FDA Announces Medical Device User Fees for FY 2004

WASHINGTON -- The Food and Drug Adminsitration (FDA) today announced medical device user fee rates for the coming fiscal year. The fees are used to achieve the FDA's long-term goal of making substantial improvements in device review performance. This is important to the entire device industry, which is expanding in size and technical complexity and has the potential for developing a broader range of safer, more effective treatments than ever before. By helping reduce the average time for marketing approval, the user fee program can help get safe and effective new devices to patients sooner.

Legislation requiring user fees was passed last year as part of the Medical Device User Fee Modernization Act of 2002 (MDUFMA).

As part of its ongoing commitment to MDUFMA, FDA is maintaining its current performance, meeting its 2003 goals, and gearing up to meet the more ambitious performance goals of the next four years. The agency has already met all statutory timeframes in the new law and has begun hiring staff who will help speed the review process and bring valuable expertise to the agency's evaluation of new technologies. The agency has also issued a number of guidances to help industry and FDA staff ensure that applications are complete and reviewed as expeditiously as possible.

Under MDUFMA, FDA is required to review and adjust the user fee amounts and publish the new fee amounts on August 1, prior to the new fiscal year that begins on October 1. Thus FDA is releasing today the new FY 2004 device user fees that will increase by a total of $8,771,789 over FY 2003 levels. This increase represents a 34.9 percent increase over FY 2003 levels. The increases are calculated according to the provisions of MDUFMA, and would be the same whether or not the appropriated resources MDUFMA envisioned had been approved.

There are several reasons for the increase in individual fees that are being announced today. These factors, all of which are required under the MDUFMA statute, include:

-- An increase in the target revenue generated from the user fees of $2,130,000 (8.5 percent)

-- An adjustment for inflation of $1,163,789 (federal pay raise for employees in the Washington DC area was 4.27 percent the most recent year.) (4.6 percent), and

-- An adjustment to compensate for an unforeseen revenue shortfall in FY 2003 of $5,478,000 (21.8 percent)

In FY 2003, the statutory revenue target for MDUFMA fees was $25,125,000. As of June 30, FDA had collected about $14,360,000. FDA estimates collecting an additional $5,287,000 in the remaining three months of the fiscal year. This totals only $19,647,000 -- a shortfall of $5,478,000 below the MDUFMA revenue target of $25,125,000 for FY 2003.

The MDUFMA statute recognized the importance of a stable FDA funding from year to year to enable the agency to develop greater long-term expertise. Under provisions of the statute's Compensating Adjustment, this revenue shortfall is to be added to the revenue target for the next year. This is the largest component of the fee increases for FY 2004. For the limited time period that MDUFMA has been operational so far, the number of FY 2003 full PMA fees and the number of PMA supplements paying higher fees are running about thirty percent lower than expected, thus creating one reason for this year's shortfall. The numbers of 510(k) fees are coming in at the anticipated rate.

By statute, all fees are set in proportion to the fee for a full PMA. Fees for 180-day supplements and real time supplements are 21.5 percent and 7.2 percent, respectively, of the full fee for PMAs. Small business rates are 38% of full fee rates. Fees for 510(k)'s are 1.42 percent of the full PMA rate (in aggregate-with 2-tier adjustments), and 510(k) small business rates are 80 percent of the full 510(k) fee rate.

In FY 2004, the two-tier fee rate for 510(k)'s goes into effect for the first time. FDA anticipates that about 80 percent of the 510(k) submitters will qualify for the small business rate in FY 2004 which, for those submitters, will amount to less than a $600 increase, for a total fee of $2,784. A majority of the medical device industry is composed of small companies that have revenues equal to or less than the $30 million small business user fee definition, thus they will qualify for the reduced 501(k) fee.

In calculating the FY 2004 user fees, FDA did not have sufficient data at this point to alter the original estimates of the projected number of applications that will be submitted next year. If FDA had adjusted the numbers in FY 04 to reflect the limited experience with FY 2003 numbers, the fee increases would have been higher than what is being announced today.

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Source: FDA