Document ID: FDA-2015-N-0007-0003
Agency: fda
Document Type: Notice
Title: Outsourcing Facility Fee Rates for Fiscal Year 2016
Posted Date: 2015-08-03T04:00Z

[Federal Register Volume 80, Number 148 (Monday, August 3, 2015)]
[Notices]
[Pages 46007-46010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18916]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2015-N-0007]

Outsourcing Facility Fee Rates for Fiscal Year 2016

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the 
fiscal year (FY) 2016 rates for the establishment and reinspection fees 
related to human drug compounding outsourcing facilities (outsourcing 
facilities) that elect to register under the Federal Food, Drug, and 
Cosmetic Act (the FD&C Act). The FD&C Act authorizes FDA to assess and 
collect an annual establishment fee from outsourcing facilities that 
have elected to register, as well as a reinspection fee for each 
reinspection of an outsourcing facility. This document establishes the 
FY 2016 rates for the small business establishment fee ($5,203), the 
non-small business establishment fee ($16,465), and the reinspection 
fee ($15,610) for outsourcing facilities; provides information on how 
the fees for FY 2016 were determined; and describes the payment 
procedures outsourcing facilities should follow.

FOR FURTHER INFORMATION CONTACT: 
    For information on pharmacy compounding and pharmacy compounding 
user fees: Visit FDA's Web site at http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/default.htm.
    For questions relating to this notice: Rachel Richter, Office of 
Financial Management, Food and Drug Administration, 8455 Colesville 
Rd., COLE-14216, Silver Spring, MD 20933-0002, 301-796-7111.

SUPPLEMENTARY INFORMATION: 

I. Background

    On November 27, 2013, President Obama signed the Drug Quality and 
Security Act (DQSA), legislation that contains important provisions 
relating to the oversight of compounding of human drugs. Title I of 
this law, the Compounding Quality Act, creates a new section 503B in 
the FD&C Act (21 U.S.C. 353b). Under section 503B of the FD&C Act, a 
human drug compounder can become an ``outsourcing facility.''
    Outsourcing facilities, as defined in section 503B(d)(4) of the 
FD&C Act, are facilities that meet all of the conditions described in 
section 503B(a), including registering with FDA as an outsourcing 
facility and paying an annual establishment fee. If these conditions 
are satisfied, a drug compounded by or under the direct supervision of 
a licensed pharmacist in an outsourcing facility is exempt from two 
sections of the FD&C Act: (1) Section 502(f)(1) (21 U.S.C. 352(f)(1)) 
concerning the labeling of drugs with adequate directions for use and 
(2) section 505 (21 U.S.C. 355) concerning the approval of human drug 
products under new drug applications (NDAs) or abbreviated new drug 
applications (ANDAs). Drugs compounded in outsourcing facilities are 
not exempt from the requirements of section 501(a)(2)(B) of the FD&C 
Act (21 U.S.C. 351(a)(2)(B)) concerning current good manufacturing 
practice for drugs.
    Section 744K of the FD&C Act (21 U.S.C. 379j-62) authorizes FDA to 
assess and collect the following fees associated with outsourcing 
facilities that elect to register under section 503B of the FD&C Act: 
(1) An annual establishment fee from each outsourcing facility and (2) 
a reinspection fee from each outsourcing facility subject to a 
reinspection (see section 744K(a)(1) of the FD&C Act). Under 
statutorily defined conditions, a qualified applicant may pay a reduced 
small business establishment fee (see section 744K(c)(4) of the FD&C 
Act).
    FDA announced in the Federal Register of November 24, 2014 (79 FR 
69856), the availability of a final guidance for industry entitled 
``Fees for Human Drug Compounding Outsourcing Facilities Under Sections 
503B and 744K of the FD&C Act.'' The guidance provides additional 
information on the annual fees for registered outsourcing facilities 
and adjustments required by law, reinspection fees, how to submit 
payment, the effect of failure to pay fees,

[[Page 46008]]

and how to qualify as a small business to obtain a reduction of the 
annual establishment fee. This guidance can be accessed on FDA's Web 
site at http://wcms.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM391102.pdf.

II. Fees for FY 2016 \1\
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    \1\ FY 2016 runs from October 1, 2015, through September 30, 
2016.
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A. FY 2016 Rates for Small Business Establishment Fee, Non-Small 
Business Establishment Fee, and Reinspection Fee

1. Establishment Fee for Qualified Small Businesses \2\
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    \2\ To qualify for a small business reduction of the FY 2016 
establishment fee, entities had to submit their exception requests 
by April 30, 2015. See section 744K(c)(4)(B) of the FD&C Act. 
Although the time for requesting a small business exception for FY 
2016 has now passed, an entity that wishes to request a small 
business exception for FY 2017 should consult section 744K(c)(4) of 
the FD&C Act and section III.D of FDA's guidance for industry 
entitled ``Fees for Human Drug Compounding Outsourcing Facilities 
Under Sections 503B and 744K of the FD&C Act,'' which can be 
accessed on FDA's Web site at http://wcms.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM391102.pdf.
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    The amount of the establishment fee for a qualified small business 
fee is equal to $15,000 multiplied by the inflation adjustment factor 
for that fiscal year, divided by three (see section 744K(c)(4)(A) and 
(c)(1)(A) of the FD&C Act). The inflation adjustment factor for FY 2016 
is 1.040646. See section II.B.1 for the methodology used to calculate 
the FY 2016 inflation adjustment factor. Therefore, the establishment 
fee for a qualified small business for FY 2016 is one third of $15,610, 
which, rounded to the nearest dollar, equals $5,203.
2. Establishment Fee for Non-Small Businesses
    Under section 744K(c) of the FD&C Act, the amount of the 
establishment fee for a non-small business fee is equal to $15,000 
multiplied by the inflation adjustment factor for that fiscal year, 
plus the small business adjustment factor for that fiscal year, and 
plus or minus an adjustment factor to account for over- or under-
collections due to the small business adjustment factor in the prior 
year. The inflation adjustment factor for FY 2016 is 1.040646. The 
small business adjustment amount for FY 2016 is $855. See section 
II.B.2 for the methodology used to calculate the small business 
adjustment factor for FY 2016. Therefore, the establishment fee for a 
non-small business for FY 2016 is $15,000 multiplied by 1.040646 plus 
$855, which equals $16,465.3.
3. Reinspection Fee
    Section 744K(c)(1)(B) of the FD&C Act provides that the amount of 
the FY 2016 reinspection fee is equal to $15,000, multiplied by the 
inflation adjustment factor for that fiscal year. The inflation 
adjustment factor for FY 2016 is 1.040646. Therefore, the reinspection 
fee for FY 2016 is $15,000 multiplied by 1.040646, which equals 
$15,610. There is no reduction in this fee for small businesses.

B. Methodology for Calculating FY 2016 Adjustment Factors

1. Inflation Adjustment Factor
    Section 744K(c)(2) of the FD&C Act specifies the annual inflation 
adjustment for outsourcing facility fees. The inflation adjustment has 
two components: One based on FDA's payroll costs and one based on FDA's 
non-pay costs for the first three of the four previous fiscal years. 
The payroll component of the annual inflation adjustment is calculated 
by taking the average change in the FDA's per-full time equivalent 
(FTE) personnel compensation and benefits (PC&B) in the first three of 
the four previous fiscal years (see section 744K(c)(2)(A)(ii) of the 
FD&C Act). FDA's total annual spending on PC&B is divided by the total 
number of FTEs per fiscal year to determine the average PC&B per FTE.
    Table 1 summarizes the actual cost and FTE data for the specified 
fiscal years, and provides the percent change from the previous fiscal 
year and the average percent change over the first three of the four 
fiscal years preceding FY 2016. The 3-year average is 2.2328 percent.

                                Table 1--FDA PC&B's Each Year and Percent Change
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             Fiscal year                     2012               2013               2014          3-Year average
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Total PC&B..........................     $1,824,703,000     $1,927,703,000     $2,054,937,000  .................
Total FTE...........................             13,382             13,974             14,555  .................
PC&B per FTE........................           $136,355           $137,949           $141,184  .................
Percent change from previous year...            3.1843%            1.1690%            2.3451%            2.2328%
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    Section 744K(c)(2)(A)(ii) of the FD&C Act specifies that this 
2.2328 percent should be multiplied by the proportion of PC&B to total 
costs of an average FTE of FDA for the same three fiscal years.

                      Table 2--FDA PC&B's as a Percent of FDA Total Costs of an Average FTE
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             Fiscal year                     2012               2013               2014          3-Year average
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Total PC&B..........................     $1,824,703,000     $1,927,703,000     $2,054,937,000  .................
Total Costs.........................     $3,550,496,000     $4,151,343,000      4,298,476,000  .................
PC&B Percent........................           51.3929%           46.4356%           47.8062%           48.5449%
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    The payroll adjustment is 2.2328 percent multiplied by 48.5449 
percent, or 1.0839 percent.
    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that the 
portion of the inflation adjustment for non-payroll costs for FY 2016 
is equal to the average annual percent change in the Consumer Price 
Index (CPI) for urban consumers (U.S. City Average; Not Seasonally 
Adjusted; All items; Annual Index) for the first 3 years of the 
preceding 4 years of available data, multiplied by the proportion of 
all non-PC&B costs to total costs of an average FTE of the FDA for the 
same period.

[[Page 46009]]

    Table 2 provides the summary data for the percent change in the 
specified CPI for U.S. cities. These data are published by the Bureau 
of Labor Statistics and can be found on its Web site at http://data.bls.gov/cgi-bin/surveymost?cu by checking the box marked ``U.S. 
All items, 1982-84 = 100 - CUUR0000SA0'' and then clicking on the 
``Retrieve Data'' button.

                   Table 3--Annual and 3-Year Average Percent Change in U.S. City Average CPI
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                Year                         2012               2013               2014          3-Year average
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Annual CPI..........................            229.594            232.957            236.736  .................
Annual Percent Change...............            2.0694%            1.4648%            1.6222%            1.7188%
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    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that this 
1.7188 percent should be multiplied by the proportion of all non-PC&B 
costs to total costs of an average FTE for the same three fiscal years. 
The proportion of all non-PC&B costs to total costs of an average FTE 
of FDA for FYs 2012 to 2014 is 51.4551 percent (100 percent - 48.5449 
percent = 51.4551 percent). Therefore, the non-pay adjustment is 1.7188 
percent times 51.4551 percent, or 0.8844 percent.
    The PC&B component (1.0839 percent) is added to the non-PC&B 
component (0.8844 percent), for a total inflation adjustment of 1.9683 
percent (rounded), and then one is added, making the inflation 
adjustment 1.019683.
    Section 744K(c)(2)(B) of the FD&C Act provides for this inflation 
adjustment to be compounded after FY 2015. This factor for FY 2016 
(1.9683 percent) is compounded by adding one to it, and then 
multiplying it by one plus the inflation adjustment factor for FY 2015 
(2.0558 percent), as published in the Federal Register of August 1, 
2014 (79 FR 44805). The result of this multiplication of the inflation 
factors for the 1 year since FY 2015 (1.019683 x 1.020558) becomes the 
inflation adjustment for FY 2016. For FY 2016, the inflation adjustment 
is 4.0646 percent (rounded). We then add one, making the FY 2016 
inflation adjustment factor 1.040646.
2. Small Business Adjustment Factor
    Section 744K(c)(3) of the FD&C Act specifies that in addition to 
the inflation adjustment factor, the establishment fee for non-small 
businesses is to be further adjusted for a small business adjustment 
factor. Section 744K(c)(3)(B) of the FD&C Act provides that the small 
business adjustment factor is the adjustment to the establishment fee 
for non-small businesses that is necessary to achieve total fees 
equaling the amount that FDA would have collected if no entity 
qualified for the small business exception in section 744K(c)(4) of the 
FD&C Act. Additionally, section 744K(c)(5)(A) states that in 
establishing the small business adjustment factor for a fiscal year, 
FDA shall provide for the crediting of fees from the previous year to 
the next year if FDA overestimated the amount of the small business 
adjustment factor for such previous fiscal year.
    Therefore, to calculate the small business adjustment to the 
establishment fee for non-small businesses for FY 2016, FDA must 
estimate: (1) The number of outsourcing facilities that will pay the 
reduced fee for small businesses for FY 2016 and (2) the total fee 
revenue it would have collected if no entity had qualified for the 
small business exception (i.e., if each outsourcing facility that 
registers for FY 2016 were to pay the inflation-adjusted fee amount of 
$15,610).
    With respect to (1), FDA estimates that eight entities will qualify 
for small business exceptions and will pay the reduced fee for FY 2016. 
With respect to (2), to estimate the total number of outsourcing 
facilities that will register for FY 2016, FDA used data submitted by 
outsourcing facilities through the voluntary registration process, 
which began in December 2013. Accordingly, FDA estimates that 55 
outsourcing facilities, including 8 small businesses, will register 
with FDA in FY 2016.
    If the projected 55 outsourcing facilities paid the full inflation-
adjusted fee of $15,610, this would result in total revenue of $858,550 
in FY 2016 ($15,610 x 55). However, because 8 of the outsourcing 
facilities expected to register for FY 2016 are estimated to qualify 
for the small business exception and will pay one-third of the full fee 
($5,203 x 8), totaling $41,624 instead of paying the full fee ($15,610 
x 8), which totals $124,880. This would leave a shortfall of $83,256 
($124,880 - $41,624).
    Additionally, section 744K(c)(5)(A) of the FD&C Act states that in 
establishing the small business adjustment factor for a fiscal year, 
FDA shall provide for the crediting of fees from the previous year to 
the next year if FDA overestimated the amount of the small business 
adjustment factor for such previous fiscal year. For each year, total 
target collections are calculated as (15,000 x [inflation adjustment 
factor] x [number of registrants]). This would have been $887,864 for 
FY 2015 ($15,308 x 58). However, because FDA did not have the exact 
number of registrants and had to rely on estimates of the number of 
small businesses and non-small businesses that would register in FY 
2015, FDA's FY 2015 small business adjustment factor resulted in excess 
collections of $43,094 ($930,958 - $887,864) as of June 30, 2015.\3\
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    \3\ If FDA receives additional excess collections for FY 2015 
after June 30, 2015, then FDA will credit this amount when it 
establishes the small business adjustment factor for FY 2017.
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    Therefore, to calculate the small business adjustment factor for FY 
2016, FDA subtracts the $43,094 overage from FY 2015 from the $83,256 
projected shortfall for FY 2016 to arrive at the numerator for the 
small business adjustment amount, which equals $40,162. This number 
divided by 47 (the number of expected non-small businesses for FY 2016) 
is the small business adjustment amount for FY 2016, which is $855. 
Therefore, the establishment fee for a non-small business for FY 2016 
is $15,000 multiplied by 1.040646 plus $855, which equals $16,465.

C. Summary of FY 2016 Fee Rates

                   Table 4--Outsourcing Facility Fees
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Qualified Small Business Establishment Fee..............          $5,203
Non-Small Business Establishment Fee....................          16,465
Reinspection Fee........................................          15,610
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III. Fee Payment Options and Procedures

A. Establishment Fee

    Once an entity submits registration information and FDA has 
determined that the information is complete, the entity will incur the 
annual establishment fee. FDA will send an invoice to the entity, via 
email to the

[[Page 46010]]

email address indicated in the registration file, or via regular mail 
if email is not an option. The invoice will contain information 
regarding the obligation incurred, the amount owed, and payment 
procedures. A facility will not be deemed registered as an outsourcing 
facility until it has paid the annual establishment fee under section 
744K of the FD&C Act. Accordingly, it is important that facilities 
seeking to operate as registered outsourcing facilities pay all fees 
immediately upon receiving an invoice. If an entity does not pay the 
full invoiced amount within 15 calendar days after FDA issues the 
invoice, FDA will consider the submission of registration information 
to have been withdrawn and adjust the invoice to reflect that no fee is 
due.
    Outsourcing facilities that registered in FY 2015 and wish to 
maintain their status as an outsourcing facility in FY 2016 must 
register during the annual registration period that lasts from October 
1, 2015, to December 31, 2015. Failure to register and complete payment 
by December 31, 2015, will result in a loss of status as an outsourcing 
facility on January 1, 2016. Entities should submit their registration 
information no later than December 10, 2015, to allow enough time for 
review of the registration information, invoicing, and payment of fees 
before the end of the registration period.

B. Reinspection Fee

    FDA will issue invoices for each reinspection after the conclusion 
of the reinspection, via email to the email address indicated in the 
registration file or via regular mail if email is not an option. 
Invoices must be paid within 30 days.

C. Fee Payment Procedures

    1. The preferred payment method is online using electronic check 
(Automated Clearing House (ACH) also known as eCheck) or credit card 
(Discover, VISA, MasterCard, American Express). Secure electronic 
payments can be submitted using the User Fees Payment Portal at https://userfees.fda.gov/pay. Once you search for your invoice, click ``Pay 
Now'' to be redirected to Pay.gov. Note that electronic payment options 
are based on the balance due. Payment by credit card is available for 
balances less than $50,000. If the balance exceeds this amount, only 
the ACH option is available. Payments must be drawn on U.S. bank 
accounts as well as U.S. credit cards.
    2. If paying with a paper check: Checks must be in U.S. currency 
from a U.S. bank and made payable to the Food and Drug Administration. 
Payments can be mailed to: Food and Drug Administration, P.O. Box 
956733, St. Louis, MO 63195-6733. If a check is sent by a courier that 
requests a street address, the courier can deliver the check to: U.S. 
Bank, Attn: Government Lockbox 956733, 1005 Convention Plaza, St. 
Louis, MO 63101. (Note: This U.S. Bank address is for courier delivery 
only; do not send mail to this address.)
    3. If paying with a wire transfer: Use the following account 
information when sending a wire transfer: New York Federal Reserve 
Bank, U.S. Dept of Treasury, TREAS NYC, 33 Liberty St., New York, NY 
10045, Acct. No. 75060099, Routing No. 021030004, SWIFT: FRNYUS33, 
Beneficiary: FDA, 8455 Colesville Rd., Silver Spring, MD 20993. The 
originating financial institution may charge a wire transfer fee. An 
outsourcing facility should ask its financial institution about the fee 
and add it to the payment to ensure that the order is fully paid. The 
tax identification number of FDA is 53-0196965.

    Dated: July 28, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015-18916 Filed 7-31-15; 8:45 am]
BILLING CODE 4164-01-P