The Sum of All Fees? About $25 Million to Start

Originally Published MPMN July/August 2002

EDITOR'S PAGE

The Sum of All Fees? About $25 Million to Start

The device industry dodged a bullet at the end of May, according to Mark Leahey, director of federal affairs at the Medical Device Manufacturers Association (MDMA). That's how he characterizes the failed attempt to tag on a $25 million medical device user fee package to the bioterrorism bill passed by Congress.

Hammered out by rival industry association AdvaMed and FDA, the package was designed to shore up FDA's flagging resources and prevent a return to the device approval backlogs and delays of yore. Under the terms of the agreement, FDA's Center for Devices and Radiological Health would receive an additional $40 million for device review activities in the first year. User fees would account for about $25 million of the total amount, progressively increasing to approximately $35 million by 2007; levying of the fees would be contingent on a $15 million increase in appropriations.

"We came very close," says AdvaMed executive vice president of technical and regulatory affairs Jim Benson. A former member of FDA who played a key role in negotiating the package with the agency, Benson is confident that user fees will be signed into law in short order. "I have assurances from the bill's supporters that we will find another legislative vehicle and get it passed by this summer," he told MPMN. Leahey and MDMA reluctantly concur that the passage of a user fees bill has momentum. That doesn't mean, adds Leahey, that industry should blithely accept terms that impair a small company's ability to compete.

MDMA has been a staunch opponent of user fees in the past. "MDMA exists to protect the interests of the small innovative entrepreneurial sector of the industry," says Leahey. "We were among the first to recognize that FDA lacks the resources to keep up with innovative technologies, but we have traditionally viewed it as a government program that should be funded by the government." MDMA is willing to bend on this principle, he adds, if AdvaMed and FDA show similar flexibility.

"We don't have the budget surpluses we had in the 1990s, and it's clear that straight appropriations are not a viable solution in the current economic environment," acknowledges Leahey. Leahey and MDMA chairman Paul Touhey met with FDA officials recently to do a line-by-line review of the user fee proposal. MDMA has made two principal demands, says Leahey: a guarantee that FDA would forfeit user fees if it does not meet its performance goals, and an exemption for small companies. If a compromise cannot be reached on these issues, he says, MDMA cannot support the bill.

The current package allows firms with sales of less than $5 million to defer their user fee payment for one year. They may also petition for extensions, and, in some cases, obtain a waiver. "A company could request a waiver because it has developed a life-saving product that has a limited market," explains Benson. "It's comparable to the orphan product concept, but in the user fee package, the device doesn't have to be an orphan for the fee to be waived." MDMA wants the waiver to be extended to all companies under a certain size.

"The deferral has no teeth to it," says Leahey. "For example, a company I know of that is developing a high-tech device will apply for a PMA in the next year or two. We know it is going to need about four or five supplements three to four years [after it has been granted a PMA] before it has a marketable product," says Leahey. Under the current proposal, that firm would pay $125,000 to submit a PMA and $25,000 for a PMA supplement. It's important to remember, says Leahey, that having a "PMA doesn't mean you're going to realize sales within a year."

Small startups don't have the big machinery of larger companies to generate revenue, says Leahey, adding that FDA has been receptive to this argument. "We are moving toward a complete exemption for companies under a certain dollar figure in sales," he says, although no agreement has been reached on a specific threshold. "We want to craft a proposal that isn't overly burdensome to large companies, but that provides protection for the small innovative entrepreneurial sector of our industry," says Leahey.

Will FDA and AdvaMed bite the bullet?

Stay tuned.

Norbert Sparrow

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