financial aspects of mdufma presentation at public meeting by frank claunts november 18, 2004

Financial Aspects of Financial Aspects of MDUFMAMDUFMA

Presentation at Public Meeting by

Frank Claunts

November 18, 2004

MDUFMAMDUFMA

• How fees are set

• FY 2004 financial results

• What’s working well

• What’s not

MDUFMAMDUFMA

How Fees are Set

MDUFMA--MDUFMA--How Fees are Set

Determined by three things:

1. Revenue Target

2. Statutory Relationship of Fees

3. Numbers of Fee-paying Applications

5HHS/FDA/Office of Management

How Fees are Set—How Fees are Set—Revenue TargetRevenue Target

2003 2004 2005 2006Estimate

2007Estimate

Target In 2003 $

$25,125,000 $27,255,000 $29,785,000 $32,465,000 $35,000,000

% Increase

%Inflation

Adjusted $ Target

% Change Year to Year



2003 2004 2005 2006Estimate

2007Estimate

Target In 2003 $

$25,125,000 $27,255,000 $29,785,000 $32,465,000 $35,000,000

% Increase 8.5% 9.3% 9.0% 7.8%

%Inflation

Adjusted $ Target




2003 2004 2005 2006Estimate

2007Estimate

Target In 2003 $

$25,125,000 $27,255,000 $29,785,000 $32,465,000 $35,000,000

% Increase 8.5% 9.3% 9.0% 7.8%

%Inflation 4.3% 4.4% 4 % 4 %

Adjusted $ Target




2003 2004 2005 2006Estimate

2007Estimate

Target In 2003 $

$25,125,000 $27,255,000 $29,785,000 $32,465,000 $35,000,000

% Increase 8.5% 9.3% 9.0% 7.8%

%Inflation 4.3% 4.4% 4 % 4 %

Adjusted $ Target

$25,125,000 $28,418,789 $32,429,908 $36,761,380 $41,217,134




2003 2004 2005 2006Estimate

2007Estimate

Target In 2003 $

$25,125,000 $27,255,000 $29,785,000 $32,465,000 $35,000,000

% Increase 8.5% 9.3% 9.0% 7.8%

%Inflation 4.3% 4.4% 4 % 4 %

Adjusted $ Target

$25,125,000 $28,418,789 $32,429,908 $36,761,380 $41,217,134


13.1% 14.1% 13.4 % 12.1 %

Revenue Amounts before Workload and Compensating Adjustments


How Fees Are Set—How Fees Are Set—Compensating AdjustmentCompensating Adjustment

Purpose—Stable & Predictable Revenues Essential to have dependable revenue stream for

program to grow Other FDA user fee programs use product,

establishment and sponsor fees for stable revenue Device industry rejected these Preferred compensating adjustment instead Compensating adjustment: any shortfall would be

added to revenue target for future years


How Fees are SetHow Fees are SetStatutory Fee RelationshipsStatutory Fee RelationshipsApplication Type Full Fee

% of PMA

Small Business

% of Full Fee for Same Type

PMA/BLA/Panel Track 100%

180 Day Supplements

Real Time Supplements

510(k)’s



% of PMA

Small Business



180 Day Supplements 21.5%

Real Time Supplements

510(k)’s



% of PMA

Small Business



180 Day Supplements 21.5%

Real Time Supplements 7.2%

510(k)’s



% of PMA

Small Business


PMA/BLA/Panel Track 100% 38%

180 Day Supplements 21.5% 38%

Real Time Supplements 7.2% 38%

510(k)’s



% of PMA

Small Business


PMA/BLA/Panel Track 100% 38%

180 Day Supplements 21.5% 38%

Real Time Supplements 7.2% 38%

510(k)’s 1.42%+ 80%

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

How Fees are SetHow Fees are SetNumbers of Fee-paying ApplicationsNumbers of Fee-paying Applications

03/04Estimate

03 Actual

04 Proj. 3-31-04

05 Fee Basis

PMA/BLA 58

“ S.B. 10

180-Day 171

“ S.B. 24

Real-Time 86

“ S.B. 14

510(k) 4000

“ S.B.


03/04Estimate

03 Actual

04 Proj. 3-31-04

05 Fee Basis

PMA/BLA 58 46

“ S.B. 10 6

180-Day 171 118

“ S.B. 24 22

Real-Time 86 136

“ S.B. 14 19

510(k) 4000 4001

“ S.B.


03/04Estimate

03 Actual

04 Proj. 3-31-04

05 Fee Basis

PMA/BLA 58 46 47

“ S.B. 10 6 5

180-Day 171 118 86

“ S.B. 24 22 9

Real-Time 86 136 159

“ S.B. 14 19 15

510(k) 4000 4001 2853

“ S.B. 482


03/04Estimate

03 Actual

04 Proj. 3-31-04

05 Fee Basis

PMA/BLA 58 46 47 51

“ S.B. 10 6 5 6

180-Day 171 118 86 86

“ S.B. 24 22 9 9

Real-Time 86 136 159 160

“ S.B. 14 19 15 15

510(k) 4000 4001 2853 3060

“ S.B. 482 540


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

Application Type Full Fee

% of PMA

Small Business


PMA/BLA/Panel Track $239,237 $90,910

180 Day Supplements $51,436 $19,546

Real Time Supplements $17,225 $6,546

510(k)’s $3,502 $2,802

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

MDUFMAMDUFMA

FY 2004 Financial Results


Revenue Percents by QuarterRevenue Percents by Quarter

25.6

20.7

24.3

29.4

0

5

10

15

20

25

30

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

2003

2004


Revenue Percents by QuarterRevenue Percents by Quarter

25.627.6

20.723.7 24.3

22.2

29.426.5

0

5

10

15

20

25

30

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

2003

2004


Numbers of PMA/BLA/Panel TrackNumbers of PMA/BLA/Panel Track

03 Actual

04 Actual

Original

Forecast

05 Fee Basis

Full Fee 45 40.5 58 51

S.B. Fee 6 4 10 6

Fee Paying 51 44.5 68 57

Exempt S.B. 16 19

Exempt Ped. 0 1

Bundled 2 4

Non Fee-Paying 18 24

Total 69 68.5


Numbers of 180-Day SupplementsNumbers of 180-Day Supplements

03 Actual

04 Actual

Original

Forecast

05 Fee Basis

Full Fee 117 93 171 86

S.B. Fee 22 13 24 9

Fee Paying 139 106 195 95

Exempt Ped. 2 1

Bundled 13 4

Non Fee-Paying 15 5

Total 154 111


Numbers of Real Time SupplementsNumbers of Real Time Supplements

03 Actual

04 Actual

Original

Forecast

05 Fee Basis

Full Fee 136 157 86 160

S.B. Fee 19 20 14 15

Fee Paying 155 177 100 175

Exempt Ped. 1 1

Bundled 21 26


Total 177 204


Numbers of 510k’sNumbers of 510k’s

03 Actual

04 Actual

Original

Forecast

05 Fee Basis

Full Fee 2874 3060

S.B. Fee 517 540

Fee Paying 3999 3391 4000 3600

Exempt 3rd Party 190 255

Fee Exempt 13 21

Not a device/etc. 67 127


Total 4269 3776


FY 2004 Preliminary Revenue FY 2004 Preliminary Revenue SummarySummary

Full Fee SB Fees Total

PMA/BLA/etc. $8,375,846 $314,352 $8,690,198

180 Day Supp’s $4,179,616 $219,648 $4,399,264

RT Supp’s $2,322,840 $118,818 $2,441,658

510k’s $10,001,520 $1,149,328 $11,440,848

Subtotal $26,971,968

FY 2003 Adj. ($139,932)

Net Collected $26,832,036


FY 2004 Cumulative Fee FY 2004 Cumulative Fee Revenue ShortfallRevenue Shortfall

FY 2004 Revenue Target $31,654,207FY 2004 Net Collected $26,852,036

Shortfall $4,802,171

Collection of shortfall will be spread between FY 2006 and 2007

MDUFMAMDUFMA

What’s Working Well


What’s Working WellWhat’s Working Well Fee Collection Process Keeping Collection Apart from Review Small Business Determinations Setting Fees Timely Utilizing Fees for Device Review Work Without MDUFMA in 2004

– Program would have contracted– Performance would have deteriorated

Visibility and Respect for Device Review Program

MDUFMAMDUFMA

What’s Not Working Well


What’s Not Working WellWhat’s Not Working WellRevenues are NOT Stable and Predictable Fee revenues less than envisioned Appropriations less than envisioned Therefore

– Staffing has increased more slowly than originally envisioned

– Urgent need to add staff to meet MDUFMA goals


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

FY 2003 FY 2004 Combined

Revenue TargetWithout Compensating Adjustment

$25,125,000 $28,418,789 $53,543,789

Received

Shortfall





$25,125,000 $28,418,789 $53,543,789

Received $21,889,582 $26,852,036 $48,741,618

Shortfall





$25,125,000 $28,418,789 $53,543,789

Received $21,889,582 $26,852,036 $48,741,618


(-13%)





$25,125,000 $28,418,789 $53,543,789

Received $21,889,582 $26,852,036 $48,741,618


(-13%)

$1,566,753

(-6%)





$25,125,000 $28,418,789 $53,543,789

Received $21,889,582 $26,852,036 $48,741,618


(-13%)

$1,566,753

(-6%)

$4,802,171

(-9%)


Fixing Fee ShortfallsFixing Fee Shortfalls

Revised estimated number of fee-paying applications when fees were set for FY 2005

Fix may have been too modestStill expect collections closer to revenue

targets in 2005 through 2007 Bigger issue now is appropriations shortfalls


FY 2003 Funding ShortfallsFY 2003 Funding ShortfallsIn Millions of DollarsIn Millions of Dollars

0

50

100

150

200

250

2003

Approp Minimum

Actual Approps

Appropriation Shortfall--$12.4 Million or 6%


FY 2004 Device AppropriationsFY 2004 Device Appropriations In Millions of Dollars In Millions of Dollars

Actual Appropriation down by $2.2 million from FY 2003 level

Pay raise alone cost $8.5 million

Cut over $11 million for IT and admin savings

Impact of appropriation cuts barely offset by fee revenue

0

50

100

150

200

250

2004

Approp Minimum

Actual Approps

Appropriation Shortfall--$19.5 Million or 9%


Appropriations IssuesAppropriations Issues

Increases in staffing have been less than planned due to FY 2004 appropriations

Administration recognizes funding needs in 2005 & future years and will request funds at MDUFMA trigger levels

Two things essential for program to survive and thrive


Appropriations—Urgent IssuesAppropriations—Urgent Issues

1. FY 2005 device appropriations must be at level envisioned in MDUFMA ($217 million)

2. MDUFMA must be amended to eliminate the catch-up appropriation requirement for FY 2003 and FY 2004

Otherwise MDUFMA program will end October 1, 2005

– Performance will deteriorate dramatically– Fix needed now or staffing in jeopardy


Brighter Prospects for FY 2005Brighter Prospects for FY 2005

Indications are that in FY 2005 the device program will get the appropriations increase envisioned in MDUFMA.

The combination of increased appropriations and fee revenues should result in FDA receiving the amount envisioned in MDUFMA.


FY 2005 Funding ProspectsFY 2005 Funding Prospects In Millions of Dollars In Millions of Dollars

0

50

100

150

200

250

2005

Approp Minimum

House Mark

Senate Mark

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


FY 2005 Funding ProspectsFY 2005 Funding Prospects In Millions of Dollars In Millions of Dollars

0

50

100

150

200

250

2005

Approp Minimum

From Fees

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


Urgent IssuesUrgent Issues

2005 Appropriation that meets MDUFMA triggers

MDUFMA must be amended to eliminate the catch-up appropriation requirement for FY 2003 and FY 2004

financial aspects of mdufma presentation at public meeting by frank claunts november 18, 2004

Documents

reduced fees

sponsor fees

pma fee

pmasmall business

level of revenue

day supplements21

real time supplements7

overall revenue level