Government Pledges to Increase CDRH Funding,but Will It Be Enough?

Originally Published MDDI January 2004

NEWSTRENDS

Government Pledges to Increase CDRH Funding, but Will It Be Enough?

Erik Swain

The Bush administration has stated that it will request increased funding for CDRH in fiscal years 2005, 2006, and 2007 to bring it in line with promises made in the Medical Device User Fee and Modernization Act of 2002 (MDUFMA). But funding shortfalls for fiscal years 2003 and 2004 will not be made up, and industry is uncertain how soon the act's performance goals for FDA can be met and whether its terms could be altered. 

In a letter to congressional leaders dated October 30, 2003, the Office of Management and Budget stated that the Bush administration intends to increase CDRH appropriations for FY 2005 to $217 million and to request inflationary increases in FY 2006 and 2007. It also said performance goals will be met through 2007. 

However, industry can opt out of the user fee program after 2005 if appropriations for its first three years come up short. Since the shortfalls of the first two years will not be made up, terms of MDUFMA will have to be altered if the user fee program is to continue. Negotiations could occur in the spring.

“To make this work, they will have to adjust the trigger mechanism next year,” said Jeff Ezell, media relations director for the Advanced Medical Technology Association (AdvaMed; Washington, DC). “We do not support changing the trigger this year. We want to make sure the $217 million appropriation actually materializes. If it looks like the appropriation will materialize, then we can support changing the trigger.”

Ezell said that AdvaMed believes there are legitimate reasons for the shortfalls and is willing to work with FDA and Congress to make sure they don't happen again. “The passage of MDUFMA occurred after the FY '03 budget process was pretty much over, and in FY '04, the war in Iraq meant that other things were hurting for funds. But the fact that they're putting elements of the FY '05 budget in writing this early is unheard of around here, so we're very confident that things will work out.”

The Medical Device Manufacturers Association (MDMA; Washington, DC), which represents mostly smaller device firms and had opposed user fees, is not so optimistic, however.

“I would argue that OMB is saying they are trying to ease themselves of their obligation,” said Mark B. Leahey, MDMA's executive director. “If there is an appropriation shortfall and they want to modify the trigger, industry will only support modifications if other elements of the user fee program are altered so user fee increases aren't so dramatic. If the government is seeking to change its trigger, everything will be on the table, from what money is needed to how the fees should be structured.”

Kelvyn Cullimore Jr., president and CEO of Dynatronics Corp. (Salt Lake City) and an MDMA board member, said there are several changes to MDUFMA that small companies such as his would like to see made if the deal is renegotiated.

“I would like to see fees only go up based on an inflationary adjustment,” he said, noting that much of the user fee increase for FY 2004 was caused by the “compensating adjustment” triggered when FDA received fewer new product applications than expected. “I would also like to see more of the burden shifted to PMAs. The purpose of the User Fee Act is to get more resources for accelerated review times, but 510(k) review times are virtually at their statutory targets, so there will be no benefit there. So small companies, contributing about half the user fees through 510(k)s, are basically subsidizing the big companies' PMA reviews.”

Ezell said AdvaMed does not feel the need to get caught up in such distinctions. “It's always been about the performance goals and the improvement of the agency,” he said. “The program needs to be given time to work, and the performance gains need to be given time to materialize.”

Whether that time will be given remains to be seen.

“If you use [the Prescription Drug User Fee Act] as a template for what could happen to device user fees, we could see PMAs in the $500,000 range and 510(k)s in the $15,000–$20,000 range within a decade,” Cullimore said. “The problem is, most drug companies are multibillion dollar companies, but around 90% of device companies are under $50 million in annual sales. Applying fees like that to the device industry is untenable.”

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