MDUFMA Financial Aspects Presentation Highlights: Fees, Results & Challenges

1. Financial Aspects of MDUFMA Presentation at Public Meeting by Frank Claunts November 18, 2004

2. MDUFMA • How fees are set • FY 2004 financial results • What’s working well • What’s not

3. MDUFMA How Fees are Set

4. MDUFMA--How Fees are Set • Determined by three things: • Revenue Target • Statutory Relationship of Fees • Numbers of Fee-paying Applications

5. How Fees are Set—Revenue Target HHS/FDA/Office of Management

6. How Fees are Set—Revenue Target HHS/FDA/Office of Management

7. How Fees are Set—Revenue Target HHS/FDA/Office of Management

8. How Fees are Set—Revenue Target HHS/FDA/Office of Management

9. How Fees are Set—Revenue Target Revenue Amounts before Workload and Compensating Adjustments HHS/FDA/Office of Management

10. How Fees Are Set—Compensating 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 HHS/FDA/Office of Management

11. How Fees are SetStatutory Fee Relationships HHS/FDA/Office of Management

12. How Fees are SetStatutory Fee Relationships HHS/FDA/Office of Management

13. How Fees are SetStatutory Fee Relationships HHS/FDA/Office of Management

14. How Fees are SetStatutory Fee Relationships HHS/FDA/Office of Management

15. How Fees are SetStatutory Fee Relationships + 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. HHS/FDA/Office of Management

16. How Fees are SetNumbers of Fee-paying Applications

17. How Fees are SetNumbers of Fee-paying Applications

18. How Fees are SetNumbers of Fee-paying Applications

19. How Fees are SetNumbers of Fee-paying Applications

20. How Fees are Set for FY 2005Doing the Math to Total $32,429,908 + 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. HHS/FDA/Office of Management

21. MDUFMA FY 2004 Financial Results

22. Revenue Percents by Quarter HHS/FDA/Office of Management

23. Revenue Percents by Quarter HHS/FDA/Office of Management

24. Numbers of PMA/BLA/Panel Track HHS/FDA/Office of Management

25. Numbers of 180-Day Supplements HHS/FDA/Office of Management

26. Numbers of Real Time Supplements HHS/FDA/Office of Management

27. Numbers of 510k’s HHS/FDA/Office of Management

28. FY 2004 Preliminary Revenue Summary HHS/FDA/Office of Management

29. FY 2004 Cumulative Fee Revenue Shortfall • FY 2004 Revenue Target $31,654,207 • FY 2004 Net Collected $26,852,036 • Shortfall $4,802,171 • Collection of shortfall will be spread between FY 2006 and 2007 HHS/FDA/Office of Management

30. MDUFMA What’s Working Well

31. What’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 HHS/FDA/Office of Management

32. MDUFMA What’s Not Working Well

33. What’s Not Working Well Revenues are NOT Stable and Predictable • Fee revenues less than envisioned • Appropriations less than envisioned • Therefore • Staffing has increased more slowly than originally envisioned • Urgent need to add staff to meet MDUFMA goals HHS/FDA/Office of Management

34. What’s Not Working Well—Unstable Fee Revenue HHS/FDA/Office of Management

35. What’s Not Working Well—Unstable Fee Revenue HHS/FDA/Office of Management

36. What’s Not Working Well—Unstable Fee Revenue HHS/FDA/Office of Management

37. What’s Not Working Well—Unstable Fee Revenue HHS/FDA/Office of Management

38. What’s Not Working Well—Unstable Fee Revenue HHS/FDA/Office of Management

39. Fixing Fee Shortfalls • Revised estimated number of fee-paying applications when fees were set for FY 2005 • Fix may have been too modest • Still expect collections closer to revenue targets in 2005 through 2007 • Bigger issue now is appropriations shortfalls HHS/FDA/Office of Management

40. FY 2003 Funding ShortfallsIn Millions of Dollars Appropriation Shortfall--$12.4 Million or 6% HHS/FDA/Office of Management

41. FY 2004 Device Appropriations In Millions of Dollars • Actual Appropriation down by $2.2 million from FY 2003 level • Pay raise alone cost $8.5 million • Cut over $11 million for IT and admin savings • Impact of appropriation cuts barely offset by fee revenue Appropriation Shortfall--$19.5 Million or 9% HHS/FDA/Office of Management

42. Appropriations 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 HHS/FDA/Office of Management

43. Appropriations—Urgent Issues • FY 2005 device appropriations must be at level envisioned in MDUFMA ($217 million) • MDUFMA must be amended to eliminate the catch-up appropriation requirement for FY 2003 and FY 2004 Otherwise MDUFMA program will end October 1, 2005 • Performance will deteriorate dramatically • Fix needednow or staffing in jeopardy HHS/FDA/Office of Management

44. Brighter 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. HHS/FDA/Office of Management

45. FY 2005 Funding Prospects In Millions of Dollars Senate mark meets appropriation minimum—House mark is very close. HHS/FDA/Office of Management

46. FY 2005 Funding Prospects In Millions of Dollars In FY 2005,85% of funds come from appropriations and 15% from fees HHS/FDA/Office of Management

47. Urgent Issues • 2005 Appropriation that meets MDUFMA triggers • MDUFMA must be amended to eliminate the catch-up appropriation requirement for FY 2003 and FY 2004 HHS/FDA/Office of Management