Medical Device Link.

Originally Published MX September/October 2003

BUSINESS NEWS

Comparison of FDA medical device user fee rates for FY03 and FY04. (Click to enlarge).

Industry controversy over FDA’s medical device user fee program may have taken a holiday for much of FY03, but nothing could have been more calculated to rekindle the flames than the agency’s fee hikes recently announced for the coming year. 

In FY04, the full rate for premarket notifications (510(k)s) will increase by nearly 60%, rising to $3480 for each submission. However, small businesses will retain some advantages, with their rate for 510(k) submissions increasing by only 27.3%, to $2784 (see Table). 

The new rates are part of an overall 34.9% increase in medical device user fees for the coming fiscal year. The adjusted rates are effective October 1, 2003.

Legislation requiring the payment of user fees for FDA clearance or approval of medical product submissions was enacted by Congress last year as part of the Medical Device User Fee and Modernization Act of 2002. Under the act, the revenue target for manufacturer payments to the user fee program increases each year. FDA is mandated to adjust fees annually according to a set of specified provisions. The rates for FY04 were adjusted for inflation as well as for a revenue shortfall that resulted from a drop in submissions during FY03. 

Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington, DC) said that the large fee hikes for FY04 will have a direct impact on medical technology innovation among small companies.

“The burden that these increased fees place on small medical device manufacturing companies serves to emphasize our concern over the way the user fee act was originally structured and to justify our original opposition to certain provisions of the legislation,” Leahey said.

Under the device user fee program, small businesses are defined as those having annual revenues of $30 million or less. Next year will mark the first time that the two-tier rate for 510(k)s will be in effect. FDA anticipates that about 80% of 510(k) submissions will qualify for the small business rate in FY04.

Janet Trunzo, senior vice president for global regulatory affairs at AdvaMed (Washington, DC), said that the impact of increased fees will concern companies of all sizes. But she acknowledged that the first year of the user fee program has been difficult. “FDA was not authorized to start billing companies until April 1, 2003, even though the legislation was in place in October 2002,” she said.

The largest component of the FY04 rate increases comes from a revenue deficit of 21.8% experienced by the user fee program during FY03. The FY03 statutory revenue target for user fees was $25.1 million. So far, FDA has collected only a portion of that amount, and it estimates that there will be a shortfall of $5.5 million at the end of the fiscal year. Under the compensating-adjustment provisions of the user fee act, any such revenue shortfall is added to the target revenue for the following year. The agency has therefore set the revenue target for FY04 at $33.9 million. 

Under the terms of the user fee act, Congress is expected to approve $45 million in additional funding for FDA’s Center for Devices and Radiological Health over the first three years of the user fee program. However, the appropriations approved for FY03 fell $11 million short of the requirement. Moreover, according to AdvaMed, proposed budget levels for FY04 will result 
in a total shortfall of $32 million, not counting required adjustments for inflation. 

According to Leahey, the new revenue target, along with a lack of federal funding, signals trouble for the future of the user fee act. Unless Congress provides the required funding appropriations, FDA’s authority to collect user fees will sunset in FY06. 
Trunzo said that she remains hopeful Congress will apportion its share of the funding required by the act. She added that AdvaMed would like to see the agency meet the performance goals established by the user fee act “so we’ll be able to have new medical technologies in the hands of patients faster.” 

Copyright ©2003 MX