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In response to a request from its stakeholders for information regarding the estimated cost for the review of various premarket applications, the Food and Drug Administration (FDA) contracted with Dr. Dale Geiger to develop unit costs for selected premarket applications. This unit cost information has been used by the Center for Devices and Radiological Health (CDRH or the Center) in re-engineering its cost accounting system to more accurately capture its review efforts, as discussed in more detail below.

In the attached report, the estimated unit costs for the eight types of device applications listed below for combined FYs 2003 and 2004 are presented.

For CDRH :

1. Investigational Device Exemptions (IDE) applications
2. Premarket notification submissions (510(k)s)
3. Premarket approval applications (PMAs)
4. PMA Supplements

For the Center for Biologics Evaluation and Research (CBER):

5. IDEs/Investigational New Drug (IND) applications
6. 510(k)s
7. PMAs/Biologics License Applications (BLAs)
8. BLA supplements

The report discusses the methodology and assumptions used and summarizes the calculation of the unit costs for these application types. For the reasons stated below, the estimated unit costs for the combined FYs 2003 and 2004 do not reflect the “true” costs of reviewing these applications types and, therefore, when reviewing the analysis and its findings, the following key points should be kept in mind.

• The Center’s Time Reporting Survey (CTRS) data that served as the basis for the analysis was fairly limited in FYs 2003 and 2004. At that point in time, the time reporting categories had not yet been refined to be able to capture all of the application types of interest under MDUFMA. For example, although MDUFMA defines panel-track, 180-day, and real-time supplements, CTRS was only able to capture the resources expended for these PMA supplements in aggregate. In recognition of this shortcoming, CDRH revamped CTRS midway through FY 2005. The Center also conducted center-wide mandatory training to explain the new reporting categories and to stress the importance of the time reporting survey in being able to more fully and accurately capture CDRH’s resource expenditures.

• As discussed in the report, when calculating the unit costs for the review of various premarket applications, a major consideration is the choice of the denominator as a reflection of workload. The options considered include the number of applications received, the number of “final actions” taken on applications, and the number of equivalent units of work completed during a specific time period. There are advantages and disadvantages associated with each as detailed in Dr. Geiger’s report. Based on these, the author of the report chose the number of final actions as a workload estimate for each application type. In future years, FDA may consider exploring alternatives, such as equivalent units, to see if that is a better measure of the work completed.

• The results of this unit cost analysis demonstrate that the user fee program does not, nor was it intended to, cover the full costs associated with the review of the agency’s premarket application review. For example, in FYs 2003 and 2004, the fees for an original PMA were $154,000 and $206,811, respectively. The estimated unit cost, however, for the review of a PMA during the FYs 03 and 04 combined time period was approximately $560,000.

• The Medical Device User Fee and Modernization Act of 2002 (MDUFMA) was crafted assuming a steady state workload and substantially increasing resources over the 5-year period from FY 2003 to FY 2007. Therefore, as the device program adds resources and reaches the funding levels specified under MDUMFA, it should be expected that the unit costs for various types of device applications may rise over this period. For that reason, the unit cost per application type that were developed for combined FYs 2003 and 2004 should be viewed in this context—as a beginning point that may increase until the program reaches the full funding levels under the user fee legislation in FY 2007.

• Finally, the attached report presents unit cost estimates for the review of device applications performed during the two year period of FYs 2003 and 2004. Because these unit costs reflect the resources and workloads available during this particular timeframe, they should not be viewed as “true” costs, but rather as benchmarks for future comparisons.

The device cost analysis report can be found here.

Updated October 14, 2005

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