# Presentation: 697380

## Financial Aspects of MDUFMA

- Presentation at Public Meeting by
- Frank Claunts
- November 18, 2004

## MDUFMA

-   How fees are set
-   FY 2004 financial results
-   What’s working well
-   What’s not

##   How Fees are Set

- MDUFMA

-   How Fees are Set

## MDUFMA--How Fees are Set

- MDUFMA--How Fees are Set

- Determined by three things:
- Revenue Target
- Statutory Relationship of Fees
- Numbers of Fee-paying Applications

## How Fees are Set—Revenue Target

- <footer>

- How Fees are Set—Revenue Target

|  | 2003 | 2004 | 2005 | 2006
Estimate | 2007
Estimate |
| --- | --- | --- | --- | --- | --- |
| Target In 2003 $ | $25,125,000 | $27,255,000 | $29,785,000 | $32,465,000 | $35,000,000 |
| % Increase |  |  |  |  |  |
| %Inflation  |  |  |  |  |  |
| Adjusted $ Target |  |  |  |  |  |
| % Change Year to Year |  |  |  |  |  |

## How Fees are Set—Revenue Target

- <footer>

- How Fees are Set—Revenue Target

|  | 2003 | 2004 | 2005 | 2006
Estimate | 2007
Estimate |
| --- | --- | --- | --- | --- | --- |
| Target In 2003 $ | $25,125,000 | $27,255,000 | $29,785,000 | $32,465,000 | $35,000,000 |
| % Increase |  | 8.5% | 9.3% | 9.0% | 7.8% |
| %Inflation  |  |  |  |  |  |
| Adjusted $ Target |  |  |  |  |  |
| % Change Year to Year |  |  |  |  |  |

## How Fees are Set—Revenue Target

- <footer>

- How Fees are Set—Revenue Target

|  | 2003 | 2004 | 2005 | 2006
Estimate | 2007
Estimate |
| --- | --- | --- | --- | --- | --- |
| Target In 2003 $ | $25,125,000 | $27,255,000 | $29,785,000 | $32,465,000 | $35,000,000 |
| % Increase |  | 8.5% | 9.3% | 9.0% | 7.8% |
| %Inflation  |  | 4.3% | 4.4% | 4 % | 4 % |
| Adjusted $ Target |  |  |  |  |  |
| % Change Year to Year |  |  |  |  |  |

## How Fees are Set—Revenue Target

- <footer>

- How Fees are Set—Revenue Target

|  | 2003 | 2004 | 2005 | 2006
Estimate | 2007
Estimate |
| --- | --- | --- | --- | --- | --- |
| Target In 2003 $ | $25,125,000 | $27,255,000 | $29,785,000 | $32,465,000 | $35,000,000 |
| % Increase |  | 8.5% | 9.3% | 9.0% | 7.8% |
| %Inflation  |  | 4.3% | 4.4% | 4 % | 4 % |
| Adjusted $ Target | $25,125,000 | $28,418,789 | $32,429,908 | $36,761,380 | $41,217,134 |
| % Change Year to Year |  |  |  |  |  |

## How Fees are Set—Revenue Target

- <footer>

- How Fees are Set—Revenue Target

|  | 2003 | 2004 | 2005 | 2006
Estimate | 2007
Estimate |
| --- | --- | --- | --- | --- | --- |
| Target In 2003 $ | $25,125,000 | $27,255,000 | $29,785,000 | $32,465,000 | $35,000,000 |
| % Increase |  | 8.5% | 9.3% | 9.0% | 7.8% |
| %Inflation  |  | 4.3% | 4.4% | 4 % | 4 % |
| Adjusted $ Target | $25,125,000 | $28,418,789 | $32,429,908 | $36,761,380 | $41,217,134 |
| % Change Year to Year |  | 13.1% | 14.1% | 13.4 % | 12.1 % |

**Revenue Amounts before Workload and Compensating Adjustments**

## How Fees Are Set—Compensating Adjustment

- <footer>

- Purpose—Stable & Predictable Revenues
- Essential to have dependable revenue stream for program to grow
- Other FDA user fee programs use product, establishment and sponsor fees for stable revenue
- Device industry rejected these
- Preferred compensating adjustment instead
- Compensating adjustment: any shortfall would be added to revenue target for future years

## How Fees are SetStatutory Fee Relationships

- <footer>

- How Fees are SetStatutory Fee Relationships

| Application Type | Full Fee
% of PMA | Small Business
% of Full Fee for Same Type |
| --- | --- | --- |
| PMA/BLA/Panel Track | 100% |  |
| 180 Day Supplements |  |  |
| Real Time Supplements |  |  |
| 510(k)’s |  |  |

## How Fees are SetStatutory Fee Relationships

- <footer>

- How Fees are SetStatutory Fee Relationships

| Application Type | Full Fee
% of PMA | Small Business
% of Full Fee for Same Type |
| --- | --- | --- |
| PMA/BLA/Panel Track | 100% |  |
| 180 Day Supplements | 21.5% |  |
| Real Time Supplements |  |  |
| 510(k)’s |  |  |

## How Fees are SetStatutory Fee Relationships

- <footer>

- How Fees are SetStatutory Fee Relationships

| Application Type | Full Fee
% of PMA | Small Business
% of Full Fee for Same Type |
| --- | --- | --- |
| PMA/BLA/Panel Track | 100% |  |
| 180 Day Supplements | 21.5% |  |
| Real Time Supplements | 7.2% |  |
| 510(k)’s |  |  |

## How Fees are SetStatutory Fee Relationships

- <footer>

- How Fees are SetStatutory Fee Relationships

| Application Type | Full Fee
% of PMA | Small Business
% of Full Fee for Same Type |
| --- | --- | --- |
| PMA/BLA/Panel Track | 100% | 38% |
| 180 Day Supplements | 21.5% | 38% |
| Real Time Supplements | 7.2% | 38% |
| 510(k)’s |  |  |

## How Fees are SetStatutory Fee Relationships

- <footer>

- How Fees are SetStatutory Fee Relationships

| Application Type | Full Fee
% of PMA | Small Business
% of Full Fee for Same Type |
| --- | --- | --- |
| PMA/BLA/Panel Track | 100% | 38% |
| 180 Day Supplements | 21.5% | 38% |
| Real Time Supplements | 7.2% | 38% |
| 510(k)’s | 1.42%+ | 80% |

- +  For 510(k)’s, fees are to be set to generate a level of revenue as if all applications were charged 1.42% of the full PMA fee, but adjusted so that revenues from reduced fees (80%), when added to revenues from full fees, equal this overall revenue level.

## How Fees are SetNumbers of Fee-paying Applications

|  | 03/04
Estimate |  03 Actual | 04 Proj. 3-31-04 | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| PMA/BLA | 58 |  |  |  |
|      “ S.B. | 10 |  |  |  |
| 180-Day | 171 |  |  |  |
|      “ S.B. | 24 |  |  |  |
| Real-Time | 86 |  |  |  |
|      “ S.B. | 14 |  |  |  |
| 510(k) | 4000 |  |  |  |
|      “ S.B. |  |  |  |  |

## How Fees are SetNumbers of Fee-paying Applications

|  | 03/04
Estimate |  03 Actual | 04 Proj. 3-31-04 | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| PMA/BLA | 58 | 46 |  |  |
|      “ S.B. | 10 | 6 |  |  |
| 180-Day | 171 | 118 |  |  |
|      “ S.B. | 24 | 22 |  |  |
| Real-Time | 86 | 136 |  |  |
|      “ S.B. | 14 | 19 |  |  |
| 510(k) | 4000 | 4001 |  |  |
|      “ S.B. |  |  |  |  |

## How Fees are SetNumbers of Fee-paying Applications

|  | 03/04
Estimate |  03 Actual | 04 Proj. 3-31-04 | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| PMA/BLA | 58 | 46 | 47 |  |
|      “ S.B. | 10 | 6 | 5 |  |
| 180-Day | 171 | 118 | 86 |  |
|      “ S.B. | 24 | 22 | 9 |  |
| Real-Time | 86 | 136 | 159 |  |
|      “ S.B. | 14 | 19 | 15 |  |
| 510(k) | 4000 | 4001 | 2853 |  |
|      “ S.B. |  |  | 482 |  |

## How Fees are SetNumbers of Fee-paying Applications

|  | 03/04
Estimate |  03 Actual | 04 Proj. 3-31-04 | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| PMA/BLA | 58 | 46 | 47 | 51 |
|      “ S.B. | 10 | 6 | 5 | 6 |
| 180-Day | 171 | 118 | 86 | 86 |
|      “ S.B. | 24 | 22 | 9 | 9 |
| Real-Time | 86 | 136 | 159 | 160 |
|      “ S.B. | 14 | 19 | 15 | 15 |
| 510(k) | 4000 | 4001 | 2853 | 3060 |
|      “ S.B. |  |  | 482 | 540 |

## How Fees are Set for FY 2005Doing the Math to Total $32,429,908

- <footer>

- How Fees are Set for FY 2005Doing the Math to Total $32,429,908

| Application Type | Full Fee
% of PMA | Small Business
% of Full Fee for Same Type |
| --- | --- | --- |
| PMA/BLA/Panel Track | $239,237 | $90,910 |
| 180 Day Supplements | $51,436 | $19,546 |
| Real Time Supplements | $17,225 | $6,546 |
| 510(k)’s | $3,502 | $2,802 |

- +  For 510(k)’s, fees are to be set to generate a level of revenue as if all applications were charged 1.42% of the full PMA fee, but adjusted so that revenues from reduced fees (80%), when added to revenues from full fees, equal this overall revenue level.

##   FY 2004 Financial Results

- MDUFMA

-   FY 2004 Financial Results

## Revenue Percents by Quarter

- <footer>

## Revenue Percents by Quarter

- <footer>

## Numbers of PMA/BLA/Panel Track

- <footer>

|  |  03 Actual |  04 Actual | Original
Forecast | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| Full Fee | 45 | 40.5 | 58 | 51 |
|    S.B. Fee | 6 | 4 | 10 | 6 |
| Fee Paying | 51 | 44.5 | 68 | 57 |
| Exempt S.B. | 16 | 19 |  |  |
| Exempt Ped. | 0 | 1 |  |  |
| Bundled | 2 | 4 |  |  |
| Non Fee-Paying | 18 | 24 |  |  |
|      Total | 69 | 68.5 |  |  |

## Numbers of 180-Day Supplements

- <footer>

|  |  03 Actual |  04 Actual | Original
Forecast | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| Full Fee | 117 | 93 | 171 | 86 |
|    S.B. Fee | 22 | 13 | 24 | 9 |
| Fee Paying | 139 | 106 | 195 | 95 |
| Exempt Ped. | 2 | 1 |  |  |
| Bundled | 13 | 4 |  |  |
| Non Fee-Paying | 15 | 5 |  |  |
|      Total | 154 | 111 |  |  |

## Numbers of Real Time Supplements

- <footer>

|  |  03 Actual |  04 Actual | Original
Forecast | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| Full Fee | 136 | 157 | 86 | 160 |
|    S.B. Fee | 19 | 20 | 14 | 15 |
| Fee Paying | 155 | 177 | 100 | 175 |
| Exempt Ped. | 1 | 1 |  |  |
| Bundled | 21 | 26 |  |  |
| Non Fee-Paying | 22 | 27 |  |  |
|      Total | 177 | 204 |  |  |

## Numbers of 510k’s

- <footer>

|  |  03 Actual |  04 Actual | Original
Forecast | 05 Fee Basis |
| --- | --- | --- | --- | --- |
| Full Fee |  | 2874 |  | 3060 |
|    S.B. Fee |  | 517 |  | 540 |
| Fee Paying | 3999 | 3391 | 4000 | 3600 |
| Exempt 3rd Party | 190 | 255 |  |  |
| Fee Exempt | 13 | 21 |  |  |
| Not a device/etc. | 67 | 127 |  |  |
| Non Fee-Paying | 270 | 385 |  |  |
|      Total | 4269 | 3776 |  |  |

## FY 2004 Preliminary Revenue Summary

- <footer>

|  | Full Fee | SB Fees | Total |
| --- | --- | --- | --- |
| PMA/BLA/etc. | $8,375,846 | $314,352 | $8,690,198 |
| 180 Day Supp’s | $4,179,616 | $219,648 | $4,399,264 |
| RT Supp’s | $2,322,840 | $118,818 | $2,441,658 |
| 510k’s | $10,001,520 | $1,149,328 | $11,440,848 |
| Subtotal |  |  | $26,971,968 |
| FY 2003 Adj. |  |  | ($139,932) |
| Net Collected |  |  | $26,832,036 |

## FY 2004 Cumulative Fee Revenue Shortfall

- <footer>

- FY 2004 Revenue Target	$31,654,207
- _FY 2004 Net Collected__	__$26,852,036_
- Shortfall				$4,802,171
- Collection of shortfall will be spread between FY 2006 and 2007

##   What’s Working Well

- MDUFMA

-   What’s Working Well

## What’s Working Well

- <footer>

- Fee Collection Process
- Keeping Collection Apart from Review
- Small Business Determinations
- Setting Fees Timely
- Utilizing Fees for Device Review Work
- Without MDUFMA in 2004
- Program would have contracted
- Performance would have deteriorated
- Visibility and Respect for Device Review Program

##   What’s Not Working Well

- MDUFMA

-   What’s Not Working Well

## What’s Not Working Well

- <footer>

**Revenues are NOT Stable and Predictable**
- Fee revenues less than envisioned
- Appropriations less than envisioned
- Therefore
- Staffing has increased more slowly than originally envisioned
- Urgent need to add staff to meet MDUFMA goals

## What’s Not Working Well—Unstable Fee Revenue

- <footer>

- What’s Not Working Well—Unstable Fee Revenue

|  | FY 2003 | FY 2004 | Combined |
| --- | --- | --- | --- |
| Revenue Target
Without Compensating Adjustment | $25,125,000 | $28,418,789 | $53,543,789 |
| Received |  |  |  |
| Shortfall |  |  |  |

## What’s Not Working Well—Unstable Fee Revenue

- <footer>

- What’s Not Working Well—Unstable Fee Revenue

|  | FY 2003 | FY 2004 | Combined |
| --- | --- | --- | --- |
| Revenue Target
Without Compensating Adjustment | $25,125,000 | $28,418,789 | $53,543,789 |
| Received | $21,889,582 | $26,852,036 | $48,741,618 |
| Shortfall |  |  |  |

## What’s Not Working Well—Unstable Fee Revenue

- <footer>

- What’s Not Working Well—Unstable Fee Revenue

|  | FY 2003 | FY 2004 | Combined |
| --- | --- | --- | --- |
| Revenue Target
Without Compensating Adjustment | $25,125,000 | $28,418,789 | $53,543,789 |
| Received | $21,889,582 | $26,852,036 | $48,741,618 |
| Shortfall | $3,235,418
(-13%) |  |  |

## What’s Not Working Well—Unstable Fee Revenue

- <footer>

- What’s Not Working Well—Unstable Fee Revenue

|  | FY 2003 | FY 2004 | Combined |
| --- | --- | --- | --- |
| Revenue Target
Without Compensating Adjustment | $25,125,000 | $28,418,789 | $53,543,789 |
| Received | $21,889,582 | $26,852,036 | $48,741,618 |
| Shortfall | $3,235,418
(-13%) | $1,566,753
(-6%) |  |

## What’s Not Working Well—Unstable Fee Revenue

- <footer>

- What’s Not Working Well—Unstable Fee Revenue

|  | FY 2003 | FY 2004 | Combined |
| --- | --- | --- | --- |
| Revenue Target
Without Compensating Adjustment | $25,125,000 | $28,418,789 | $53,543,789 |
| Received | $21,889,582 | $26,852,036 | $48,741,618 |
| Shortfall | $3,235,418
(-13%) | $1,566,753
(-6%) | $4,802,171
(-9%) |

## Fixing Fee Shortfalls

- <footer>

- Revised estimated number of fee-paying applications when fees were set for FY 2005
- Fix may have been too modest
- Still expect collections closer to revenue targets in 2005 through 2007
- Bigger issue now is appropriations shortfalls

## FY 2003 Funding ShortfallsIn Millions of Dollars

- <footer>

- FY 2003 Funding ShortfallsIn Millions of Dollars

- Appropriation Shortfall--$12.4 Million or 6%

## FY 2004 Device Appropriations In Millions of Dollars

- <footer>

- FY 2004 Device Appropriations In Millions of Dollars

- Actual Appropriation down by $2.2 million from  FY 2003 level
- Pay raise alone cost $8.5 million
- Cut over $11 million for IT and admin savings
- Impact of appropriation cuts barely offset by fee revenue

- Appropriation Shortfall--$19.5 Million or 9%

## Appropriations Issues

- <footer>

- Increases in staffing have been less than planned due to FY 2004 appropriations
- Administration recognizes funding needs in 2005 & future years and will request funds at MDUFMA trigger levels
- Two things essential for program to survive and thrive

## Appropriations—Urgent Issues

- <footer>

- FY 2005 device appropriations must be at level envisioned in MDUFMA ($217 million)
- MDUFMA must be amended to eliminate the catch-up appropriation requirement for FY 2003 and FY 2004
- Otherwise MDUFMA program will end October 1, 2005
- Performance will deteriorate dramatically
**Fix needed** **now** or staffing in jeopardy

## Brighter Prospects for FY 2005

- <footer>

- Indications are that in FY 2005 the device program will get the appropriations increase envisioned in MDUFMA.
- The combination of increased appropriations and fee revenues should result in FDA receiving the amount envisioned in MDUFMA.

## FY 2005 Funding Prospects In Millions of Dollars

- <footer>

- FY 2005 Funding Prospects In Millions of Dollars

- Senate mark meets appropriation minimum—House mark is very close.

## FY 2005 Funding Prospects In Millions of Dollars

- <footer>

- FY 2005 Funding Prospects In Millions of Dollars

- In FY 2005, 85% of funds come from appropriations and 15% from fees

## Urgent Issues

- <footer>

- 2005 Appropriation that meets MDUFMA triggers
- MDUFMA must be amended to eliminate the catch-up appropriation requirement for FY 2003 and FY 2004