Congress Acts to Ensure Continuation of User Fee Program

Just days before their August break, the House and Senate passed legislation to ensure the continuation of the Medical Device User Fee and Modernization Act of 2002, which was initially signed into law to provide FDA with greater resources for the timely review of devices submitted for approval. Without congressional action to modify provisions of the original user fee act, the law would have likely expired on September 30 of this year.

The new bill, known as the Medical Device User Fee Stabilization Act of 2005, was signed into law by President Bush on August 1.

The original user fee legislation authorized a two-prong funding structure for facilitating the device approval process: user fees from manufacturers and appropriations from Congress. Under the so-called “workload and compensating adjustments,” FDA was permitted to increase the rate for fees paid by industry when the revenues gained from device submissions fell below projections. Under this arrangement, fees have increased by more than 50% since the inception of the program and were seen to be on a steep upward trajectory without congressional review and adjustment.

Many medtech manufacturers have expressed support for the concept of user fees to speed up the approval process. But some have continued to question the value of the program, especially in light of rising costs and FDA’s difficulty in meeting its performance objectives. The early take on the user fee stabilization act is that it’s a good start at addressing industry’s major concerns. Key provisions of the new legislation include the following.

• Limits user fee increases to 8.5% for the next two years. Premarket approval (PMA) submissions will be charged $259,600 in 2006 and $281,600 in 2007.
• Eliminates concept of workload adjustments, which means that FDA cannot unilaterally increase user fees. The agency will be authorized to allocate up to two-thirds of fees carried over from previous years to keep the program going, but it must notify Congress if it intends to take such action.
• Forgives all outstanding industry and Congressional shortfalls from previous years.
• Requires Congress to fully appropriate program funds in 2006 and 2007.
• Moves small manufacturer threshold from the current $30 million in annual revenues to $100 million. Small manufacturers are eligible for reduced user fees. The fee waiver for first-time PMAs submitted by small manufacturers remains at $30 million. The small business threshold cannot be reset without congressional approval.
• Calls for more-detailed reporting systems from FDA regarding the number and type of device submissions received and reviewed each year.
• Defines requirements and responsibilities for labeling reprocessed manufacturer-designated single-use devices for more-effective tracking.

AdvaMed’s Ubl: Improving on success.

Referring to the bill as a “vital piece of legislation,” Stephen J. Ubl, president and CEO of industry association AdvaMed (Washington, DC), said that the new law “will improve an already strong user fee program which has successfully expedited patient access to lifesaving and life-enhancing medical technologies and holds FDA to strict performance. It will encourage continued medical technology innovation by bringing down the rate of user fee increases to the single-digit range for the remaining two years of the program and increase the number of small businesses eligible to pay substantially reduced fee rates.”

MDMA’s Leahey: Sharp criticism.

Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington, DC) also hailed the bill as a significant accomplishment, but took issue with AdvaMed’s stated concern for small device manufacturers. “Increasing the small business threshold from $30 million to $100 million was the biggest obstacle that MDMA faced,” said Leahey. “However, the greatest opposition was not from the Hill or from FDA, but from AdvaMed. It, along with certain large companies, was the loudest critic against increasing the small business threshold. While it was not surprising given its large-company slant, I am disappointed that it was not forthright with its members, especially the emerging technology companies.”

“Certain large companies benefit when the regulatory burdens are high for smaller players,” said Leahey. “This is not lost on AdvaMed, or some of its larger members.”

In response, AdvaMed’s Ubl was quick to note that 80% of his organization’s members are small manufacturers with less than $100 million in annual revenues.

Both industry organizations have pledged to monitor the implementation and resulting effectiveness of the new law over the next two years.