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Background on MDUFMA

The Medical Device User Fee and Modernization Act of 2002 (MDUFMA) was enacted “in order to provide the Food and Drug Administration (FDA) with the resources necessary to better review medical devices, to enact needed regulatory reforms so that medical device manufacturers can bring their safe and effective devices to the American people at an earlier time, and to ensure that reprocessed medical devices are as safe and effective as original devices.”¹ MDUFMA has four particularly important features:

• User fees for medical device premarket applications provide additional resources to make FDA reviews more timely, predictable, and transparent to applicants. MDUFMA fees, and linked increases in appropriations for the medical device program, help FDA expand available expertise, modernize its information technology (IT) infrastructure, provide new review options, and provide more guidance to prospective applicants. The ultimate goal is to approve and clear safe and effective medical devices more rapidly, benefiting applicants, the health care community, and most importantly, patients.
   
• Performance goals for many types of premarket reviews provide FDA with a roadmap to achieving review improvements. These quantifiable goals become more demanding each year and include FDA decision goals and cycle goals (cycle goals refer to FDA actions prior to a final action on a submission). Under MDUFMA, FDA must also meet several non-quantifiable commitments, such as to develop performance goals for modular premarket approval applications (PMAs) and to improve pre-approval inspection timeliness.
   
• Establishment inspections may be conducted by accredited persons (third-parties), under carefully prescribed conditions. These inspections will augment FDA inspections and will provide U.S. firms who compete in international markets greater flexibility in meeting multiple sets of regulatory requirements.
   
• New regulatory requirements for reprocessed single-use devices, including devices on the market prior to enactment of MDUFMA, provide FDA strengthened authority to help ensure reprocessed devices are safe and effective for their intended uses.

Medical device user fees and increased appropriations were viewed by FDA, Congress, and industry stakeholders as essential to support high-quality, timely medical device reviews, and other activities critical to the device review program.

MDUFMA provides for fee discounts and waivers for small businesses. Small businesses make up a large proportion of the medical device industry, and these discounts and waivers help ensure they remain economically healthy and innovative.

The performance goals and commitments set under MDUFMA are comprehensive and demanding. By FY 2007, a total of 85 will be in effect. All of these were developed collaboratively by FDA, Congress, and the device industry. FDA provides periodic reports on its progress towards meeting these goals to its stakeholders and Congress. FDA also provides an annual financial report to Congress to help ensure transparency and accountability of its use of the additional resources provided by MDUFMA.

Before MDUMFA. In the years preceding enactment of MDUFMA, FDA’s medical device program suffered a long-term, significant loss of resources that undermined the program’s capacity and performance.

In early 2002, the medical device industry and Congress recognized that the program needed additional resources. Indicators of problems included: expedited premarket approval applications were taking longer than standard reviews; many reviews were delayed because necessary expertise was stretched thin or not available; and many guidance documents were out-of-date. In response, leaders of the device industry approached FDA and Congress to initiate discussions about linking new user fees to increased appropriations to augment the resources available for device review. Congress concluded that "FDA resources are limited, and that without a new infusion of funding, it is likely that review times will increase in the future."² Soon after, Congress, FDA and industry worked to develop a solution: the Medical Device User Fee and Modernization Act of 2002.

Progress Under MDUFMA. FDA has made significant progress towards meeting MDUFMA’s fundamental objectives:

• FDA has expanded its review capabilities and expertise through targeted hiring of highly qualified professionals, enhanced training of staff, and development of a Medical Device Fellowship Program.
• FDA is currently on track to meet almost all of MDUFMA’s decision and cycle performance goals.
• FDA expanded the availability of innovative review processes — expedited reviews, modular reviews, and real-time reviews.
• FDA is improving management and oversight of its review processes through the development of electronic tracking systems and project management initiatives.
• FDA established an Office of Combination Products that is improving coordination of combination product reviews.
• FDA issued new guidance to help staff and industry better understand MDUFMA processes and requirements.
• FDA fulfilled the statutory mandate to re-examine reprocessed single-use devices and put new safeguards into effect to ensure their continued safety and effectiveness.
• FDA met the statutory requirement to establish a third-party inspection program. This option may be particularly useful to U.S. firms who compete in international markets and are faced with multiple sets of regulatory requirements.

Problems that Limited Progress. Although FDA has been making good progress towards achieving MDUFMA’s central objectives, our progress has been limited by financial shortfalls and uncertainties. As originally enacted, MDUFMA specified the amounts that Congress was expected to appropriate each year from FY 2003 through FY 2007, and the revenues user fees were expected to provide in each of those years. However, in practice, the user fee framework under MDUFMA has created uncertainty for industry and FDA regarding the annual increase in fees and the amount of funds that would be collected by the Agency in any given year. For example,

• MDUFMA contained a “compensating adjustment” that could lead to escalating user fee rates if fee payments did not generate revenue levels specified by MDUFMA. In FY 2003, user fee payments did not reach the required levels, and FDA applied the compensating adjustment when setting fees for FY 2004, leading to fees that were substantially higher than industry had expected. Although FDA could have applied the compensating adjustment when we set the fees for FY 2005, we deferred use of the adjustment. Nevertheless, there was the possibility that fees for FY 2006 and FY 2007 would rise sharply when FDA could no longer defer application of the compensating adjustment.
   
• Unlike the user fee programs enacted for prescription drugs and animal drugs, MDUMFA permitted the collection of fees only for applications submitted to FDA. In addition, the number of applications FDA may receive in a given year as well as the number of those applications for which fees may be reduced or waived because they were submitted by a small business can fluctuate. As a result, MDUFMA exposed FDA to unpredictable funding levels that could only be remedied in future years through use of the compensating adjustment.

By May 2005, uncertainty concerning whether corrective legislation would be enacted before the October 1, 2005 termination date required FDA to impose a hiring freeze in its Center for Devices and Radiological Health.

FDA was also faced with a very difficult task of trying to develop a workable approach to implement section 502(u) of the Federal Food, Drug, and Cosmetic Act (added by section 301 of MDUFMA) which required all medical devices to “prominently and conspicuously” bear the name of the manufacturer. This provision applied to all classes of devices and the only allowable exception involved FDA’s granting of device-specific waivers. There were many questions and concerns regarding the interpretation of the provision and the burden its implementation would impose on FDA and the regulated industry.

To avoid the premature termination of medical device user fees and to address the concerns regarding section 502(u), Congress enacted the Medical Device User Fee Stabilization Act of 2005 (the Stabilization Act). The Stabilization Act: (1) repealed the appropriations trigger for FY 2003 and FY 2004 and allows for tolerances of up to 1% of the appropriations trigger for FY 2005-2007, (2) provides for predictable application fees by establishing fixed annual fees for FY 2006 and FY 2007, although at a lower rate of increase than under the original legislation; and (3) expands the definition of “small business” for FY 2006 and FY 2007. The new law also limits section 502(u) to reprocessed single-use devices and eliminates the granting by FDA of device-specific waivers. However, the Stabilization Act leaves open how to ensure predictable revenues for FDA.

Moving Forward. With the enactment of the Stabilization Act, FDA plans to build on its MDUFMA achievements during FY 2006 and FY 2007. We expect continued progress towards achieving MDUFMA’s performance goals, but we also anticipate that some of the commitments established under MDUFMA will be more difficult or not feasible to achieve.

The user fee provisions of MDUFMA will sunset on October 1, 2007. If the user fee program is not reauthorized, FDA will be unable to continue on our current path of improvement and will instead be facing very difficult financial challenges to our medical device program.

On November 17, 2005, FDA is holding the Third Annual Stakeholder Meeting on MDUFMA. The focus of this meeting will be on obtaining input from interested parties to help us and our stakeholders evaluate the program and prepare for possible new legislation to reauthorize MDUFMA user fees. We strongly encourage you to attend this meeting and provide your comments and recommendations that will help us provide for continued improvement and additional benefits to all our stakeholders. To learn how to participate in this important effort, see the accompanying Federal Register notice.

¹ Medical Device User Fee and Modernization Act of 2002, Report 107-728 (October 7, 2002), p. 21.

² Medical Device User Fee and Modernization Act of 2002, House Report 107-728 (October 7, 2002), p. 21.

Updated September 29, 2005

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