, . .
IMPLEMENTING USER FEES 
THE FOOD 
AND DRUG 
ADMINISTRATION 
A CASE STUDY

Richard P. Kusserow 
INSPECTOR GENERAL 
OEI-12-90-02020 
JULY 1990  IMPLEMENTING USER FEES 

THE FOOD AND 
DRUG

ADMINISTRATION

A CASE STUDY

f.IlVJC'rs. 
'i S 
"b 
lr"ila 
OFFICE OF INSPECTOR GENERAL 
OFFICE OF EVALUATION AND INSPECTIONS 
JULY 1990  , "
INTRODUCTION

PURPOSE 
In the past, the Office of Inspector General (OIG) has conducted audits of existing
user fee systems and conducted 
analyses for the President's Council on Integrty and
Efficiency on establishing and implementing user fee 
systems in the U.S. Department
of Health and Human Servces (HHS). 
Over the past several years, HHS budget proposals have induded 
provisions for user
fees to support various program activities previously funded through general 
appropriations. In connection with these proposals, the Offce of Management and
Budget has suggested that the Department 
develop an analytic framework for 
discussing and considering additional user fees in HHS. The purpose of this report
is to provide such a framework using the Food and Drug Administration 
as the case 
study. 
BACKGROUND 
User fees are charges directed at specific beneficiaries of specific governmental 
activities. The HHS currently charges user fees for a variety of purposes. 
Additional 
fees will become effective soon, induding user charges to States (who are expected
to recover the charge from end users) for 
using the Federal Parent Locator Servce 
in certain cases, and user charges to laboratories conducting medical 
testing to
recoup the cost of regulating those laboratories under the Clinical Laboratories 
Improvement Amendments of 
1988 (CLIA). 
The Food and Drug Administration (FDA) 
currently imposes user fees for several 
activities, including color certification, reconditioning of products, and imported tea
inspections. Previous work by the Office of Inspector General has 
examined the 
implementation of these user fees and th 
estimated costs that might be incurred and
recovered for proposed new fees. 
General statutory autho ity for imposing user fees is found in title V 
of the 
Independent Offices Appropriation Act of 1952 (10M), 
currently codified at 31 
c. 9 9701. Under this statute  (t)he head of each agency..may prescribe
regulations establishing the charge for a servce or thing of value provided by the 
agency." Executive guidance on this subject is provided in Office of Management 
and Budget Circular A- , which outlines general policy for assessing and collecting
fees. Circular A-25 states in part  A user charge...will be assessed against each identifiable recipient for 
benefits derived from Federal activities beyond those received by the 
neral public....(S)pecial benefit will be considered to accrue and a 
user charge will be .imposed when a Government servce: (a) enables 
the beneficiary to obtain more immediate or substantial gains or 
values...than those that accrue to the general public..; or (b) provides
business stabilty or contributes to public confdence in the 
business 
activity of the beneficiary..; or (c) is performed at the request of or for 
the convenience of the recipient, and is beyond the servces regularly 
received by other members of the same 
industry or group, or of the 
general public.... 
The Congress has also required agencies to impose user fees through specific
authoriing legislation mandating collection of user fees for certain 
activities. 
Legislation directed HHS to charge users for use of the Federal Parent Locator 
System and regulating medical laboratories under CLIA. 
AIl user fees currently in 
place at the FDA are assessed in accordance with specific legislative guidance. For 
color certification and antibiotic certification, the Congress directed FDA to assess 
fees "as may be necessary to provide, maintain, and equip" the servce. (21 U.  c. 9 
357(b) and 376(e).) For tea imports, the Congress prescribed that "no tea...shall be 
examined for importation into the United States..unless the importor or consignee of 
such tea or merchandise, prior to such examination, has paid for 
deposit into the 
Treasury of the United States as miscellaneous receipts 5 cents for each 
, a fee of 3.
hundred weight or fraction thereof of 
such tea and merchandise." (21 U.  c. 9 46a. 
For imports, Congress also directed the FDA to charge the owner or consignee for
expenses incurred by the agency with respect to refused articles (e.g., travel, per
diem or subsistence, and salaries of officers or employees involved in destruction or 
relabeling). (21 U. 
c. 9 381(c). 
For several years, budgets proposed by the Administration have 
included provisions 
for expanded user fees in FDA. 
Such proposals have never been enacted into law 
by the Congress. Nevertheless, the Presic.nt s 1991 budget includes a provision for 
collection of $152 milion in new user fees by FDA 
OBJECTIES AND METODOLOGY 
The FDA was chosen as our case study because it is frequently 
suggested and
debated as a program area that might be funded through a 
system of user fees and
because it provides a rich background against which to explore the 
complexities of
the arguments for and against imposing user fees. To conduct this study, the OIG: 
synthesized previous work done on user fees, especially as it relates to 
FDA and other regulatory environments, through an extensive literature 
review and analysis;  assessed the experiences of selected Federal 
agencies and programs 
with established user fees, through intervews with officials in those 
agencies and review of relevant documents; and 
assessed the views of program officials
, affected industry 
representatives, and others in regard tQ possible user fees in FDA.  . ..  . 
. .." . ......    . .
. .. " . .. '.'. 
. . .. . ...  .' . .".....  ....... . '  ... . ..,'.  "... .... . ...  ..  .... .'.... ... . ."....".. ... .......   ..... .....,.. ,". ." ...    ......" ...... .  "."..., ..' ... ." ...... . ... ...
 .. . .. ...  ....  .. .. .. ..... . ....
FINDINGS 
User fee are impose on indidua and busines by the Federa State and locl 
progr. 
governents for a vaety of purse and  Some of the Federal actties 
for which usr fees are impose are simar to actties underten in the Foo and 
Drg Admjnj tration and paid for though genera appropriations. 
User fees are collected for a wide range of governental activities at the Federal 
State and local levels. Examples of these activities are listed in 
Exibits 1 and 
XHffITl. 
STATEILCALACfIVITIES FpRWFICH 
USER FEES ARE IMPOSED 
us 
License applications: professionallicense busil1esslicense, liquor licens 
- Engineerig and building safety plan reView iindinpetiol1 .

Fire permits, inspe ions  and plan revieW

-Receational facilty.
-Water and sewage supply 

- Emergency. and police .servces necestated by negligence or ilegal behavior 
EXHffIT2. 

FEDERALACfIVITIES FORWHlc:H USER FEES ARE 
IMPOSED

typesofirpeions . 
-; . Certain  performedbytb  l1mel1r()fAg(:lt\Jre. 
Patent. andtnideinrkservCeprbvdedbyt 
C9mer
eJ)p8rtllent 
-. Pescie . regitration lit the ErivironmentaIPtOtectici.tenc. . 
-Fmgerprinting serves af the Federal Bureau ofIrivetigations . 
- Brodcat lii:ns from the Federal CommuriicationsCommiiori. . . 
- Applications to. acquirecommercial ' rightsprcidbytheInterstte Commeri:Commission 
Inspection servces ofth  Immigration and. Naturaliztion.S Mce .. 
-Rulings, determination 1etters, and opinion leue'rfronithe Interal Revnue Servce

Copyght regisration by ihe Library of Congres .

- Adminitration. of pipeline saety progrms by the Department of Transportatin

Freeom of Informtion requests frm variou "agenci

Over time, various studies have found that the Federal Government is not 
recovering 
appropriate costs through user fees. In 1982, the President's Private Sector Survey 
on Cost Control concluded that recovering the full costs of Federal programs
benefitting specific beneficiaries would save taxayers $21 bilion over 3 years. 
Assessing policies and practices regarding user fees in six executive departments in  1989, the President s Council on Integrity and Efficiency found that the 
agencies have
not "maxmized the opportunity to 
establish and collect user charges as a method of
recovering costs incurred in providing benefits to identifiable recipients. 
However
, as Exibit 2 demonstrates, numbers of Federal agencies do impose user
fees--some of them for regulatory 
functions similar to those performed by FDA.
Their experience is of special interest in 
examining the feasibility and method of
instituting fees in FDA. (For a more complete description of these agencies
' user
fees systems, see appendix A. 
The Environmental Protection Agency 
Under the Federal Insecticide, Fungicide and Rodenticide Act (FIF), 
the

Environmental Protection Agency (EP A) is responsible for regulating 
pesticides. In

1972, EP A was charged with the task 
of reregistering all pesticides in order to 
assess
safety and environmental impact based on current scientific 
dat and analysis. After
numerous deadlines passed for 
completing the reregistration effort, the Congress
established a 9-year program with user fees to supplement the 
reregistration effort.
The EP A charges a one-time reregistration fee for 
reviewing an active ingredient and
charges a maintenance or annual fee to product registrants
, which is based on 
number of registrations held. 
Apart from this program, manufacturers are required to register their 
products with

EP A prior to marketing. The EP A had developed a fee 
schedule to charge

manufacturers for processing applications for registering a pesticide product and 
asssessed these charges for a short time prior to the enactment of the accelerated
reregistration program. These fees were 
suspended until  FIFR 
Once the reregistration effort is complete 1997 by  of 1988.
, EP A will again charge 
these fees.
Applications are categorized as new 
chemical registrations, new biochemical and
microbial registrations
, new use pattern registrations, old chemical registrations
amendments and experimental use permits. Registration fees (based on 
1988 costs)
range from $184 500 for a new chemical review to $700 for an amendment review 
submitted at the time of fiing. 
The Federal Communications 
Commission 
The Federal Communications 
Commission (FCC) charges fees for 
processing
applications for broadcast 
licenses based on authority granted the 
agency under the
Consolidated Omnibus Budget Reconcilation Act of 
1985 (COBRA). The 
COBRA
established numerous categories and amounts of fees to be 
assessed and 
collected by 
FCC in support of its 
application processing responsibilities. The Federal Energy Regulatory Commission 
The Federal Energy Regulatory Commission (FERC) assesses fees to regulated gas 
oil, electric and hydroelectric companies. Fees are charged for the following 
activities, among others: changes in producer rate schedules, producer certificates 
applications, pipeline certificate applications, and changes in electric rates. The 
general authority for collecting fees is found in the 10M and the Omnibus Budget 
Reconciliation Act of 1986. Fees are assessed at the time of 
filing. 
In addition to specific user charges for its review of various fings, FERC charges 
hydroelectric licensees annual charges to recover the costs 
of regulating the 
hydroelectric industry in accordance with the Federal Power Act. 
The FERC 
recovers the remainder of its budget through annual charges 
levied on regulated oil 
gas and electric firms based on broad authority granted the 
agency in the Omnibus 
Budget Reconcilation Act of 1986. 
The Nuclear Regulatory Commission 
The Nuclear Regulatory Commission (NRC) charges fees to its 
licensees for license 
reviews and inspections based on the general authority in IOAA 
In addition, NRC
assesses annual charges on operating nuclear power reactors based on 
authority 
Omnibus Budget Reconcilation Act of 1985 
granted the agency in the Consolidated 
as amended. These 10M and annual COBRA fees together are to amount to 
percent of the NRC budget. 
tation: 
User fee represent an application of the "bnefit priciple" of  those who 
benefit from governenta proviion of a servce or goo 
should be requied to pay 
for it To appropriately determe what progr with the Foo and Drug
Admitrtion 
could be fuded, paraly or in whole, though user charges
necess  fit  , it is 
to  ask: who benefits from FDA reguation? 
User fees are generally imposed when two basic conditions exist. First, certain 
identifiable individuals or businesses--as distinct from the general public--
benefit from 
the servce or function. . Second, the servce or good is exclusionary in nature. 
other words, someone who has not paid for the servce or good can be excluded 
from obtaining it. 
According to the benefit principle of taxation, those who benefit from governmental 
activity should be required to pay for it. Governmental functions which benefit the 
common good" and which are indivisible in nature (national defense is 
the most 
obvious example) are to be funded through general taxation; special servces or 
benefits conferred on select groups or individuals (mail delivered by the U.S. Postal 
Servce, for example) are paid for by those select groups or individuals (the "users  The principle itself is generally accepted as a 
valid premise on which to base revenue
decisions. The Congress formally indicated its agreement with this principle in the 
early 1950s when it expressed concern that "
the Government is not 
receiving full
return from many of the servces for which it renders to special beneficiaries"4 and 
enacted the provision in 10M 
to allow agency heads to impose user fees for 
various
servces or products or value so long as the charge 
was (l) fair; (2) based on

governmental costs, value of the servce or product
, public benefit, and other

relevant facts ; and (3) not prohibited by statute.

Agreement in principle has not prevented 
controversy concerning the application of 
the principle to specific governmental functions and beneficiaries. 
A prime example
is the disagreement which exists as to whether FDA should impose user fees for its 
regulatory activities. 
According to one view, FDA's regulatory activities in ensuring the safety of drugs 
devices, cosmetics and food entering the marketplace serve the public interest rather 
than commercial firms regulated under the Food
, Drug and Cosmetic Act.5 For 
example, the Pharmaceutical Manufacturers Association
, in testimony before

Subcommittee on Rural Development
, Agrculture, and Related Agencies on the

President s 1991 budget, stated:

The FDA product review activities for which this tax would be imposed 
are not voluntary--a basic requirement to justify user fees under current 
Federal policy. Instead, they are required by law for the public 
benefit.
The only private benefit--the second criterion for allowing user 
fees to
be charged--that is received by regulated companies in the approval of 
health products premarking 
applications is that they are allowed to 
remain in business. 
Meanwhile
, the alleged benefit of a so-called "seal of approval" by FDA
on these products is discounted by the reality that the law 
prohibits any 
indication of such "approva1." Morever, FDA approval has not 
provided a defense, on the whole, from State product-liability laws to a
manufacturer based on compliance with Federal Government standards 
of safety and effcacy. 
According to this view, regulatory activities do not constitute a benefit to 
commercial 
firms but rather a cost of doing business: to pay for the "

libert" of marketing a

product is to pay tribute to the agency in a distorted variation of the 
privilege theory
of taxation (those who exercise a privilege should pay for it). 
Others make an opposite case. While they 
may agree that FDA 
serves the public
interest, they also see private benefits 
accruing to the regulated industry and the
consumers of their products. They point to the 
wide range of functions at the local  ....  
. '
.. ....  
.. .. .... ..." "...."". ," ..... . ..  .' .. ...' . . ....  ..'.."...'..  ..... ......".   .... "".  . '......  .... ..."  ....  .....  .. ... .,.. ...
 . .. . .. 
State and Federal level supported in 
BE? 
whole or in part by user fees; some of 
. WHO 
the agencies charging user fees are, like 
FDA, expressly constituted to protect  1bFDAis. not. theonJagency where 
the public from harm. Further geemerit ha. evedover "who benefits" 
, they 
fr9Dits regulatory acivti

suggest that the fact that regulation 

mandatory does not constitute pria TheNillearReguJatOCo  ion. sucafull 
defende its fee: schellleln ..  broughtbefore 
facie evidence that regulated firms 
theoouribYPetitionersarguing they deried no
derive no benefit from FDA activities;  pri  bCnefit from NRCaciVties.. The court 
nor does the fact that FDA product  agree  thNRC' scontentionthar regulated
firm dcfirdC: deri a 
review activities are mandatory prevent  thiraCtivitil:. .fM  isipprpiait Pe obewnerf&it  . from 
Light Co.
imposition of user fees (even under the  . v':rC 
F1fth.. Circuit Court of. Appels

strict rules of 10M), because firms  rejececftl1  rgumenL thafthe NRC benefits

cjnlthe ger1atpublicand doe not confer .

voluntarily enter a regulated business.7
 fuat  fits 9nlieens;..
. The. court's opinion 
sta1Ccibat;';Nationai Cable (Televiion 
In this view, the beneficiaries of FDA'  ASi:ijon/lnc. v. Fcq. the court recognized 
theiluthorityof tbeFCC to asss a 
regulatory activities include commercial  fee. even 
tfugh' themain function . of the Commision is 
firms and the consumers of their  to Saeg1ard thep blicinterest.'  415 U. 
products. While public benefits accrue  341  94S.Ctarn49  The Court thus 
ackl0wledgedthe FCC's authority to asss 
in the form of general 
improvement in  againt applicants a fee for servces rendered 
health and safety, psychological  nothwithStanding the strong public interest served 
reassurance regarding the availabilty of  in PrOvdirigJhe  rvce;... 
safe and effective drugs and devices  Iicens. frrn the. NRCis an abslute 
and protection from the spread of  piei  uistetooperatingariuclear facility, and as 
sll  iSa  nefi' no shared by other members
communicable disease controlled 
bfSoiety;  .Aside from. the . benefit of being able
through Fl)A-approved drugs, the  to operate a busines, the. petitioners are. 
consumers of such products and firms  recpients9fother beriefitsflowg from the

grntor a licens . or pennit..
which manufacture the products derive  inpei(). (R Joutine
c6ducedby theNRC could uncoer 
special private benefit from FDA'  hadous**nditions which ifallowed to
(:tinu 
regulatory activities. Consumers get  wot1ld jeopadize the Safe operation of
license sfacility.  Inshort, We are nm
safe and effective products; and while  ilprCSbythepeitioners 
argument that they
attaching a user fee to consumers of  . reciVenObel1efitfrom the conferral of an NRC 
licens; . Even 
such products may not be practical,  sO; to aCcpt. petitioners' argument

asss

would mcim that  no  federa agency could 
charging the manufacturer " anyfeej 
provides a  sinee 311 publi agencies are constituted

convenient, though admittedly imperfect  iI the. publi  ter
es~ 
conduit for passing through some or all 
Th First Cin:uitCourt of Appels cotinued thi 
of the costs of the reguatory agency line of renig in holding in New England 
forward to consumer beneficiaries."8 In  POwer. Company, et al. v. NRC that "revew work 
addition, a regulated firm reaps certain  performed by the NRCat the reque:t or an 
applicant. constitues a. suffciently substantial and 
benefits from FDA's review, approval  parlicularidbenefit to. the applicat to justify
inspection and enforcement activities:  the impoition of fee" even where the 
application is voluntarily withdrawn. 
permission to market a product 
increased consumer confidence in 
industry s products, reduced exposure (and potential liabilty) for 
businesses that  .. 
. '
. '
..  ....   .. ' ... 
. "..  ....... . ' ."' '.....   ."y"..." .....,..... "... .....,.." . . ..  .... ..... . . ....... ...... .. . .  . ...... . ., .. . ... . . ..q.. ".. '  ..'........ .".'.. ," . ..."..... ... . . ..... "... ... .. " "".....  ... .....  ...
might have marketed a less-than-safe product except for FDA' 
s oversight, improved
products resulting in better sales
, and protection from unfair competition. 
The act of imposing a upsrr fiee  creates cert benefits and costs which may by
themslves provde the  impeent 
impetu or  to the charge. These
benefits and costs may accrue to the 
agency or program instituting the fee, to the
users themselves, and to the 
general public. Exbits 3 and 4 list the possible 
benefits and costs to these groups.

EXHffIT3. . 
POTENT. 
OFUS:ERFEES 
:ENEFITS 
. n. "

To theAgency. 
Users  To the PUblic

To the 
Peripberarbenefitso(cos
accunting  . Can challenge ageI1CyoI1.  . Relieved or cot. burden unless.
.servce  cots .  auser orditect beneficiary
Revenues act as "demand  . More rapid  etfeciVe  Qpportunity" benefit; . allow
Signals" which allow the  servce  . exting reSurCe to be usd 
. agency to allocte resurces  for other, more public goo
. effciently improves governmenta  pruct and servces 
effciency
Increa 
reveues which. a)uld

be use. forexpnsi()o . of seCe

. or improvment. in. exiStg servces

PpjXrtunit:" .. benefit; allO . exiing

.resurces to. be. used forpther  more

public gOo, proucts arid. seces

. AII() Jotr  upmerif()(Cots frm

thosootSidedirecttaba .

llof  goo

GOritrols  servce or 
ul1gesmiuse 
courages

eco 
The priary benefit of imposing user fees is generally considered the increased
revenue they generate, which might be used to continue
, expand or improve 
existing
servce. For some, these increased revenues might be important enough to overrde 
other objections to the imposition of fees. However, it has been suggested that other 
benefits can accrue to the agency imposing the fee, the general public, and even the
users themselves, when user fees are imposed. For example, the agency may become
more aware of the 
costs of its activities, better able to identify 
needed system
improvements, and more motivated to make those 
improvements. If fees are related
to both intensity and tye of servce, the agency can use the fees as a measurement
of resource requirements and a way of meeting those 
same resource demands, and
users are more responsible for the use of 
resources.  .. 
... ..... ........ ........... ..  .. . '....   ..."..". ...'' ".' ....'...'..'.'.'..'... .., ."..'. ..... ....... . ......  . .... .. .. ......,... . . ................ ... ..... ... ......,..  ...... .  ..  .. ... ...... ...  ... .......  . .......  .". .  ...".. "....."....  .... '.  ....," ...... .. ,..'..''..',.. ''. ". '..'.'.... .'. ..... .'.. ' . .'.'. ,.. "...... .  ."..... ..". .. . ."......'..' .'... ....... ...  .......'.'..'.." .. ... ..... . . '.......   .  .. ..'...... . . ........ .. .,  . ."..'.'...........,....... '.''.... .'''.,.....  .

XFmIT4. 
POTENTIA .COSTSOPUSER 
FEES. 
. Tgih  &encY.  ToihetJsi/fs  TOlhiPublic 
RevenueSmayrif  the .  Le MfuentuScCs aLa
Co ()f8diniiionr.oir  ..  diSCintage .  .....In  ration 
OOlJecri  mayJ:t .
. Disourages us  ..Use. may adjust their
fUnd to Want the effor  Payingfor.8 baicse(V 
:ohrmaafebea .n toeOsfnfuuel c9t . beJuvirin solly.
undesrabJe .ways

. Cotsn-"u-r1 on to 
not accpftJeuJe e.  ;t:os:; . 
JI':)L1ibSlic  will 
ageS u 
)hepr 
threby .
1I it 
i1c6  rages  gaming  . u

Redu.  regularbudget .

appropritions.. . .

I.gal 
halJenges . 
Users themselves benefit from increased effciency and 
accountability in agency
operations, as well as from system maintenance and expansion made possible as a 
result of collected revenues. In addition
, users directly charged for servces are 
better able to document and challenge agency activities affecting their industry or 
business. 
At the same time, user fees have certain costs beyond the fee which the user must
pay. As a practical matter, fees might be 
difcult to administer and may be too
small to warrant the effort of assessment and collection. Further
, the collection of
fees may result in a reduction in agency appropriations in the amount 
of expected
collections through fees, a signicant concern to program offcials worred about 
possible "shortfalls. 
The public may not respond positively to the imposition of fees
, even where it
relieves them of cost burdens, based on tneir fears that 
agency or user behavior
might be adversely or inappropriately 
affected. Regulatory offcials might be
particularly concerned that the agency 
s role in protecting the public from undue
fis 
health risks might be compromised by user fees; 
might charge that the agency
is conducting inspections only to increase revenues
, or that it is reluctant to impose
severe penalties on firms because such firms represent the funding 
source for the
agency. Firms might be discouraged from or 
delay applying for agency approval to
engage in various activities because of the user fee. 
The possibilty of legal challenge to the fee represents 
another possible cost of 
imposing a charge. Federal agencies have been challenged on 
their authority to 
institute fees and method for 
assessing fees.  . . ... ...... . .". .. . .."., .."..... "..  ..."". ' "~:........,~ ... .. ..~.......  .... .". '
' . ... .. .....  .....~.  ...~ . . ......~....  ..." ~ ...'..... "...  . ..  . ........ ......  ... ...... .. ..... .. .. . .
Numerous considerations should be taen into accunt when developing the pricig
strcte 
and fee  of a usr charge. Some of these considerations are listed in 
Exibit 
.", n..

prOvding thei.  rVorprbdticL

t6f 
':M*igin8I  ofprodfugthe. Sece or product .

riIiti 
;g:;publi benefits 

. FEff  ODuse  gaVior .

treciv fr 
4:;  itY  ??t1	 mceor. product 
';Yei'c ileq 
7Abilio6ft  r to 
The degree to which each of these considerations is taken into account would 
signficantly affect how fees might be structured in FDA If 
we synthesize various
approaches to developing fee schedules based on possible application to FDA 
activities, the following 
range of options emerges: 
Consideration	 ADDlication 
Cot	
Fees based on actual or estimated 
costs to the agency of
processing applications, conducting inspections and surveilance. 
Firms applying for FDA approval or market clearance 
or being
inspected would be charged for the cost of 
providing that 
servce. 
Equity	 Fees based on abilty of firms to pay charges. Total agency
costs for various functions might be allocated among regulated 
firms based on sales, profits, market share
, or other indices. 
Industr Benefit	 Fees based on benefit of FDA regulatory activities. Fees 
discriminate among activities based on anticipated benefit 
to the 
firm , user charges might be applied to approved drug 
, e.g.
applications but not for nonapproved drug 
applications. 
Soal 
Benefit	 Fees based on social benefit of various 
industry activities
, e.g.
full or partial waivers might be instituted for applications for 
important new drug therapies and 
applications for drugs to treat 
contagious diseases (one example might be AIDS drugs).  Competition	 Fees based on market factors , larger firms might be charged
,f ei.sg. 
at a higher rate than smaller 
to encourage new competitors
in the market; firms requiring more frequent 
inspections because
of past violations might be charged more than firms in 
continuous compliance to reflect comparative costs of oversight 
and to provide incentives for improved compliance performance. 
Accptace	
Fees based on expediency and past success of simiar user 
charges , fees might be developed to ensure acceptabilty to 
, e.g.
the Congress and the court, industry, agency offcials, and 
consumers. 
dmjnj~trtion	 Fees based on ease of administration  , flat fees reflecting
, e.g.
average agency costs for processing certain 
fis  tyes of applications;
must include payment along with applications rather than 
being biled.

In practice, user fee systems reflect consideration of many of these 
concepts. User
fee schedules at EPA, FCC
, FERC, and NRC are based primarily on 
cost to the
agency. But the agencies have also instituted waiver 
systems to take into account
social or public benefit and effect of the fee on 
competition. For example, FERC
bases user fees on costs to the agency, but allow waivers for certain licensees 
(municipalities and firms in financial diffculty); they recover the remaining portion of 
their budget through annual charges 
which are assessed based on the market 
standing of licensees. A somewhat similar system is in place at NRC and EP A and 
with the exception of annual charges, at FCC. 
Administrative feasibilty is also an important 
consideration. Complex 
systems which
seek to impose user charges based on precise 
calculations of costs and complicated
waiver criteria are diffcult to 
administer and resource-intensive. Agencies tyically
try to strike a 
balance between such precision and administrative simplicity. 
Little consideration is given to industry benefit (although at EP 

A, registration for
pesticides with "minor use" are exempt from the fee schedule to take effect in 
1997;
the equivalent exemption at FDA might be for orphan 
drugs). No system among the
four agencies bases any. of its charges on whether the agency ultimately makes a
decision that is favorable or unfavorable to the 
applicant. Offcials thought that
developing charges based on benefit to 
industry would be more difficult to develop
and defend in court than 
charges based solely on costs
, as well as creating larger
conflct-of-interest problems for the 
agency.  ..  .. 
... .
.. '
. '
... .....'... .. "  .''....   '".". .. 
.. ....  ... ... "" . "" .... . . .
dmjnj~terig and collecg fee ca represnt a substatial inestment of 
tie.  agency
resurce and 
Officials at the four agencies we visited agreed that "user fees are work." Fee

schedules must be developed;

regulations published in the Federal 
Register outlinng the fee schedule (if 
not detailed in legislation) and the  IMROVJG ADMITI..EFCICY 
collection mechanism; public comments 
To. iIIproveadministrntive effclencyand reduce 
received and considered; procedures 
adD1nistrativecOts for thecoJJ  tion()fuser
developed to account for incoming  fee;tbeFCC ha entered. irtoa  agreement 
Withaldc 
funds, returned checks, insuffcient  boX"()perator  FJrmssend. their 
appljctior, paynentand paynent
amounts included with figs, and  lok booPerat()rwbodepotsthJe(f)eremitro  the
the

biling; and procedures instituted for  .. tJ.s.Treaui';  f"Oresia1I)Iar  fiings, the

adjusting the fees on a periodic basis.  pa)'nt fornf!1d paYment  resenttotheJock

. bo operator \Vfe the  pplicati(mis depoited

Because of these complexities, offcials . direetly Wi the FCX: The 
th  operation of the
estimated that FDA would require at  . lOk booperatorisfundedby. the Treaury.

least 1 year to implement a user fee  Jh FCC i1implementedb. tahis  approach to

collecion andaccoting.  pat .
. on 
system. 
eXprience, which wa not positive, of mairtaining
acoUectionandaccounting operation withi the 
Officials at NRC and FERC COmmiion  The FCC found this. internal 
, which  operation to be difcult. to manage and to stff

have annual charges to supplement  and. exprience significant procesngbackJogs of

specific processing and inspection fees  2to3weeks,  The FCC estimates tPhaUrhoe 
suggested that annual charges are easier  averagetim  . for applications to be 
the lock bOoperator and received by FCC
to administer. At FERC (though not at  . Bureausror substative procing 
will. be 2 to 3 
NRC) officials thought annual charges  daYs. .. 
were better accepted by 
industry
because they are based on a measure of 
ability to pay," even though such charges can result in fis 
which have not received
a particularized benefit from the agency 
s activities (for example
, those that have not
made a filing with the agency durig the 
year) being charged to support those
activities. But not 
aU annual fees are easy to administer--
EP A reported diffculty in
assessing its reregistration fees because tne 
Congress required the agency to prorate
charges in certain cases based on market share. 
This approach requires the agency
to maintain records of market share
, an index constantly in flux and requiring 
continual adjustment.

Questions for policyakers considerig FDA usr fee include: (1) determg 
tig the
actities to be included or supported by the fee; (2) determg 
the 
asessment; (3) settg the fee; (4) decidig where the fee should be deposited; and
(5) relatig the fee to the procss.  Determining the activities to be included or supported 
he fee 
One of the first decisions to be considered is what activities should be included in 
the user fee schedule. For example, to regulate new drug products
, FDA requires
submission of investigational new drug 
(INs) and new drug applications (NDAs).
Once a product is approved, the agency conducts inspections of facilties producing
approved drug products, collects and analyzes 
report of adverse drug reactions
associated with approved drug products
, and requires submission of NDA

supplements when certain changes in 
manufacturig or 
labeling take place. 

similar set of activities takes place for generic drug and 
device clearance and

approval.) Some proposals have focused on 
assessing fees for processing NDAs
rather than the whole spectrum of activities associated with regulating new drug
products. Ths approach has the advantage of adminstrative 
simplicity; it has the
disadvantage of either limiting cost recovery for regulatory activities or of 
subsidizing
these activities by charging higher fees for NDAs. 
While firms which submit NDAs
for FDA approval may "
use" more FDA servces in the way of IND review and
consultation, inspection and other surveilance activities
, this relationship is imperfect.
Some firms may submit numerous INs 
for which an NDA is never 
submitted; some
NDAs may not be approved
, so no inspection or surveilance activity is required for
that specific product. 
The most complex system is one is which each discrete function or 
tye of activity
performed by the agency is charged to a specific user. However
, this is not always
feasible, equitable, or necessary. For many FDA functions
, especially those other
than premarket approvals and inspections
, FDA would face a formidable task to
identify the right firm to charge. In 
such cases, one manufacturer might initiate an
action with benefits to a larger group of 
manufacturers (device reclassifications
, OTC
switches) or the identity of the manufacturer is obscure (e.g.
, standard setting,
research, over-the-counter review, postmarketing surveilance reports). 
As a result of 
congressional authorization, other agencies have moved to a
combination of user fees and annual fees 
which alleviates this difficulty. The 
NRC 
bils for application processing and inspectons while recovering an additional portion
of regulatory costs of generic 
activities through annual charges. The FERC and EP
have also moved to a combination of user 
fees and annual charges to more 
fully
recover total agency costs. 
Determining the timing of 
assessment 
Another key decision for policymakers developing a fee 
system is when to actually 
assess a fee. For example, a user fee for NDAs might be 
assessed at the time of
filng or at the time of approval. 
Assessing the charge at the time of filing more
fully recovers agency costs, encourages manufacturers to submit only those
applications with a reasonable chance of approval
, and reduces possible conflcts of  . ' . . 
.... 
... . .. " ... . .. . ... ....
interest (agency incentives to approve products in order 
to increase revenues). 
Assessing a charge at the time of approval has the advantage of more clearly linking 
the fee to particularied benefits to the manufacturer. The 
Federal agencies which
we visited all assess charges at the time 
of filig, even though, lie FDA, they may
take months or years to complete a review and make a determination that may 
ultimately be unfavorable. As discussed earlier, NRC successfully defended its
practice of charging a fee even when a firm voluntarily 
withdraws its application on
the basis that even applications which are withdrawn incur 
costs to the agency.
Thus, EP A, FERC, FCC and NRC all assess fees based on agency costs rather than
a favorable agency decision. Officials believe that this approach, in addition to
following the requirements of Circular A-25 (which indicates that costs should be 
recovered rather than the monetary equivalent of private 
benefits when Federal 
activities have incidental public benefits) is also easier to defend in court. 
Setting the fee

What are the agency costs to process 
various tyes of applications, inspect  WHT OOFSIT 
facilities and goods, and meet other 
regulatory obligations? The sidebar  At NRCandFERC, fee are bcaod  on strict 
tra  nganddocumentation af 
describes the approaches NRC, FERC  by agency
employee. Employees supply infonnation on 
EP A, and FCC have taken to answer  tie spnt on various categories of aCtivities; that 
this question.  information is. entered. into lime accounting 
. Sytems. Averagc:eotsby category of activity
aredeterminedby tabulating the number. of 
Ideally the agency should consider, in  employee hours spnt on the activity, determining 
setting fees, the economic adjustments  otbowmpoIrtkeldoQafdii nfogrs )t,h aant da cdteivlitoyp. (ieg.g a.,n n uamvebrearg eo f 
that will occur based on the fee amount  ar 
. /1l1r1 cot per employee. Hours .  divided by 
and placement. Rational consumers
 ldoad an  .l!ultiplibj~he hourly cot 

make economic adjustments on the  jjguraveragerots fo aciviies within that

categor,  l1e fee schedule . .is.updtedannually
basis of anticipated benefit and cost.  ontheDewyea scIuian employee hours 
Such decisions may work in favor of  and rates (FERCis . starting to average cots over 
yea period). 

efficient use of servce, but underuse or 
overuse may also occur. Set too high, a  At EPA, cots of the registration program were
fee can discourage manufacturers from  domented. using information from. the. agency 
accntig, 
tjme.  tracng, management, and 
producing drugs and devices. Too low 
ficil syem, along with input from program 
us a 
a fee induces overuse of agency
 offcial. The FCC  more general 
resources and servces. ' In the case of  approach to develotp yest imated cots for 
procssing. various.  of filings and conducting 
FDA, althougl: manufacturers incur 
inspections.b Thae  FCC Schedule, while very 
costs to prepare applications, the  detailed, is  primarily on its budget and COt
absence of a fee or too Iowa fee  alloctions within. its bureaus. 
may 
nevertheless induce submission of 
applications that the manufacturer 
consideres to hold little prospect for 
success.  (Such "overuse" of FDA resources  might be indicated by the volume of withdrawn 
applications or approved applications 
yielding no marketed product.) 
Regardless of where the fee is set
, some degree of economic adjustment 
wil1 occur.
The net effect of these economic adjustments may be either positive or 
negative.
Where a fee is charged for a previously "free" servce, some reduction in demand can
be expected to occur, although in a regulated industry with 
fees imposed on profit
makig fis, the effect may be muted (especial1y if marginal costs 
are relatively
low). Firs may also merge capital and resources in order to reduce 
marginal costs.
While offcials at FERC and NRC saw little to no effect on 
industry as a result of 
their fee systems, EP A offcials did 
report that smaller businesses were adversely
affected by their reregistration fees; a number left the 
pesticide market, resulting in a
smaller number of fee payers and higher 
charges for those remainng. 
Waivers may be one solution to correct undesirable 
economic adjustments, although
a waiver system increases administrative complexity. 
Waivers can be based on the 
characteristics of the applicant (e. 
, smal1 businesses, nonprofit businesses) or on the
nature of the activity (e.g.
, products with substantial ''benefit spilovers " to the general
public, such as drugs or devices representing important new therapies or drugs to 
prevent the spread of communicable disease). Waivers will 
also tend to encourage
the activity to which they are 
applied: higher fees for certain activities will 
encourage firms to move resources towards those 
activities for which lower charges 
are assessed.

Generally it is assumed that FDA user fees 
would result in consumers paying higher
costs for products regulated by the agency. To the extent that fees assessed by FDA 
raise a fi's overall costs, the firm may increase pricefsi.  (Price increases and fees
would not likely be linked product-
by-product when a  sells a 
lie of products.
To some extent any additional 
costs passed on to the .consumer would be offset by a
reduced tax burden. However, this shifting of costs might prove troublesome to
those already concerned about the high price of drugs and 
medical devices, or who
are concerned about trading a 
progressive (income-based) funding source for a
regressive (flat) funding source. The 
higner price would also induce consumers to
reduce purchases or substitute out of the higher-
priced products. If fees 
were to
become a significant part of overall costs
, affected products would be placed at a
disadvantage in competition with substitute products not burdened by 
significant fee
expenses, and consumers might be made worse off as a result 
of having to make
substitutions in the face of higher 
prices. 
Deciding where the fee 
should be deposited 
Revenues from user fees can be deposited as 
miscellaneous receipts in the general
fund of the U.S. Treasury, to reduce the budget deficit or to 
offset agency
appropriations, or can be 
directed to the agency for general or specific use
, as  through a special revolving fund. 
Earmarking the revenues for use by the 
F.A'S. REOLVIG 
agency for specific purposes (e.g.
, to 
fund improvements and  Fund colleced 
expansions in  through EP Nsuser fee charges 
for reregitiOn pring 
existing servce areas for which the user  and . maintenance 
fee are depoted in a newly created
fee is imposed) may increase the 
reregitrtion . and exted. proing fund
lielihood of their acceptance by  th.  S; Treaury, . available to. the 
AdmiisratO
industry and others.  , without . fiyear limitation
Fungibilty of funds  carr out. reregitration an exted pro,i ntog . 
may be such that earmarkig is largely of similar applications,
 Th singiJlar legislation
cosmetic. Special arrangements have  reqires that 
collec. funds are earmarked to 
supp. 
been devised to improve credibilty that  the actties . fOr whih . they wee
coJIected andaIlbw the agency flexibilty in using
earmarked funds will be used in a  the funds thought 
irne  the reregiration period as 
particular way. The EP A's arrangement  fu  the.. The EP A is using some of thes
to iipprovr  . 
its data management sytems
( see sidebar) for the disposition of fees  and internal  an 
and procdures  the
is unique, and EP A officials considered  bulk. of the monies to . expnd . the agency

this element of the user fee  scentific  stff.

system to  exrtis and 
be critical in obtaining the 
necessary

industry support for the fee program. 
ReJating the fee to the process

Another key consideration is how the user fee wil 
affect and reflect how FDA does
its business. For example
, some drug manufacturers, in a previous study conducted
by the Offce of 
Inspector General, criticized the FDA for 
inconsistency in reviewing
and approving applications for new and generic drugS.l0 An 
audit conducted by the
OIG confirmed that there is 
significant variation in elapsed time to approval for
applications submitted by different manufacturers to different 
reviewers for the same
generic drug product.ll If such variabilty is due to differences among FDA 
reviewers in workload
, skill level, and requirements they impose
, then it is more 
defensible to develop a fee which represents the average cost of 
category of application. Thus processing a

, manufacturers whose applications are 
assigned to less
experienced reviewers, reviewers who hav 
more applications to review
, or reviewers
with more stringent standards
, are not unfairly penalized by the assignment. On the
other hand, if the 
differences in review times are attributable to 
adequacy of applications submitted by manufacturers differences in the 
, it might be more 
defensible to
charge a fee based on actual 
costs so that manufacturers which prepare better 
applications are not subsidizing those firms which submit less than adequate
applications. 
As experts review FDA'
s mission and performance
, procedures and protocols might
be altered. Significant changes in FDA functions or procedures might affect 
the 
advisabilty of charging a fee for a particular function
, and might create a greater or
lesser case for imposition of a fee. 

For example, some manufacturers have 
that FDA reduce its  suggested
involvement in the IND stage of 
product development while  others want increased FDA involvement at this stage.12 One possible response is for 
FDA to make its involvement at the IND stage 
voluntary. Manufacturers who
wanted to consult with FDA at this stage in order to better ensure that their NDA 
would pass muster could do so, while those that felt they had sufficient in-house
knowledge could proceed without FDA 
oversight. Under such a system, a user fee
for IND review and consultation would appear to be very appropriate: 
manufacturers
who feel they need and benefit from FDA 
advice and guidance would be charged a 
fee for that consultation.

User fees to recover the 
costs of inspection activities represent another area where 
process is an important consideration. The amount of variabilty and 
discretion in 
how inspections are conducted leads to a set of questions similar to those we rais
in regard to drug application review. Further, if routine inspections are conducted
randomly, with some facilties never or infrequently visited by FDA, 
charging the
establishment under review a fee for the cost 
of inspection unfairly penalizes the firm
randomly selected for review. However, if every manufacturig or 
processing site is 
inspected within a certain period (even if the period is one of years, as with drug
and device manufacturing inspections), an equitable fee may be more 
easily assessed.
For some of these areas where the nature of the activity 
precludes easy assessment
of a fee, annual charges spread throughout industry might be the preferred 
solution.  SUMMARY 
The question of whether to 
assess user fees in Federal programs is a 
contentious
one. Considering user fees as a method of funding for a particular program or
agency precipitates debate which continues as any legislation and implementing 
regulations take form. 
Because imposition of fees involves charging users for 
servces 
previously funded through general appropriations
, questions of equity, effciency, and 
externalities naturally arise. 
Based on our review, we believe that user fees in the Food and Drug 
Administration
(FDA), properly instituted
, represent a legitimate method to recover regulatory
Such fees would be consistent with fee  costs. 
systems in other Federal regulatory

environments. However, as this report demonstrates
, developing a fee 
FDA is not a simple matter. Even so, while time and resource intensivseystem
, the process
of developing a fee system might 
have its own benefits 
ncluding increased scrutiny 
of procedures and tasks and the 
costs of doing business.

In all four cases we examined
, the Envionmental 
Protection Agency (EP 
Federal Communications  A), the
Commission (FCC), the Federal Energy Regulatory
Commission (FER C), and the 
Nuclear Regulatory Commission (NRC), the Congress
has passed and the President has 
signed into law specific components of their user
fee systems. While such 
legislation can range from the more general (authorizing
agencies to collect annual charges
, as with FERC and NRC) to the more 
specific
(delineating an actual fee schedule, as with FCC) it is 
generally considered preferable
to sole reliance on the general authority in the Independent 
Act.  Offices Appropriations
Specific authoriing 
legislation allows for expanded authority, more flexibility,

and greater protection from legal 
challenge.

While we have not attempted to examine 
exhaustively how user fees might be
implemented in FDA, our 
review does suggest a number of 
One of these is possible use of a hybrid system of annual chiasrsgueess  afnord  consideration.
specific user
fees. Annual fees at EP A, NRC, and FERC have 
worked well, especially in concert
with specific user charges. Such 
a hybrid system has increased cost recovery without
requiring detailed assessment of charges for every agency 
activity. 
The framework provided by this report might be used by other 
agencies within the 
S. Department of Health and Human Servces (HHS) as they
consider
implementing user fees in other areas. 
While this report is 
specifically tailored 
toward examination of our case 
study, FDA, the structure of 
considerations and 
questions may remain much the same for any HHS program. APPENDIX A 
SUMMARIES OF USER FEE 
SYSTEMS

IN OTHER 
FEDERAL REGULATORY AGENCIES
 Appendix A: Summaries of User Fee 
Systems in 
Other Federal Regulatory Agencies

ENONMNTAL 
PROTECI0N AGENCY (EA) 
(1) 
Type of fee  Reregistration fees and maintenance (annual) fees. 
Amount of fee 
Reregistration fees are variable, and based on characteristics of
the pesticide such as the number and 
tye of 
active ingredients
and end use. Fees are 
paid collectively by all registrants of the
pesticide. One-time reregistration fees range from $50 
000 to
$150 000. Maintenance fees are based on number of product 
registrations held. Maintenance fees in FY 1990 are $650 for
the first product and $1 
300 for additional registrations
, with caps
on the total fee for anyone part 
holding registrations. 
Legal authority 
Public Law 100-532, enacted October 25, 1988 and effective 60 
days later. Authority terminates in 1997.

Disposition of fee  Reregistration and expedited processing fund in the U. 
Treasury, "available to the Administrator
, without fiscal year
limitation, to carr out reregistration and expedited 
processing of 
similar applications" (e.g., so-called "me-too" applications). Pub. 
L. 100-532 s 102(k)(2). 
WaiveT:  For reregistration of pesticides for minor use and partial 
waivers 
for small businesses.

Adjustments  Fees subject to adjustment by EP A 
Administrator in order to 
collect $14 000 000 each fiscal year, except that maxmum
maintenance fee for Ji registrant with 50 or less 
registrations is
$20 000, and for a registrant with more than 50 registrations 
$35 000. 
A -1
 , "
Appendix A: Summaries of User Fee Systems in 
Other Federal Regulatory Agencies

ENVONMNTAL PROTECTON AGENCY (EA) 
(2) 
Type of fee  A pending fee schedule (to be implemented in 1997) will 
establish registration fees for (1) new chemical registration 
reviews; (2) new biochemical and microbial registration 
reviews; 
(3) new use pattern registration reviews; (4) old chemical 
registration reviews; (5) amendment review; (6) experimental use 
permt reviews. (This fee schedule was in effect for a period 
FIF 
6 months prior to its 
suspension under  of 1988. 
Amount of fee  The pending fee schedule establishes the following charges (1988 
costs): $184 500 for new chemical registration reviews; $64 000 
for new biochemical and microbial registration review; $33 800 
for new use pattern registration 
review; $4 500 for experimental 
use permit review; $4 000 for old chemical registration review; 
$700 for amendment review. 
Legal authority  31 U.  c. 9701 and Public Law 100-202. Proposed rules 
implementing the fee schedule were published citing the 
authority under 31 U.  C. 9701. Subsequently, EPA's FY 1988 
appropriation (Public Law 100-202) authorized EP A to collect 
not more than $25 milion for its regulatory activities. The final 
rule implementing EPA's fee schedule cited both 31 U. 
c. 9701 
and Public Law 100-202 as its authority. EP A's proposed rule 
was published November 1986; the final rule was published May 
1988. Public Law 100-532, FIFRA of 1988, postponed 
implementation of the fee schedule until September 
1997. 
Disposition of fee  Under Public Law 100-202, fees for the agency s regulatory 
activities will be deposited in a special fund available for 
appropriation to carr out the agency s activities in the programs 
for which the charges are made. 
Waivers  The agency may waive the fee when (1) it initiates the 
amendment; (2) the anticipated revenues from the uses 
described in the application are insufficient to 
cover the fee; (3) 
the applicant will experience severe economic hardship; and (4) 
applications are for pesticides servng significant public interests 
(e.  pesticides offering unique advantages for reducing public 
health risks, those that significantly reduce a current 
environmental risk, or a product with extraordinary utility in use 
A - 2
 Appendix A: Summaries of User Fee Systems in 
Other Federal Regulatory Agencies 
in Integrated Pest Management"
). Firms must submit a waiver 
request, and pay a fee for the review of the 
request. If the
waiver is granted, the fee is refunded; if the waiver 
is denied 
the agency retains the fee. 
Adjustments	 Based on periodic review of agency costs. New fees 
will be 
established through rule making. 
A - 3
 Appendix A: Summaries of User Fee 
Systems in 
Other Federal Regulatory Agencies

FEERA 
ENERGY REGUlTORY COMMSSION 
(FRC) 
TYpe of fee  Pilng fees for applications, petitions, requests for review and
certifications. The FERC has 
established 31 different categories

of fiings for which fees are assessed. Annual 
charges for the
cost of operating FERC which 
have not been recovered through.
processing fees are assessed against companies that hold 
hydroelectric licenses, natural gas pipeline companies
, public
utilties, and oil pipeline companies. 
Amount of fee  1990 filing fees range from $26 
260 for a pipeline certificate
application to $80 for review of jurisdictional 
agency 
determinations. 
Legal authority  For collection of filing fees
, 31 U.  c. 9701. Annual charges are
authoried by the Federal Power Act, Part I (16 U. 
c. s 991

828(e) and Pub. L. 99-509, s 3401(a)(1), Omnibus Budget

Reconciliation Act of 1986.

Disposition of fee  Credited to FERC's Proprietary Fund. Any revenues in 
excess
of FERC' s appropriation are credited to the General Fund of 
the U.S. Treasury. 
Waivers  If applicant is suffering severe 
economic hardship at the time of
filing, a petition for a 
waiver may be fied. State, municipalities
and anyone engaged in the offcial 
business of the Federal 
government are exempt and may file a petition
exemption.  requesting such 
Adjustments  Updated annually in the Federal 
Register. 
A - 4
 Appendix A: Summaries of User 
Fee Systems in 
Other Federal Regulatory Agencies 
FEDERA COMMCATIONS COMMION 

(FCC)

Type of fee	 Applications for broadcast 
licenses. 
Amount of fee	
The COBRA of 
1985 established 80 fee categories. Fees
from as low as $20 for renewal of a cellular  range 
system license to as
high as $18 00 for an application to launch and operate a space
station. 
Legal authority	
Consolidated Omnibus Budget Reconciliation Act of 1985 
Law 99-272, Section 5002( e) and  , Public 
(f), codified at 47 U. 
c. s 158.

Disposition of fee 
General fund of the U.
S. Treasury "to reimburse the United
States for amounts appropriated for use by the 
carrng  Commission in 
out its functions...
" 47 U.  c. s 158( e). 
Waivers 
No charges to radio servces of local government

, police, fire

highway maintenance
, forestry-conservation
, public safety and
special emergency radio
, or other government entities. No
charges for good cause in the public interest. 
Adjustments	
Schedule to be reviewed every 2 years and adjusted to reflect 
changes in the Consumer Price Index. 
A - 5
 , " , " , "
ENDNOTES 
1. Office of Inspector General  Analysis of Costs Included in Current Food and 
Drug Administration User Fees and the Potential for Additional 
User Fees

December 1987, A-01-87-02522.

2. 
J. Peter Grace, Chairman, President's Private Sector Survey on Cost Control  War 
on Waste (New York: MacMilan Publishing Company, 1984. 
3. Audit Committee, President s Council on Integrty and Efficiency, "Audit of the

Establishment and Collection of User Charges 
" p. 3.

4. House Report 82-384
, p. 2
5. At one time this view was widely held; as evidence, the 1959 version of OMB 
Circular A-25 which provides executive guidance on Federal user charges explicitly 
used FDA approval of new drugs as an 
example of an activity particularly il-suited
for user fees. The latest version of OMB Circular A-
, circulated in draft July 
1987, uses the same example to demonstrate appropriate application of 
user fees. 52 
Fed. Reg.

6. See Milton Kafoglis  User Fees as a Regulatory Tool " in Thomas D. Hopkins
Federal User Fees: Proceedings of a Symposium, Administrative Conference of the 
United States, Washington, D. 
, 1988, p. 18. 
7. In National Cable Television Assn. v. U.S. the Supreme Court 
distinguished taxes
which are levied by Congress, from fees 
which are levied by Federal agencies based 
on authority contained in 10M by developing this distinction: A 
fee "is incident to 
a voluntary act, e.g., a request that a public agency permit an applicant" to do 
something. Hence the Court took the view that 
applicants enter a regulated industry 
voluntarily, and thus amounts collected to support the 
activities of the regulating 
agency are "fees" rather than "taxes. 
8. Kafoglis, in Hopkins
, p. 15. 
9. See for example, National Cable Television Asso. v Federal Communications 
Com. (1976) 180 App DC 235, 554 F2d 1094; Mississippi Power & Light Co.
United States Nuclear Regulatory Com. (1979
, CA5) 601 F2d 223, 51 ALR Fed 571
cert den 
444 US 1102 62 L Ed 2d 787, 100 S Ct 1066; and Skinner v. Mid-America 
Pipeline Co. (1986) 87-2098, 57 LW 4458-4462. 
10. Office of Inspector General, Office of Evaluation and Inspections  Perspectives
of Drug Manufacturers: Investigational New Drug and New Drug Applications 
" and
Perspectives of Drug Manufacturers: 
Abbreviated New Drug Applications 
" 12-90
00770 and 12-90-00771, February 1990.  , " , " " p.

11. Office of Inspector General, Office of Audit  Management Advisory Report: 
Vulnerabilties in the Food and Drug Administration 
s Generic Drug Approval 
Report;" August 1989, A-15-89-00051. 
12. Office of Inspector General, Office of Evaluation and Inspections  Perspectives
of Drug Manufacturers: Investigational New Drug and New Drug Applications 
12.  ,. 

, " , ", " , " , " , "
SELECTED REFERENCES

During the course of the OIG's literature review on user fees, the following references 
proved most helpful. Readers interested in more detail on Federal user fees should 
consult these sources.

Eastern Research Group Inc.  Federal User Fees: Data Compilation with 
Addendum" (prepared for the Administrative Conference of the United States 
symposium on user fees), Washington, DC, May 3
, 1988. 
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