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average review time for the 510(k)'s assigned to that Branch. The sponsor may request updates at 30-day intervals. To date, over assist manufacturers in deciding submissions for modified products are necessary. 7,000 requests for the processed. • Finalizing guidance to status of over 10,000 510(k)'s have been when 510(k) • In addition, significant.-help for devices came from the Administration and Congress through the FY 1994 appropriation. The Agency was provided $20 million in additional appropriated for funds the medical device program, enabling the Agency to hire 99 new FTE's. These additional employees were added to the review process and other key activities. Their presence greatly enhanced the Center's ability to make improvements in the review process and to develop and implement necessary management reforms. The impact of all these actions is being felt today. In the last year, the Center has begun to reduce the application backlog and the number application reviews completed has increased significantly. Management improvements alone, however, will not get the device review process where the Agency, Congress, and industry want it to be. OBJECTIVES OF MEDICAL DEVICE USER FEES Additional resources funded from user fees could still be used Z1Z O effectively to eliminate the application backlog and, for the future,~ _ C7 • 10 ~ C,O 00

• • • maintain aggressive review timeframes. Building upon the successful effort which led to enactment of prescription drug user fees, the Agency and industry representatives were encouraged to meet to explore the feasibility of a medical device user fee program. 'Industry agreed that a user fee program was worth pursuing if fees would be: 1) additive to FDA's base and dedicated to specific functions; 2) tied to and based on-Agency goals; 3) fair throughout industry; and 4) simple to administer. In February of this year, the merits of an additive user fee approach for medical devices were reflected in the President's FY 1995 budget. As I testified in 1992 regarding prescription drug user fees, there is sound economic rationale for user fees. User fees are based on equity: an identifiable beneficiary of a government service should pay the cost to the Federal Government of providing that service. The pharmaceutical, biotechnology, and medical device industries derive enormous private benefit from FDA's review and approval. FDA approval. helps assure consumers that marketed products are safe and effective and provides companies access to lucrative markets. Most important, a system of fees will improve FDA's approval processes. With additional funds, FDA will be able to interact more closely with industry to ~ 9 produce guidance and product data that have high scientific quality. ~ ~ 11 W C,O W

• • This will help the Agency to review applications more quickly and consistent with the public health standards that the law demands. This is a proposal under which everyone benefits: industry will be able to move devices to market more quickly, consumers will have the benefit of new, safe technologies sooner, and the regulatory review process will be enhanced and improved. ' SUMMARY OF H.R. 4728 The Administration strongly supports authorization of medical device user fees to provide FDA additional resources for the medical device review program. The President's FY 1995 Budget included a $24 million increase for the medical device program to be derived from specifically authorized user fees. We agree that such fees should provide additional resources for the Agency's medical device review program, these additional resources should be dedicated to premarket review functions and tied to specific, agency-wide performance o s, and the program should include accommodation for small business and a public health waiver. FDA has agreed to performance goals, in terms of timeframes for taking action on device applications, and to implementing further enhancements to the device review process. These goals and other activities are s ecified in the letter dated July 8, ~-f- - 1994, I have provided to Chairmen Dingell and Waxman, and to Ranking Members Moorhead and Bliley.> An identical letter was provided to lll Member Kassebaum. The Administration Chairman Kennedy and Ranking strongly supports these elements of H.R. 4728. 0 ~ ~ ~ 12 ~ ~ ~ 0

• • Two aspects of the legislation have raised special concerns. First, the legislation exempts personnel engaged in medical device review from any personnel reductions, including those from the Federal Workforce Restructuring Act of 1994 (P.L. 103-226). Earlier this year, the Congress passed and the President signed the Workforce Restructuring Act, which limits the number of full-time equivalent personnel the Federal Government may employ. The Act requires the Federal Government to reduce Federal employment by 272,900 by the end of 1999. The Administration has consistently opposed FTE exemptions in appropriations and authorizations bills because such provisions are incompatible with the Act. We want to work with the Congress to ensure that the FDA has adequate personnel to perform its mission and to meet the objectives of the proposed medical device legislation. Secondly, the Administration is seriously concerned that, through this legislation, general user fees would be excluded from FDA base appropriations. We urge the Committee to revise this section to be consistent with the Prescription Drug User Fee Act. Let me briefly discuss some of the components of the Medical Device User Fee Act of 1994: 1. Assessment of Fees Fees will be assessed by application type: ~ O ~ ~ CU 13 ~ CC ~ ~

• PMA submissions under section 515(c) of the Food, Drug, and Cosmetic Act and PLA's under section 351 of the Public Health Service Act would require a fee of $52,000; • Supplements to the above applications that require clinical data would have a fee of $7,100; ' • Supplements without required data would be assessed $4,500; and • Submissions under section 510(k) would require a fee of $3,200. • • If the Agency refuses to file an application based on the inadequacy of the submission, 510(k) applicants would receive a full refund while PMA/PLA applicants would receive an 85 percent refund. 2. Small Business and Public Health Exceptions to Fees To address the concern that user fees should not, in certain circumstances, stand as an impediment to small businesses or desirable public health innovation, the bill would provide both a small business and public health exception to payment of fees. • Small businesses with fewer than 20 employees that do not already have a device marketed in the United States would pay only 50 percent of the PMA fee, and the fee would be due one year from the date of final action by the Agency. If the submission is a 510(k), a small business would have one year after final agency action to pay the full fee. • A public health waiver or reduction would be provided for PMA's if ~ the submission qualifies for a humanitarian device exemption under ~ ~ C,O 14 W CD ~ tz

• section 520(m) or if the Secretary finds a waiver is necessary to protect public health and the fee presents a barrier to innovation. • • 3. Activities Funded By User Fees 3 User fees would be dedicated exclusively to support review activities of CDRH and CBER, including the costs of administering the program. For the Office of Regulatory Affairs, it could provide additional investigators to ensure timely preapproval inspections of manufacturing facilities. The activities that may be funded are specified in the bill and include: • All activities related to review and approval of device applications • Development of guidance and policy documents • Development of test methods and standards • Technical assistance connected with the submission of an application • Classification and reclassification activities under sections 513 and 515(i) and premarket requirements under section 515(b) • Designated post-market activities that support premarket review activities--specifically, SMDA-mandated postmarket surveillance and review of adverse medical device reports. ~ ~ ~ Cs~ 15 ~ ~ ~ to:

• • • 4. Performance Goals In developing the program's performance goals, we were guided by the principles that such goals should: 1) be aggressive, but achievable; 2) be tied to the level of resources derived from feesp and 3) include eliminating the current backlog of 510(k) and PMA/PLA applications. The Agency has agreed to--goals as set forth in my July 8, 1994 letters. They are as follows: • 95 percent of the current backlog in 510(k)'s and 90 percent of PMA's/PLA's should be eliminated within 24 months of the program's ef f ective date. • After 24 months: - final action on 95 percent of 510(k)'s should be completed within 90 days - comprehensive, substantive review on 90 percent of PMA's and PLA's should be completed within 180 days - review and action on PMA/PLA supplements containing required clinical data should be completed within 180 days - review and action on PMA/PLA supplements without required ~ O clinical data should be completed within 120 days ~ W C] Because the goals are tied closely to the number of anticipated C~ W" submissions and paying submissions, any increase or decrease greateroi~,~ than 10 percent in the anticipated number of submissions would require 16

• • • that the goals be adjusted. This will be done in consultation with industry. In addition, the effective date for meeting the goals is the date FDA has received the authority to collect the fees, and an appropriation to begin collecting and spending fees, and the authority to add personnel. 5. User Fees are to be Additive Like PDUFA, H.R. 4728 would require that new revenues derived from the medical device industry do not offset the current base of direct appropriations, and that FDA cannot use fees to offset current base allocations to CDRH and CBER. The user fee system would be subject to the Chief Financial Officers Act of 1990, which requires annual audited financial statements in order to evaluate the use of user fee proceeds and accomplishment of performance goals. 6. Reports to Congress H.R. 4728 would require the Secretary to submit two annual reports to Congress. The first would outline the progress made in achieving the goals described and provide additional information regarding review times and the number and nature of Agency decisions concerning device applications. The second would concern the implementation of user fee authority, including an income and expense statement demonstrating the amount of fees collected and how the fees were used. O 17 O~ CD W Cn to $P •LP

a > • • These reports will enable Congress to hold the Agency accountable, through the annual appropriations process, for its progress toward meeting the performance goals set forth in my July 8, 1994, letters. Further accountability is provided for in H.R. 4728 through the sunset provision, under which the authority to collect user fees would expire at the end of five years, unless reauthorized by Congress. SUMMARY Let me close, Mr. Chairman, with a final view of why this legislation is so important to the public health mission of the FDA. We are on the verge of tremendous new medical breakthroughs. Mr. Chairman, the Congress and the Administration have been particularly concerned about encouraging the growth of medical device technology in the United States. New medical devices coming into FDA for review show great potential for the treatment of afflictions for which there are no or only inadequate treatments. Moreover, through the 510(k) process, we see numerous new products improving upon the effectiveness of their predicate devices, and this translates into more efficient use of scarce health resources. FDA must be prepared to ensure that these products are safe and effective and to get them approved for use in patients as rapidly as possible. Mr. Chairman and members of the Subcommittee, I appreciate the opportunity to appear before you today and again appreciate your O ~ 18 ~ . ~ . CO ~ ~ ,

• concern regarding the funding needs of FDA. I would be happy to answer your questions at this time. • O ~ ~ 19 ~ C~9 . 07 ~ •.~