MDUFMA User Fees to Jump 34.9% for FY 2004

Originally Published MDDI September/October 2003

NEWSTRENDS

Erik Swain

Because industry did not submit as many applications as expected, FDA did not raise as much revenue from medical device user fees in fiscal year 2003 as projected. Primarily because of that, the agency is increasing user fees by 34.9% for FY 2004. The news produced mixed reactions from industry regarding the future of the user-fee program.

Complicating matters, Congress did not increase FDA's funding for device reviews as specified under the Medical Device User Fee and Modernization Act (MDUFMA) of 2002. That relieves FDA of its performance requirements for FY 2003, but it does not lift industry's obligation to pay user fees for FY 2003 through FY 2005. If Congress does not appropriate the extra funds by 2005, industry has the right to end the program.

Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington, DC), said his group is "extremely disappointed . . . but not terribly surprised" by the hike. MDMA, which primarily consists of small device manufacturers, had opposed user fees until it reached a compromise with other stakeholders last year.

Conversely, Janet Trunzo, senior vice president of regulatory affairs for AdvaMed (Washington, DC), said she remains positive that Congress will eventually come up with the funding. AdvaMed, which has a greater share of large device manufacturers, has been a strong supporter of the program.

The agency has set the revenue target for FY 2004 user fees at $33,896,789, compared to a FY 2003 target of $25,125,000. However, as of June 30, FDA had collected only $14,360,000 for FY 2003 and was projecting another $5,287,000 to come in by the end of the fiscal year on October 1, 2003. That would leave the agency $5,478,000 short of its FY 2003 revenue target.

The main reason for the shortfall, the agency says, is that the number of full PMA fees and PMA supplements paying higher fees has been about 30% lower than expected. Collections from 510(k) fees have come in at about the anticipated rate.

All three PMA rates—for full fees, 180-day supplements, and real-time supplements—will increase 34.3% for all applicants. 510(k) fees will go up 27.3% for small businesses—defined as those with revenues under $30 million—and 59.1% for other applicants. This will be the first year that small businesses pay less for 510(k)s than other firms. That was already true for PMAs. (See chart for dollar figures.)

The $5,478,000 shortfall that FDA will try to make up in FY 2004 is causing the user fees to increase 21.8%. The remainder of the jump comes from an increase in target revenue of $2,130,000 (8.5%) and from a $1,163,789 adjustment for inflation (4.6%).

Leahey noted that a PMA would be "$200,000 for a firm with $31 million in sales, which is a real burden for an innovative company. We agree that FDA needs money, but government agencies should be funded by the government. The bill as structured needs improvement if it is to benefit industry."

In particular, he said, MDMA disapproves of industry being obligated to pay user fees in each of the program's three years regardless of whether FDA or Congress meets their goals for the program. He also questioned whether small firms would be priced out if PMA fees continue to increase substantially.

Trunzo of AdvaMed said, however, that Congress is aware of the program's benefits and should be able to provide more funding by 2005. "The enthusiasm from my perspective is still there, and I like to believe that everything will turn out by the end of the day and the program will continue," she said.

Leahey also said CDRH told his group that bundling of submissions was a contributor to the shortfall. "From a purely financial standpoint, there is too much revenue at stake to allow the bundling of submissions," he said. "It's allowing large companies with large regulatory teams to look further down the development pipeline to circumvent user fees."

But Trunzo noted that there are specific rules about what can and cannot be bundled together, and companies of all sizes have the option to use them. "We just wanted to ensure that bundling practices, which have existed for years and years, would continue under the user-fee agreement," she said. "It benefits all companies alike."

In other MDUFMA-related news, FDA announced plans to reduce its review time by 30 days for the fastest 50% of PMA applications approved for FY 2005 through 2007. FDA will use as a baseline the three-year average of its time for the fastest 50% of approved PMAs for FY 1999–2001 applications.

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