the typical manufacturer share of the cost to an animal owner for new 
animal drugs of the kind that are likely to qualify for minor use 
status.
    The manufacturer's price for a new animal drug product and the 
subsequent prices of those involved in the distribution of the product 
to the animal owner are significantly affected by a number of factors 
including the nature of the drug involved, the significance of the 
intended use of the product, the availability of alternative products 
for the intended use, and ultimately by the amount that animal owners 
are willing to pay to treat their animals for particular intended uses 
(see the results of the surveys cited in the response to the previous 
comment).
    Based on the information available to the agency, a more typical 
example of pricing for a product with an intended use in dogs that 
would qualify for minor use status would be about $350 from a 
manufacturer to a distributor, $440 from a distributor to a 
veterinarian, and $880

[[Page 43049]]

from a veterinarian to an animal owner. Thus the manufacturer would 
receive approximately 40 percent of the cost of the drug to the animal 
owner. However, for expensive drugs veterinarians may be willing to 
decrease their price from the routine 200 percent of their cost to 
something on the order of 135 to 150 percent which would result in a 
price to the animal owner of about $590 to $660. In this case, the 
manufacturer would receive approximately 50 to 60 percent of the cost 
of the drug to the animal owner (Ref. 2).
    As explained in response to comment 15 of this document, even a 
final drug price of $880 would likely be acceptable to most dog owners 
for the treatment of a serious condition.
    The information available to the agency, as cited previously, does 
not support the comment's assertion that manufacturers receive only 25 
percent of the final cost to the animal owner of a new animal drug. 
However, FDA will periodically reexamine this estimate to determine 
whether the small numbers need to be revised.

III. Legal Authority

    FDA's authority for issuing this final rule is provided by the MUMS 
Act (section 571 of the FD&C Act et seq. (21 U.S.C. 360ccc et seq.)). 
When Congress passed the MUMS Act, it directed FDA to publish 
implementing regulations (see 21 U.S.C. 360ccc note). In the context of 
the MUMS Act, the statutory requirements of section 573 of the FD&C Act 
(21 U.S.C. 360ccc-2), along with section 701(a) of the FD&C Act (21 
U.S.C. 371(a)) provide authority for this final rule. Section 701(a) 
authorizes the agency to issue regulations for the efficient 
enforcement of the FD&C Act.

IV. Analysis of Economic Impacts

    FDA has examined the impacts of the final rule under Executive 
Order 12866 and the Regulatory Flexibility Act (5 U.S.C. 601-612), and 
the Unfunded Mandates Reform Act of 1995 (Public Law 104-4). Executive 
Order 12866 directs agencies to assess all costs and benefits of 
available regulatory alternatives and, when regulation is necessary, to 
select regulatory approaches that maximize net benefits (including 
potential economic, environmental, public health and safety, and other 
advantages; distributive impacts; and equity). The agency believes that 
this final rule is not a significant regulatory action under the 
Executive order.
    The Regulatory Flexibility Act requires agencies to analyze 
regulatory options that would minimize any significant impact of a rule 
on small entities. Because the final rule is only expected to slightly 
reduce the administrative effort of ``minor use'' requestors while 
imposing no additional costs, the agency certifies that the final rule 
would not have a significant economic impact on a substantial number of 
small entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires 
that agencies prepare a written statement, which includes an assessment 
of anticipated costs and benefits, before proposing ``any rule that 
includes any Federal mandate that may result in the expenditure by 
State, local and tribal governments, in the aggregate, or by the 
private sector, of $100,000,000 or more (adjusted annually for 
inflation) in any one year.'' The current threshold after adjustment 
for inflation is $133 million, using the most current (2008) Implicit 
Price Deflator for the Gross Domestic Product. FDA does not expect this 
final rule to result in any 1-year expenditure that would meet or 
exceed this amount.
    FDA previously published both a proposed rule and final rule on the 
MUMS designation system. Each of these publications included analyses 
of the expected economic impacts of the creation and administration of 
the MUMS designation system as required by the Executive order and two 
statutes mentioned in the previous paragraphs. The 2007 final 
designation regulation presented estimates of the annual costs of the 
MUMS designation system of about $65,000 annually. Additionally, the 
2007 final designation regulation provided some discussion of, but was 
not able to quantify, the expected benefits of the regulation.
    The 2007 final designation regulation included a statement that FDA 
would address the issue of establishing a definition of ``small number 
of animals'' in a future rulemaking. In the March 2008 proposed rule, 
FDA proposed a specific ``small number of animals'' for each of the 
seven major animal species as defined by the MUMS Act, based on the 
data and analysis described in its preamble.
    The March 2008 proposed rule, which this rule finalizes, sets an 
upper limit on the number of animals of each of the seven major animal 
species for which a request for designation could be made under the 
``minor use'' provisions of the 2007 final designation regulation. When 
proposing the rule, FDA did not have any additional information to show 
that the proposed threshold numbers would significantly affect the 
expected number of MUMS designation requests that are received by the 
agency each year. The definition of a ``small number'' of each of the 
seven major species reduces the ambiguity for ``minor use'' requestors. 
Additionally, the rule provides for a small reduction in administrative 
effort by ``minor use'' requestors who are no longer required to 
provide additional information on potential markets and drug 
development costs due to the proposed removal of Sec.  516.21(c) (21 
CFR 516.21(c)).
    FDA did not receive any comments pertaining to the analysis of 
impacts section of the March 2008 proposed rule. Further, FDA has not 
made any substantive changes to this final rule that would require 
significant changes to the assumptions used, and conclusions reached, 
in the impacts section of the March 2008 proposed rule. As such, FDA 
retains its impacts analysis of the March 2008 proposed rule for this 
final rule. FDA has determined that the final rule would not impose any 
additional costs or provide any further health benefits beyond those 
contained in the 2007 final designation regulation.

V. Paperwork Reduction Act of 1995

    This final rule does not contain new information collection 
provisions that would be subject to review by the Office of Management 
and Budget (OMB), under the Paperwork Reduction Act of 1995 (the PRA) 
(44 U.S.C. 3501-3520).
    Title: Setting ``Small Numbers of Animals'' for Determining Minor 
Use
    Description: This final rule revises the minor use provisions of 21 
CFR part 516, subpart B. Part 516 contains the implementing regulations 
for the MUMS Act and subpart B contains the designation provisions for 
minor use and minor species new animal drugs. Currently, requests for 
minor use designation are considered on a case-by-case basis by the 
agency under a regulation (Sec.  516.21) requiring that product-
specific financial information supporting minor use status be included 
in the request. In order to further define minor use, this rule 
provides seven threshold ``small numbers of animals,'' one for each 
major species, based on industry-wide economic or animal production 
data. With these numbers in place, drug sponsors requesting minor use 
designation will no longer be required to submit the confidential 
product-specific financial information described in Sec.  516.21(c). 
Therefore, the reporting burden for minor use designation, as currently 
required in Sec.  516.20(b)(7), will be somewhat lower. However, we 
anticipate that many requests for designation will be for minor 
species, not minor use, and furthermore, the current requirement for 
financial information is only one part of

[[Page 43050]]

a request for designation, therefore, the total paperwork burden 
currently assigned to Sec.  516.20 will not be affected significantly.
    This final rule also refers to previously approved collections of 
information found in FDA regulations. These collections of information 
are subject to review by OMB under the PRA. The collections of 
information in Sec.  516.20 have been approved under OMB control number 
0910-0605.

VI. Environmental Impact

    We have carefully considered the potential environmental impacts of 
this final rule and determined under 21 CFR 25.30(h) that this action 
is of a type that does not individually or cumulatively have a 
significant effect on the human environment. Therefore, neither an 
environmental assessment, nor an environmental impact statement is 
required.

VII. Federalism

    FDA has analyzed this final rule in accordance with the principles 
set forth in Executive Order 13132. FDA has determined that the rule 
does not contain policies that have substantial direct effects on the 
States, on the relationship between the National Government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government. Accordingly, the agency has concluded 
that the rule does not contain policies that have federalism 
implications as defined in the Executive order and, consequently, a 
federalism summary impact statement is not required.

VIII. References

    The following references have been placed on display in the 
Division of Dockets Management, 5630 Fishers Lane, rm. 1061, Rockville, 
MD 20852, and may be seen by interested persons between 9 a.m. and 4 
p.m., Monday through Friday.
    1. Brakke Consulting, Inc., ``Disease Incidence Rates, Drug 
Development and Treatment Costs,'' September 2005.
    2. Brakke Consulting, Inc., ``Pharmaceutical Pricing for 
Companion Animal Products,'' December 2008.
    3. American Veterinary Medical Association, ``U.S. Pet Ownership 
& Demographics Sourcebook,'' 2002.
    4. Brown, J.P., and J.D. Silverman, ``The Current and Future 
Market for Veterinarians and Veterinary Medical Services in the 
United States,'' Journal of the American Veterinary Medical 
Association, vol. 215, No. 2, July 15, 1999.
    5. Verdon, D.R., ``Clients Spending More Before Stopping 
Treatment, DVMs Say,'' DVM Newsmagazine, July 1, 2003.
    6. PR Newswire, ``New National Hartz Survey on the Human-Animal 
Bond Finds That Pets Are Seen as Part of the Family by Three in Four 
Pet Owners,'' April 2005.

List of Subjects in 21 CFR part 516

    Administrative practice and procedure, Animal drugs, Confidential 
business information, Reporting and recordkeeping requirements.

0
Therefore, under the Federal Food, Drug, and Cosmetic Act and under 
authority delegated to the Commissioner of Food and Drugs, 21 CFR part 
516 is amended as follows:

PART 516--NEW ANIMAL DRUGS FOR MINOR USE AND MINOR SPECIES

0
1. The authority citation for 21 CFR part 516 continues to read as 
follows:

    Authority:  21 U.S.C. 360ccc-1, 360ccc-2, 371.

0
2. Amend Sec.  516.3 by alphabetically adding a new definition to 
paragraph (b) as follows:


Sec.  516.3   Definitions.

* * * * *
    (b) * * *
    Small number of animals means equal to or less than 50,000 horses; 
70,000 dogs; 120,000 cats; 310,000 cattle; 1,450,000 pigs; 14,000,000 
turkeys; and 72,000,000 chickens.
* * * * *


Sec.  516.21   [Amended]

0
3. Amend Sec.  516.21 by removing paragraph (c).

    Dated: August 18, 2009.
David Horowitz,
Assistant Commissioner for Policy.
[FR Doc. E9-20553 Filed 8-25-09; 8:45 am]
BILLING CODE 4160-01-S