And that's not even counting what's behind the couch cushions in Peggy's office

  • by: |
  • 08/03/2011

According to the Pink Sheet, FDA has amassed a large reserve fund throughout PDUFA IV, but will likely be forced to spend most of it in the next fiscal year as application volume declines and more personnel move to the agency's new headquarters.

 

FDA ended FY 2010 with more than $150.6 million in the carryover account, a 252% increase from the $42.8 million in the account as of June 30, 2006. The agency said aside from excess fee collections during PDUFA III, the fund also included fees saved for the agency relocation to its White Oak campus that were allocated during PDUFA IV and a reserve for refunds.

 

Spending the carryover funds will allow FDA to reduce the size of the user fee the upcoming fiscal year, although that will probably feel like a small comfort to sponsors facing a more than 19% increase in FY 2012, which brings the total fee for a full application requiring clinical data to $1.842 million.

 

Two of the largest carrover balance expenses will be personnel-related. The agency said in the notice it expects to spend about $37.9 million to move the Center for Biologics Evaluation and Research to its White Oak campus in Silver Spring, Md. by FY 2014. CBER now is located in nearby Rockville, Md.

 

The General Services Administration already approved the project and President Obama allocated $23.68 million in his FY 2012 budget request to complete the lab and ensure it is ready for use by FY 2014. FDA said without the investment, it would be forced to pay rent for a new lab it cannot use and for an old lab it cannot vacate.

 

FDA also plans to spend $29.8 million from the carryover balance in FY 2011 and FY 2012 to pay for 53 new full-time equivalent employees. The hires were authorized in FY 2009 to handle additional work created by the FDA Amendments Act's drug safety provisions.

 

Another $2.5 million of the carryover fund must be reserved for refunds, the agency said in the notice.

 

FDA also is obligated by PDUFA rules to use some carryover money to offset industry fee overpayments made from FY 2002 and FY 2007. That nearly $31 million payment lowered the revenue target and, subsequently, the fees sponsors will pay. The agency said in the notice fee payments from FY 2008 through FY 2011 will be more than $27.2 million less than the amounts appropriated, which would not require an offset payment.

 

The agency also will be forced to cover two years of shortfalls with the carryover balance that were caused by slumping submissions. The agency projected an $8.4 million revenue shortfall in FY 2011 and an $8.7 million shortfall in FY 2012, according to the notice.

 

After receiving 17 fewer full paid applications in 2010, the agency adjusted its assumptions for annual volume to be 5.5 submissions fewer in FY 2011 and FY 2012, which caused the shortfalls. FDA received 118.4 fee paying full application equivalents in FY 2010 and estimated it would receive 102.5 through the end of FY 2011. Both were near record lows since PDUFA was implemented in FY 1993.

 

The shortfalls also likely influenced an FDA decision to lower its revenue target for operational reserves in early FY 2013. The agency is allowed to add three months of operating expenses to its fee calculations for the final year of a PDUFA cycle so it can "assure sufficient operating reserves" at the start of the next fiscal year, which would be the first for PDUFA V.

 

Three months of revenue at that time would be $169.2 million. When the remaining $32.4 million in the carryover balance is subtracted out, the agency would need another $136.9 million.

 

But FDA decided it would "assume more risk" and only require two months of operating expenses for the reserve, lowering the required amount to $80.4 million. The agency said including the full three months in FY 2012 "poses a substantial burden on the regulated industry at a time when it is undergoing significant financial strain," according to the notice.

 

The decision will save sponsors of applications requiring clinical data about 8% in fee payments. The fee would have been about $1.99 million if FDA demanded a three-month reserve.

 

When the House approved the FY 2012 Agriculture/FDA appropriations bill in June, it gave the agency a miniscule $3 million budget increase. User fee revenue increases were used to offset a $285 million cut in federal funding.

 

For more discussion of PDUFA, have a look (and bookmark) www.modernmedicines.com. It’s an important and useful site from the folks at Eli Lilly & Co on all-things PDUFA.

CMPI

Center for Medicine in the Public Interest is a nonprofit, non-partisan organization promoting innovative solutions that advance medical progress, reduce health disparities, extend life and make health care more affordable, preventive and patient-centered. CMPI also provides the public, policymakers and the media a reliable source of independent scientific analysis on issues ranging from personalized medicine, food and drug safety, health care reform and comparative effectiveness.

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