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[Senate Report 108-51]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 104
108th Congress                                                   Report
                                 SENATE
 1st Session                                                     108-51

======================================================================

 
                    ANIMAL DRUG USER FEE ACT OF 2003

                                _______
                                

                  May 21, 2003.--Ordered to be printed

                                _______
                                

    Mr. Gregg, from the Committee on Health, Education, Labor, and 
                   Pensions, submitted the following

                              R E P O R T

                         [To accompany S. 313]

    The Committee on Health, Education, Labor, and Pensions, to 
which was referred the bill (S. 313) to amend the Federal Food, 
Drug, and Cosmetic Act to establish a program of fees relating 
to animal drugs, having considered the same, reports favorably 
thereon with amendments and recommends that the bill (as 
amended) do pass.

                                CONTENTS

                                                                   Page
  I. Purpose and summary of legislation...............................1
 II. Committee action.................................................2
III. Background and need for legislation..............................2
 IV. Cost estimate....................................................4
  V. Application of law to the legislative branch.....................6
 VI. Regulatory impact statement......................................7
VII. Section-by-section analysis......................................7
VIII.Changes in existing law.........................................10

                 I. Purpose and Summary of Legislation

    The Animal Drug User Fee Act (ADUFA) of 2003 (S. 313) would 
authorize a program of fees by the Food and Drug Administration 
(FDA) relating to the review of new animal drugs. Under this 
proposal, the additional revenues generated from fees paid by 
the animal health industry would be dedicated for use in 
expediting the new animal drug review process, in accordance 
with performance goals that would be developed by FDA in 
consultation with the industry. This legislation will provide 
resources to improve the animal drug review process through the 
hiring of new personnel and purchase and maintenance of 
technological management and information systems. The 
legislation will also increase the animal drug review program's 
performance capacity and efficiency, aligning it with the 
Government Performance and Results Act and the President's 
Management Agenda. The committee intends that the user fee 
levels reflected in this bill will be sufficient to meet the 
established performance goals that were negotiated by the 
industry and the FDA.
    With the additional revenues, if appropriated by Congress, 
FDA should be able to: (1) eliminate existing backlogs of 
applications within 2 years; (2) over a 5-year period, move 
toward the goal of completing the review of 90 percent of new 
animal drug applications within 180 days; (3) resolve new and 
emerging scientific issues that affect the ability of FDA's 
Center for Veterinary Medicine (CVM) to make approval 
decisions; and (4) achieve an enhanced and predictable review 
performance.
    S. 313 will extend the user fee approach to funding FDA 
animal medical product review activities. The legislation will 
directly benefit individual members of the regulated industries 
and speed access to new animal drugs for use by veterinarians 
and owners of agricultural stock and pets. The legislation also 
provides flexibility to FDA to adjust fees in appropriate 
circumstances.
    The committee recognizes the value of implementing the full 
5-year ADUFA program negotiated between the animal health 
industry and FDA through 2008. The committee also recognizes 
the value of the ADUFA being reauthorized at the same time as 
other FDA user fee programs are reauthorized. The committee 
anticipates that the animal health industry and FDA will 
initiate the ADUFA reauthorization process and discussions in 
2007, to allow Congress to concurrently reauthorize all FDA 
user fee programs in 2007.

                          II. Committee Action

    The S. 313, Animal Drug User Fee Act of 2003 was introduced 
on February 5, 2003 and subsequently marked up by the Committee 
on Health, Education, Labor, and Pensions executive session on 
February 12, 2003. At that time, Senator Gregg offered an 
amendment in the nature of a substitute that changed the 
initial authorization period for the user fee program from 4 to 
5 years, and that made several technical changes to clarify the 
language of the bill. S. 313 was accepted by unanimous consent 
and reported favorably from the committee by voice vote.

                III. Background and Need for Legislation

    Congress, in enacting the Prescription Drug User Fee Act of 
1992, Public Law 102-571 (PDUFA), for human pharmaceuticals, 
required FDA in section 108(a) to conduct a study to evaluate 
whether, and under what conditions, to impose user fees to 
supplement appropriated funds to improve the process of 
reviewing applications for new animal drugs under section 512 
of the Federal Food, Drug, and Cosmetic (FD&C) Act.
    FDA submitted a report to Congress in 1994. The report 
revealed several problems: inadequate review resources, a 
growing workload, and low quality applications submitted by 
industry. The combination of problems had slowed the approval 
process to an unacceptable rate. The report noted that if 
Congress were to consider legislation authorizing the FDA to 
impose and collect user fees, approximately $11 million would 
need to be collected annually.
    The problems identified in the report continue to persist. 
A prolonged decrease in resources in the 1990's resulted in a 
slower, less predictable animal drug review program. In recent 
years, while funding for CVM programs, in general, has 
increased significantly, most of these increases were earmarked 
for CVM activities other than its animal drug review process. 
Recent modest increases in drug review resources, combined with 
intense effort on the part of review personnel, have resulted 
in some improvement in review times. However, the level of 
effort needed to accomplish this improvement cannot be 
maintained over the long term without increased funds. The 
committee believes that a sustainable, predictable animal drug 
approval process can only be achieved with the additional funds 
provided by this legislation. Fees collected annually would 
increase from $5 million in the first year to $10 million in 
the third year and remain steady through the end of the 5-year 
period proposed in the legislation.
    The veterinary pharmaceutical industry, represented by the 
Animal Health Institute (AHI), believes it is appropriate that 
the sponsors of applications, who would receive substantial and 
identifiable benefits from improved and predictable review 
performance, should share in financing the costs associated 
with these program enhancements. AHI and FDA strongly support 
an animal drug user fee program.
    Most of the financial provisions of this act are patterned 
after those of PDUFA, as reauthorized in 2002, and are intended 
to work in a similar fashion. This includes provisions for 
annual revenue amounts, adjustments, and triggers. These 
provisions have been tested and modified over time and are 
known to provide an efficient and workable financial framework 
for a drug user fee program.
    User fees collected under this program are to be considered 
an addition to, and not a replacement for, the annual 
appropriations amount designated for CVM through the annual 
appropriations process. This requirement is important for 
generic animal drug manufacturers, whose applications are 
reviewed by the same office at CVM that reviews new animal drug 
applications. Unlike the human generic drug industry, the 
animal generic drug industry is quite small, but it plays an 
important role in providing cost-effective animal health 
products. This legislation will not result in a decrease in 
resources available for generic animal drug review, and the 
committee expects that the pace of generic drug approvals will 
not be affected as a result of its enactment.

                           IV. Cost Estimate

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, May 15, 2003.
Hon. Judd Gregg,
Chairman, Committee on Health, Education, Labor, and Pensions,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 313, the Animal Drug 
User Fee Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Thomas 
Bradley.
            Sincerely,
                                          Barry B. Anderson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 313--Animal Drug User Fee Act of 2003

    Summary: S. 313 would amend the Federal Food, Drug, and 
Cosmetic Act to authorize the Food and Drug Administration 
(FDA) to collect fees to cover the cost of expediting the 
review of new and supplemental animal drug applications and 
investigational animal drug submissions. Such fees could be 
collected and made available for obligation only to the extent, 
and in the amount, provided in advance in appropriation acts.
    S. 313 also would require that the Secretary of Health and 
Human Services submit annual performance and fiscal reports 
related to the animal drug user fee program to the 
Congressional committees of jurisdiction.
    CBO estimates that implementing S. 313 would reduce net 
outlays by $1 million in 2004 and $4 million over the 2004-2008 
period, assuming the necessary authorities are provided in 
appropriation acts.
    S. 313 contains no intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA) and would not affect 
the budgets of state, local, or tribal governments.
    The bill would impose private-sector mandates as defined in 
UMRA on manufacturers of new animal drugs, by requiring them to 
pay fees to the Food and Drug Administration. CBO estimates 
that the direct cost of the mandates would not exceed the 
annual threshold specified in UMRA ($117 million in 2003, 
adjusted annually for inflation) in any of the first five years 
that the mandates would be effective.
    Estimated cost to the Federal Government: The estimated 
budgetary impact of S. 313 is shown in the following table and 
assumes enactment of the bill by October 1, 2003. The costs of 
this legislation fall within budget function 550 (health).

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2003     2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                   CHANGES IN SPENDING SUBJECT TO APPROPRIATION: FOOD AND DRUG ADMINISTRATION

Collection of User Fees:
    Estimated Authorization Level.........................        0       -5       -8      -11      -11      -14
    Estimated Outlays.....................................        0       -5       -8      -11      -11      -14
Spending of User Fees:
    Estimated Authorization Level.........................        0        5        8       11       11       11
    Estimated Outlays.....................................        0        3        7       10       10       11
Administrative Expenses:
    Estimated Authorization Level.........................        0        1    (\1\)    (\1\)    (\1\)        1
    Estimated Outlays.....................................        0        1    (\1\)    (\1\)    (\1\)        1
Net Effect on Spending by the Food and Drug
 Administration:
    Estimated Authorization Level.........................        0        1    (\1\)    (\1\)    (\1\)       -2
    Estimated Outlays.....................................        0       -1    (\1\)    (\1\)    (\1\)       -2
----------------------------------------------------------------------------------------------------------------
\1\ Note: = Less than $500,000.

Basis of estimate

            Estimated authorizations
    S. 313 would establish a new user fee program to help 
defray FDA's costs of expediting the review process for animal 
drugs. CBO estimates that implementing the bill would save $1 
million in 2004 and $4 million over the 2004-2008 period.
    User Fees. S. 313 would require FDA to assess and collect 
application and other user fees from manufacturers of drugs for 
animals to expedite the development of such drugs and the 
review of new and supplemental animal drug applications and 
investigational animal drug submissions. S. 313 would create 
four types of user fees: (1) animal drug application and 
supplement fees, (2) animal drug product fees, (3) animal drug 
establishment fees, and (4) animal drug sponsor fees. The fees 
could be refunded, waived, or reduced in certain situations. 
The aggregate amounts of such fees are specified for each 
fiscal year 2004 through 2008. Each year the amounts to be 
collected would be adjusted further for inflation, workload 
estimates, and other factors, when applicable. CBO assumes FDA 
would collect the amounts specified in the bill increased by 
the inflation index for wages and salaries for federal workers. 
In total, we estimate receipts from those fees would amount to 
$48 million over the 2004-2008 period. Such fees could be 
collected and made available for obligation only to the extent, 
and in the amount, provided in advance in appropriation acts.
    Under the bill, those user fees could not be assessed in a 
given year unless appropriations for salaries and expenses of 
FDA (excluding the amount of user fees appropriated for such 
fiscal year) in that year satisfy a maintenance-of-effort 
requirement: the amount appropriated would have to exceed the 
amount appropriated for 2003 by the percentage increase since 
2003 in the consumer price index for all urban consumers (CPI-
U). In addition, fees could be collected and made available to 
defray increases in the cost of resources allocated to 
reviewing animal drug applications only to the extent that the 
percentage increase in those costs (excluding fees) exceeds the 
costs for fiscal year 2003 adjusted by CPI-U. (The bill defines 
special circumstances under which the Secretary would be 
considered to have met the maintenance-of-effort requirement.) 
This estimate assumes that these conditions would be met.
    Before accounting for costs associated with additional 
administrative activities not covered by the user fees, CBO 
estimates that establishing the user fee program would reduce 
net outlays by $2 million in 2004 and $7 million over the 2004-
2008 period, assuming appropriation of the necessary amounts. 
The estimated budget authority for collections and spending 
offset each other exactly from 2004 through 2007, while outlays 
would lag slightly, resulting in small savings each year. For 
fiscal year 2008, the bill would authorize the assessment and 
collection of up to three months of operating reserves for the 
review of animal drug applications for the first three months 
of fiscal year 2009. However, the user fee program is 
authorized only through fiscal year 2008. CBO assumes that the 
amounts available for obligation and spending in fiscal year 
2008 would not include those special reserve funds collected in 
that year. The difference between the estimated collections and 
spending of the user fees in fiscal year 2008 would result in 
savings of $3 million for that year, CBO estimates.
    Other Administrative Expenses. Based on the experience with 
similar activities of FDA, CBO assumes that funding for certain 
administrative activities associated with the new user fee 
program would not be fully covered by the new fees. The bill 
would require that FDA report annually to the Congress on its 
performance under the user fee program and on the fiscal status 
of the program. S. 313 also would require that FDA consult with 
the Congressional committees of jurisdiction and outside 
experts, including industry and consumer groups, and publish 
its recommendations concerning reauthorization of the user fee 
program. CBO estimates that the administrative activities 
associated with implementing the user fee program that are not 
covered by the user fees would cost about $2 million over the 
2004-2008 period.
    Estimated impact on State, local and tribal governments: S. 
313 contains no intergovernmental mandates as defined in UMRA 
and would not affect the budgets of state, local, or tribal 
governments.
    Estimated impact on the private sector: Subject to approval 
in an appropriation act, S. 313 would require manufacturers of 
new drugs for animals to pay application fees, product fees, 
establishment fees, and drug-sponsor fees to FDA. The 
application fees would apply to new or supplemental animal drug 
applications that are submitted after September 1, 2003. The 
product, establishment and drug sponsor fees would apply to 
manufacturers of new animal drug products that have an 
application pending with FDA after September 1, 2003. The duty 
to pay those fees would be a private-sector mandate under UMRA. 
CBO estimates that the fees collected over the 2004-2008 period 
would total $48 million. Those amounts would not exceed the 
annual threshold specified in UMRA ($117 million in 2003, 
adjusted annually for inflation) in any of the first five years 
that the mandates would be effective.
    Estimate prepared by: Federal estimate: Julia Christensen; 
impact on State, local and tribal governments: Leo Lex; impact 
on the private sector: Anna Cook.
    Estimate approved by: Robert A. Sunshine, Assistant 
Director for Budget Analysis.

            V. Application of Law to the Legislative Branch

    The Animal Drug User Fee Act of 2003 would amend the 
Federal FD&C Act by creating a program authorizing the 
collection of fees to expedite the new animal drug review 
process at CVM. As such, the legislation would not apply to the 
legislative branch.

                    VI. Regulatory Impact Statement

    The regulatory impact of this legislation will be minimal 
because it authorizes the collection of fees to expedite and 
improve an existing animal drug review process at CVM. The 
legislation does not affect the substance of this process. This 
legislation requires the FDA to publish a notice of fees 
annually adjusted for workload and inflation as defined in the 
legislation, 60 days before the start of the fiscal year. Prior 
to consideration of reauthorization, the FDA is required to 
publish in the Federal Register a notice of recommendations for 
changes to the program, and a 30 day comment period is to be 
provided for written comments on the recommendations.

                    VII. Section-by-Section Analysis

Section 1. Short title

    Section 1 designates the Short Title and Reference as the 
``Animal Drug User Fee Act of 2003,'' which amends the Federal 
FD&C Act.

Sec. 2. Findings

    Section 2 declares the findings of Congress related to the 
authorization of animal drug user fees. In particular, the fees 
authorized will be dedicated toward expediting the animal drug 
development process as set forth in the goals in a letter from 
the Secretary to the authorizing committee chairmen.

Sec. 3. Fees relating to animal drugs

    Section 4 adds to Chapter VII, Subchapter C of the Federal 
FD&C Act, a new Part 3, ``Fees Relating to Animal Drugs.''
    New Section 739. Subsection (a) provides definitions for 
the following 11 terms, when used related to animal drug user 
fees: animal drug application, supplemental animal drug 
application, animal drug product, animal drug establishment, 
investigational animal drug submission, animal drug sponsor, 
final dosage form, process for the review of animal drug 
applications, costs of resources allocated for the process for 
the review of animal drug applications, adjustment factor, and 
affiliate. These definitions are necessary to give effect to 
the procedures instituted by the authorization of the ADUFA. 
The term ``process for the review of animal drug 
applications,'' is a term of art that describes all of the 
functions related to the pre-market review of submissions and 
applications pertaining to animal drugs. The term is used 
throughout the document to provide simplicity and consistency 
in the language referring to the process funded by this 
legislation. ``Affiliates'' is also a term of art and is 
intended to include affiliates, partners and parent firms. An 
abbreviated new animal drug application--an application for 
approval of a generic animal drug--is not included in the term 
``animal drug application'' and is not subject to the user fee 
program. A request to approve a change in a generic animal drug 
application after it has been approved is included in the term 
``supplemental animal drug application,'' and subject to the 
user fee program if the supplemental approval requires data to 
demonstrate safety or effectiveness. Changes that are subject 
to user fees under the program are limited to those that extend 
the generic animal drug beyond the scope of its original 
approval, such as the addition of a new claim, the addition of 
a new species, a change in the treatment regimen, or a change 
in the drug's prescription or over-the-counter status. Changes 
to an approved generic animal drug that maintain the scope of 
its original approval, such as a change in the methods used in 
manufacturing, are not included in the term ``supplemental 
animal drug application.'' The committee understands that CVM's 
policy allows for so-called ``hybrids,'' where a generic animal 
drug applicant submits a request to copy the pioneer animal 
drug product and, at the same time, a request to make a change 
that differs from the pioneer animal drug product that requires 
data to demonstrate safety or effectiveness. In such 
circumstances, the committee intends that only the request for 
a change would be subject to the user fee program, and the 
request for a change would be construed to meet the definition 
of a ``supplemental animal drug application.''
    Subsection (b) allows fees authorized under ADUFA to be 
assessed beginning on October 1, 2003. The fees authorized are 
animal drug application and supplement fees, animal drug 
product fees, animal drug establishment fees, and animal drug 
sponsor fees. Application fees, in general, are due upon 
submission of the application. Fees paid and not refunded for 
filed applications that were not approved or were withdrawn do 
not have to be paid a second time. If an application is refused 
for filing, the Secretary must refund 75 percent of the fee. If 
the application is withdrawn, the Secretary has sole discretion 
to refund the fee or any portion of the fee. Product, 
establishment, and sponsor fees are assessed in any fiscal year 
when certain specified criteria are met. Only one such fee per 
product, establishment, or sponsor must be paid each year. 
Transition rules for product, establishment, and sponsor fees 
related to products under review at the time of implementation 
of this law are specified.
    Subsection (c) lists the total fee revenues for fiscal 
years 2004 through 2008 for application and supplement fees and 
for product, establishment, and sponsor fees.
    Subsection (d) sets forth adjustments to take into account 
changes in workload and the cost of performing the work. The 
section provides for inflation, workload, final year and annual 
fee adjustments. The section also sets forth a limit on the 
total amount of fees charged for any year, not to exceed total 
costs for that fiscal year.
    Subsection (e) sets the rules for the waiver or reduction 
of fees. The waivers and reductions are for those situations in 
which: (1) assessing the fees would be a barrier to innovation; 
(2) the fees exceed the anticipated costs; (3) the animal drug 
application or supplemental application is solely to provide 
for use of an approved Type A drug in a Type B medicated feed 
intended for use in the manufacture of Type C free-choice 
medicated feeds or a Type C free-choice medicated feed. (These 
are supplemental applications that occur usually after the Type 
A medicated article is approved. The Type A article can be used 
for a variety of feeding systems. However, when the Type A 
article is to be used in a ``free-choice'' feeding system, FDA 
requires the sponsor do a study to determine that the animals 
do not over eat or under eat the prerequisite amount of drug. 
They file this study as a supplemental new animal drug 
application. If FDA did not waive the fee for this specific 
type of application, the sponsor will be charged twice for the 
same new animal drug product.); (4) the waiver or reduction is 
necessary to promote the availability of animal drugs for minor 
uses or minor species; or (5) the sponsor is a small business 
submitting its first animal drug application. Periodically, the 
Secretary shall publish a list of companies certifying they 
qualify for a small business waiver.
    Subsection (f) states that, due to a failure to pay the 
required fees, the Secretary may consider an application or 
submission incomplete or discontinue review of an application 
or submission.
    Subsection (g) states fees may not be assessed for any 
fiscal year after fiscal year 2003 unless appropriations are at 
least equal to the adjusted salaries and expenses for FDA for 
fiscal year 2003, excluding fees appropriated. If the trigger 
conditions for collecting fees are not met until later in a 
year, the full year's fees will still be required.
    Subsection (h) authorizes appropriations (adjusted for 
workload and inflation) of $5 million, $8 million, $10 million, 
$10 million, $10 million for fiscal years 2004 through 2008, 
respectively, in amounts consistent with the total fee revenue 
amounts set forth in subsection (c). Such collected fees remain 
available until expended without fiscal year limitation.
    Subsection (i) provides that fees overdue by 30 days shall 
be treated as a claim of the U.S. Government subject to 
subchapter II of Chapter 37 of 31 U.S.C.
    Subsection (j) provides that written requests for waivers 
must be submitted within 180 days after the fee is due to 
qualify for consideration.
    Subsection (k) states that the legislation may not be 
construed to require the number of full time equivalents in the 
Department of Health and Human Services to be reduced to offset 
full time equivalents under this user fee legislation.
    Subsection (l) requires the FDA, to the extent practicable, 
to take appropriate action to segregate the review of generic 
animal drug applications, which are not under the user fee 
program, from the user fee funded program. It also requires the 
agency to adopt other administrative procedures to ensure that 
the review times for generic animal drugs do not increase from 
their current level due to activities under the user fee 
program.

Sec. 4. Accountability and reports

    In developing recommendations to Congress for goals and 
plans for reauthorization of the legislation, the Secretary is 
required to consult with the authorizing committees, scientific 
and academic experts, veterinary professionals, consumer 
advocacy groups and the regulated industry in developing 
recommendations. The recommendations are to be published in the 
Federal Register, and a public meeting is to be held and a 30-
day comment period is to be provided for written comments on 
the recommendations.
    This section requires an annual Performance Report and an 
annual Financial Report to be submitted to the authorizing 
committees by the Secretary. The performance goals are set 
forth in a separate goals letter referenced in section 2 of the 
legislation.

Sec. 5. Sunset

    Section 5 provides that the amendments made by section 3 
(relating to definitions and to the authority to assess and use 
drug fees) cease to be effective on October 1, 2008. The 
section further provides that section 3, as it relates to 
annual reports, will cease to be effective 120 days after 
October 1, 2008. The additional 120 days will allow the animal 
drug user fee reports for fiscal year 2008 to be prepared and 
submitted.

                     VIII. Changes in Existing Law

    In compliance with rule XXVI paragraph 12 of the Standing 
Rules of the Senate, the following provides a print of the 
statute or the part or section thereof to be amended or 
replaced (existing law proposed to be omitted is enclosed in 
black brackets, new matter is printed in italic, existing law 
in which no change is proposed is shown in roman):

FEDERAL FOOD, DRUG, AND COSMETIC ACT

           *       *       *       *       *       *       *

ANIMAL DRUG USER FEE ACT OF 2003

           *       *       *       *       *       *       *

                     CHAPTER VII--GENERAL AUTHORITY

Subchapter A--General Administrative Provisions

           *       *       *       *       *       *       *

                           Subchapter C--Fees

PART 1--FREEDOM OF INFORMATION FEES

           *       *       *       *       *       *       *

                [PART 3--FEES RELATING TO ANIMAL DRUGS]

                  PART 4_FEES RELATING TO ANIMAL DRUGS

[SEC. 738. DEFINITIONS.]

    [``For purposes of this subchapter:]

SEC. 739. AUTHORITY TO ASSESS AND USE ANIMAL DRUG FEES.

    (a) Definitions.--For purposes of this subchapter:
          (1) The term ``animal drug application'' means an 
        application for approval of any new animal drug 
        submitted under section 512(b)(1). Such term does not 
        include either a new animal drug application submitted 
        under section 512(b)(2) or a supplemental animal drug 
        application.
          (2) The term ``supplemental animal drug application'' 
        means--
                  (A) a request to the Secretary to approve a 
                change in an animal drug application which has 
                been approved; or
                  (B) a request to the Secretary to approve a 
                change to an application approved under section 
                512(c)(2) for which data with respect to safety 
                or effectiveness are required.
          (3) The term ``animal drug product'' means each 
        specific strength or potency of a particular active 
        ingredient or ingredients in final dosage form marketed 
        by a particular manufacturer or distributor, which is 
        uniquely identified by the labeler code and product 
        code portions of the national drug code, and for which 
        an animal drug application or a supplemental animal 
        drug application has been approved.
          (4) The term ``animal drug establishment'' means a 
        foreign or domestic place of business which is at one 
        general physical location consisting of one or more 
        buildings all of which are within 5 miles of each 
        other, at which one or more animal drug products are 
        manufactured in final dosage form.
          (5) The term ``investigational animal drug 
        submission'' means--
                  (A) the filing of a claim for an 
                investigational exemption under section 512(j) 
                for a new animal drug intended to be the 
                subject of an animal drug application or a 
                supplemental animal drug application, or
                  (B) the submission of information for the 
                purpose of enabling the Secretary to evaluate 
                the safety or effectiveness of an animal drug 
                application or supplemental animal drug 
                application in the event of their filing.
          (6) The term ``animal drug sponsor'' means either an 
        applicant named in an animal drug application, except 
        for an approved application for which all subject 
        products have been removed from listing under Section 
        510, or a person who has submitted an investigational 
        animal drug submission that has not been terminated or 
        otherwise rendered inactive by the Secretary.
          (7) The term ``final dosage form'' means, with 
        respect to an animal drug product, a finished dosage 
        form which is approved for administration to an animal 
        without substantial further manufacturing. Such term 
        includes animal drug products intended for mixing in 
        animal feeds.
          (8) The term ``process for the review of animal drug 
        applications'' means the following activities of the 
        Secretary with respect to the review of animal drug 
        applications, supplemental animal drug applications, 
        and investigational animal drug submissions:
                  (A) The activities necessary for the review 
                of animal drug applications, supplemental 
                animal drug applications, and investigational 
                animal drug submissions.
                  (B) The issuance of action letters which 
                approve animal drug applications or 
                supplemental animal drug applications or which 
                set forth in detail the specific deficiencies 
                in animal drug applications, supplemental 
                animal drug applications, or investigational 
                animal drug submissions and, where appropriate, 
                the actions necessary to place such 
                applications, supplements or submissions in 
                condition for approval.
                  (C) The inspection of animal drug 
                establishments and other facilities undertaken 
                as part of the Secretary's review of pending 
                animal drug applications, supplemental animal 
                drug applications, and investigational animal 
                drug submissions.
                  (D) Monitoring of research conducted in 
                connection with the review of animal drug 
                applications, supplemental animal drug 
                applications, and investigational animal drug 
                submissions.
                  (E) The development of regulations and policy 
                related to the review of animal drug 
                applications, supplemental animal drug 
                applications, and investigational animal drug 
                submissions.
                  (F) Development of standards for products 
                subject to review.
                  (G) Meetings between the agency and the 
                animal drug sponsor.
                  (H) Review of advertising and labeling prior 
                to approval of an animal drug application or 
                supplemental animal drug application, but not 
                such activities after an animal drug has been 
                approved.
          (9) The term ``costs of resources allocated for the 
        process for the review of animal drug applications'' 
        means the expenses incurred in connection with the 
        process for the review of animal drug applications 
        for--
                  (A) officers and employees of the Food and 
                Drug Administration, contractors of the Food 
                and Drug Administration, advisory committees 
                consulted with respect to the review of 
                specific animal drug applications, supplemental 
                animal drug applications, or investigational 
                animal drug submissions, and costs related to 
                such officers, employees, committees, and 
                contractors, including costs for travel, 
                education, and recruitment and other personnel 
                activities,
                  (B) management of information, and the 
                acquisition, maintenance, and repair of 
                computer resources,
                  (C) leasing, maintenance, renovation, and 
                repair of facilities and acquisition, 
                maintenance, and repair of fixtures, furniture, 
                scientific equipment, and other necessary 
                materials and supplies, and
                  (D) collecting fees under section 739 and 
                accounting for resources allocated for the 
                review of animal drug applications, 
                supplemental animal drug applications, and 
                investigational animal drug submissions.
          (10) The term ``adjustment factor'' applicable to a 
        fiscal year refers to the formula set forth in section 
        735(8) with the base or comparator year being 2003.
          (11) The term ``affiliate'' refers to the definition 
        set forth in section 735(9).

[``SEC. 739. AUTHORITY TO ASSESS AND USE ANIMAL DRUG FEES.]

    [(a)] (b) Types of Fees.--Beginning in fiscal year 2004, 
the Secretary shall assess and collect fees in accordance with 
this section as follows:
          (1) Animal drug application and supplement fee.--
                  (A) In general.--Each person that submits, on 
                or after September 1, 2003, an animal drug 
                application or a supplemental animal drug 
                application shall be subject to a fee as 
                follows:
                          (i) A fee established in subsection 
                        [(b)] (c) for an animal drug 
                        application; and
                          (ii) A fee established in subsection 
                        [(b)] (c) for a supplemental animal 
                        drug application for which safety or 
                        effectiveness data are required, in an 
                        amount that is equal to 50 percent of 
                        the amount of the fee under clause (i).
                  (B) Payment.--The fee required by 
                subparagraph (A) shall be due upon submission 
                of the animal drug application or supplemental 
                animal drug application.
                  (C) Exception for previously filed 
                application or supplement.--If an animal drug 
                application or a supplemental animal drug 
                application was submitted by a person that paid 
                the fee for such application or supplement, was 
                accepted for filing, and was not approved or 
                was withdrawn (without a waiver or refund), the 
                submission of an animal drug application or a 
                supplemental animal drug application for the 
                same product by the same person (or the 
                person's licensee, assignee, or successor) 
                shall not be subject to a fee under 
                subparagraph (A).
                  (D) Refund of fee if application refused for 
                filing.--The Secretary shall refund 75 percent 
                of the fee paid under subparagraph (B) for any 
                animal drug application or supplemental animal 
                drug application which is refused for filing.
                  (E) Refund of fee if application withdrawn.--
                If an animal drug application or a supplemental 
                animal drug application is withdrawn after the 
                application or supplement was filed, the 
                Secretary may refund the fee or portion of the 
                fee paid under subparagraph B if no substantial 
                work was performed on the application or 
                supplement after the application or supplement 
                was filed. The Secretary shall have the sole 
                discretion to refund the fee under this 
                paragraph. A determination by the Secretary 
                concerning a refund under this paragraph shall 
                not be reviewable.
          (2) Animal drug product fee.--Each person--
                  (A) who is named as the applicant in an 
                animal drug application or supplemental animal 
                drug application for an animal drug product 
                which has been submitted for listing under 
                Section 510, and
                  (B) who, after September 1, 2003, had pending 
                before the Secretary an animal drug application 
                or supplemental animal drug application;
        shall pay for each such animal drug product the annual 
        fee established in subsection [(b)] (c). Such fee shall 
        be payable for the fiscal year in which the animal drug 
        product is first submitted for listing under Section 
        510, or is submitted for relisting under section 510 if 
        the animal drug product has been withdrawn from listing 
        and relisted. After such fee is paid for that fiscal 
        year, such fee shall be payable on or before January 31 
        of each year. Such fee shall be paid only once for each 
        animal drug product for a fiscal year in which the fee 
        is payable.
          (3) Animal drug establishment fee.--Each person--
                  (A) who owns or operates, directly or through 
                an affiliate, an animal drug establishment, and
                  (B) who is named as the applicant in an 
                animal drug application or supplemental animal 
                drug application for an animal drug product 
                which has been submitted for listing under 
                Section 510, and
                  (C) who, after September 1, 2003, had pending 
                before the Secretary an animal drug application 
                or supplemental animal drug application,
        shall be assessed an annual fee established in 
        subsection [(b)] (c) for each animal drug establishment 
        listed in its approved animal drug application as an 
        establishment that manufactures the animal drug product 
        named in the application. The annual establishment fee 
        shall be assessed in each fiscal year in which the 
        animal drug product named in the application is 
        assessed a fee under paragraph (2) unless the animal 
        drug establishment listed in the application does not 
        engage in the manufacture of the animal drug product 
        during the fiscal year. The fee shall be paid on or 
        before January 31 of each year. The establishment shall 
        be assessed only one fee per fiscal year under this 
        section, provided, however, that where a single 
        establishment manufactures both animal drug products 
        and prescription drug products, as defined in section 
        735(3), such establishment shall be assessed both the 
        animal drug establishment fee and the prescription drug 
        establishment fee, as set forth in section 736(a)(2), 
        within a single fiscal year.
          (4) Animal drug sponsor fee.--Each person--
                  (A) who meets the definition of an animal 
                drug sponsor within a fiscal year; and
                  (B) who, after September 1, 2003, had pending 
                before the Secretary an animal drug 
                application, a supplemental animal drug 
                application, or an investigational animal drug 
                submission,
        shall be assessed an annual fee established under 
        subsection [(b)] (c). The fee shall be paid on or 
        before January 31 of each year. Each animal drug 
        sponsor shall pay only one such fee each fiscal year.
  [(b)] (c) Fee Amounts._Except as provided in subsection 
[(a)(1)] (b)(1) and subsections [(c), (d), (f), and (g),] (d), 
(e), (g), and (h), the fees required under subsection [(a)] (b) 
shall be established to generate fee revenue amounts as 
follows:
          (1) Total fee revenues for application and supplement 
        fees._The total fee revenues to be collected in animal 
        drug application fees under subsection [(a)(1)(A)(i)] 
        (b)(1)(A)(i) and supplemental animal drug application 
        fees under subsection [(a)(1)(A)(ii)] (b)(1)(A)(ii) 
        shall be $1,250,000 in fiscal year 2004, $2,000,000 in 
        fiscal year 2005, and $2,500,000 in fiscal years 2006 
        and 2007.
          (2) Total fee revenues for product fees._The total 
        fee revenues to be collected in product fees under 
        subsection [(a)(2)] (b)(2) shall be $1,250,000 in 
        fiscal year 2004, $2,000,000 in fiscal year 2005, and 
        $2,500,000 in fiscal years 2006 and 2007.
          (3) Total fee revenues for establishment fees._The 
        total fee revenues to be collected in establishment 
        fees under subsection [(a)(3)] (b)(3) shall be 
        $1,250,000 in fiscal year 2004, $2,000,000 in fiscal 
        year 2005, and $2,500,000 in fiscal years 2006 and 
        2007.
          (4) Total fee revenues for sponsor fees._The total 
        fee revenues to be collected in sponsor fees under 
        subsection [(a)(4)] (b)(4) shall be $1,250,000 in 
        fiscal year 2004, $2,000,000 in fiscal year 2005, and 
        $2,500,000 in fiscal years 2006 and 2007.
  [(c)] (d) Adjustments._
          (1) Inflation adjustment._The fees and total fee 
        revenues established in subsection [(b)] (c) shall be 
        adjusted by the Secretary by notice, published in the 
        Federal Register, for a fiscal year according to the 
        formula set forth in section 736(c)(1).
          (2) Workload adjustment.--After the fee revenues are 
        adjusted for inflation in accordance with subparagraph 
        (1), the fee revenues shall be further adjusted each 
        fiscal year after fiscal year 2004 to reflect changes 
        in review workload. With respect to such adjustment:
                  (A) This adjustment shall be determined by 
                the Secretary based on a weighted average of 
                the change in the total number of animal drug 
                applications, supplemental animal drug 
                applications for which data with respect to 
                safety or effectiveness are required, 
                manufacturing supplemental animal drug 
                applications, investigational animal drug study 
                submissions, and investigational animal drug 
                protocol submissions submitted to the 
                Secretary. The Secretary shall publish in the 
                Federal Register the fees resulting from this 
                adjustment and the supporting methodologies.
                  (B) Under no circumstances shall this 
                workload adjustment result in fee revenues for 
                a fiscal year that are less than the fee 
                revenues for that fiscal year established in 
                subsection [(b),] (c), as adjusted for 
                inflation under subparagraph [(c)(1)] (d)(1).
          (3) Final year adjustment.--For fiscal year 2007, the 
        Secretary may further increase the fees to provide for 
        up to 3 months of operating reserves of carryover user 
        fees for the process for the review of animal drug 
        applications for the first 3 months of fiscal year 
        2008. If the Food and Drug Administration has carryover 
        balances for the process for the review of animal drug 
        applications in excess of 3 months of such operating 
        reserves, then this adjustment will not be made. If 
        this adjustment is necessary, then the rationale for 
        the amount of the increase shall be contained in the 
        annual notice setting fees for fiscal year 2007.
          (4) Annual fee setting._The Secretary shall 
        establish, 60 days before the start of each fiscal year 
        that begins after September 30, 2003, for that fiscal 
        year, animal drug application fees, supplemental animal 
        drug application fees, animal drug sponsor fees, animal 
        drug establishment fees, and animal drug product fees 
        based on the revenue amounts established under 
        subsection [(b)] (c) and the adjustments provided under 
        this subsection.
          (5) Limit.--The total amount of fees charged, as 
        adjusted under this subsection, for a fiscal year may 
        not exceed the total costs for such fiscal year for the 
        resources allocated for the process for the review of 
        animal drug applications.
  [(d)] (e) Fee Waiver or Reduction.--
          (1) In general._The Secretary shall grant a waiver 
        from or a reduction of 1 or more fees assessed under 
        subsection [(a)] (b) where the Secretary finds that--
                  (A) the assessment of the fee would present a 
                significant barrier to innovation because of 
                limited resources available to such person or 
                other circumstances,
                  (B) the fees to be paid by such person will 
                exceed the anticipated present and future costs 
                incurred by the Secretary in conducting the 
                process for the review of animal drug 
                applications for such person,
                  (C) the animal drug application or 
                supplemental animal drug application is 
                intended solely to provide for use of the 
                animal drug in--
                          (i) a Type B medicated feed (as 
                        defined in section 558.3(b)(3) of title 
                        21, Code of Federal Regulations (or any 
                        successor regulation)) intended for use 
                        in the manufacture of Type C free-
                        choice medicated feeds, or
                          (ii) a Type C free-choice medicated 
                        feed (as defined in section 558.3(b)(4) 
                        of title 21, Code of Federal 
                        Regulations (or any successor 
                        regulation)),
                  (D) the animal drug application or 
                supplemental animal drug application is 
                intended solely to provide for a minor use or 
                minor species indication, or
                  (E) the sponsor involved is a small business 
                submitting its first animal drug application to 
                the Secretary for review.
          (2) Use of standard costs.--In making the finding in 
        paragraph (1)(B), the Secretary may use standard costs.
          (3) Rules for small businesses.--
                  (A) Definition.--In paragraph (1)(D), the 
                term ``small business'' means an entity that 
                has fewer than 500 employees, including 
                employees of affiliates.
                  (B) Waiver of application fee.--The Secretary 
                shall waive under paragraph (1)(D) the 
                application fee for the first animal drug 
                application that a small business or its 
                affiliate submits to the Secretary for review. 
                After a small business or its affiliate is 
                granted such a waiver, the small business or 
                its affiliate shall pay application fees for 
                all subsequent animal drug applications and 
                supplemental animal drug applications for which 
                safety or effectiveness data are required in 
                the same manner as an entity that does not 
                qualify as a small business.
                  (C) Certification.--The Secretary shall 
                require any person who applies for a waiver 
                under paragraph (1)(D) to certify their 
                qualification for the waiver. The Secretary 
                shall periodically publish in the Federal 
                Register a list of persons making such 
                certifications.
  [(e)] (f) Effect of Failure To Pay Fees._An animal drug 
application or supplemental animal drug application submitted 
by a person subject to fees under subsection [(a)] (b) shall be 
considered incomplete and shall not be accepted for filing by 
the Secretary until all fees owed by such person have been 
paid. An investigational animal drug submission under section 
738(5)(B) that is submitted by a person subject to fees under 
subsection [(a)] (b) shall be considered incomplete and shall 
not be accepted for review by the Secretary until all fees owed 
by such person have been paid. The Secretary may discontinue 
review of any animal drug application, supplemental animal drug 
application or investigational animal drug submission from a 
person if such person has not submitted for payment all fees 
owed under this section by 30 days after the date upon which 
they are due.
  [(f)] (g) Assessment of Fees._
          (1) Limitation._Fees may not be assessed under 
        subsection (a) for a fiscal year beginning after fiscal 
        year 2003 unless appropriations for salaries and 
        expenses of the Food and Drug Administration for such 
        fiscal year (excluding the amount of fees appropriated 
        for such fiscal year) are equal to or greater than the 
        amount of appropriations for the salaries and expenses 
        of the Food and Drug Administration for the fiscal year 
        2003 (excluding the amount of fees appropriated for 
        such fiscal year) multiplied by the adjustment factor 
        applicable to the fiscal year involved.
          (2) Authority._If the Secretary does not assess fees 
        under subsection [(a)] (b) during any portion of a 
        fiscal year because of paragraph (1) and if at a later 
        date in such fiscal year the Secretary may assess such 
        fees, the Secretary may assess and collect such fees, 
        without any modification in the rate, for animal drug 
        applications, supplemental animal drug applications, 
        investigational animal drug submissions, sponsors, 
        animal drug establishments and animal drug products at 
        any time in such fiscal year notwithstanding the 
        provisions of subsection (a) relating to the date fees 
        are to be paid.
  [(g)] (h) Crediting and Availability of Fees._
          (1) In general._Fees authorized under subsection 
        [(a)] (b) shall be collected and available for 
        obligation only to the extent and in the amount 
        provided in advance in appropriations Acts. Such fees 
        are authorized to be appropriated to remain available 
        until expended. Such sums as may be necessary may be 
        transferred from the Food and Drug Administration 
        salaries and expenses appropriation account without 
        fiscal year limitation to such appropriation account 
        for salary and expenses with such fiscal year 
        limitation. The sums transferred shall be available 
        solely for the process for the review of animal drug 
        applications.
          (2) Collections and appropriation acts.--
                  (A) In general.--The fees authorized by this 
                section--
                          (i) shall be retained in each fiscal 
                        year in an amount not to exceed the 
                        amount specified in appropriation Acts, 
                        or otherwise made available for 
                        obligation for such fiscal year, and
                          (ii) shall only be collected and 
                        available to defray increases in the 
                        costs of the resources allocated for 
                        the process for the review of animal 
                        drug applications (including increases 
                        in such costs for an additional number 
                        of full-time equivalent positions in 
                        the Department of Health and Human 
                        Services to be engaged in such process) 
                        over such costs, excluding costs paid 
                        from fees collected under this section, 
                        for fiscal year 2003 multiplied by the 
                        adjustment factor.
                  (B) Compliance.--The Secretary shall be 
                considered to have met the requirements of 
                subparagraph (A)(ii) in any fiscal year if the 
                costs funded by appropriations and allocated 
                for the process for the review of animal drug 
                applications--
                          (i) are not more than 3 percent below 
                        the level specified in subparagraph 
                        (A)(ii); or
                          (ii)(I) are more than 3 percent below 
                        the level specified in subparagraph 
                        (A)(ii), and fees assessed for the 
                        fiscal year following the subsequent 
                        fiscal year are decreased by the amount 
                        in excess of 3 percent by which such 
                        costs fell below the level specified in 
                        subparagraph (A)(ii); and
                          (II) such costs are not more than 5 
                        percent below the level specified in 
                        subparagraph (A)(ii).
          (3) Authorization of appropriations.--There are 
        authorized to be appropriated for fees under this 
        section--
                  (A) $5,000,000 for fiscal year 2004;
                  (B) $8,000,000 for fiscal year 2005;
                  (C) $10,000,000 for fiscal year 2006; and
                  (D) $10,000,000 for fiscal year 2007; as 
                adjusted to reflect adjustments in the total 
                fee revenues made under this section and 
                changes in the total amounts collected by 
                animal drug application fees, supplemental 
                animal drug application fees, animal drug 
                sponsor fees, animal drug establishment fees, 
                and animal drug product fees.
          (4) Offset.--Any amount of fees collected for a 
        fiscal year under this section that exceeds the amount 
        of fees specified in appropriations Acts for such 
        fiscal year shall be credited to the appropriation 
        account of the Food and Drug Administration as provided 
        in paragraph (1), and shall be subtracted from the 
        amount of fees that would otherwise be authorized to be 
        collected under this section pursuant to appropriation 
        Acts for a subsequent fiscal year.
  [(h)] (i) Collection of Unpaid Fees._In any case where the 
Secretary does not receive payment of a fee assessed under 
subsection [(a)] (b) within 30 days after it is due, such fee 
shall be treated as a claim of the United States Government 
subject to subchapter II of chapter 37 of title 31, United 
States Code.
  [(i)] (j) Written Requests for Waivers, Reductions, and 
Refunds._To qualify for consideration for a waiver or reduction 
under subsection [(d),] (e), or for a refund of any fee 
collected in accordance with subsection [(a),] (b), a person 
shall submit to the Secretary a written request for such 
waiver, reduction, or refund not later than 180 days after such 
fee is due.
  [(j)] (k) Construction._This section may not be construed to 
require that the number of full-time equivalent positions in 
the Department of Health and Human Services, for officers, 
employees, and advisory committees not engaged in the process 
of the review of animal drug applications, be reduced to offset 
the number of officers, employees, and advisory committees so 
engaged.
  [(k)] (l) Administrative Procedure._The Secretary shall--
          (1) to the extent practicable, segregate the review 
        of abbreviated new animal drug applications from the 
        process for the review of animal drug applications, and
          (2) adopt other administrative procedures to ensure 
        that review times of abbreviated new animal drug 
        applications do not increase from their current level 
        due to activities under the user fee program.

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