[House Report 107-728]
[From the U.S. Government Publishing Office]
107th Congress Rept. 107-728
HOUSE OF REPRESENTATIVES
2d Session Part 2
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MEDICAL DEVICE USER FEE AND MODERNIZATION ACT OF 2002
_______
October 15, 2002.--Ordered to be printed
_______
Mr. Tauzin, from the Committee on Energy and Commerce, submitted the
following
SUPPLEMENTAL REPORT
[To accompany H.R. 3580]
This supplemental report shows the cost estimate of the
Congressional Budget Office with respect to the bill (H.R.
3580), as reported, which was not included in part 1 of the
report submitted by the Committee on Energy and Commerce on
October 7, 2002 (H. Rept. 107-728, pt. 1).
This supplemental report is submitted in accordance with
clause 3(a)(2) of rule XIII of the Rules of the House of
Representatives.
CONTENTS
Page
Committee Cost Estimate.......................................... 1
Congressional Budget Office Estimate............................. 1
Federal Mandates Statement....................................... 10
COMMITTEE COST ESTIMATE
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
CONGRESSIONAL BUDGET OFFICE ESTIMATE
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, October 11, 2002.
Hon. W.J. ``Billy'' Tauzin,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 3580, the Medical
Device User Fee and Modernization Act.
If you wish further details on this estimate, we will be
placed to provide them. The CBO staff contacts are Shawn Bishop
and Julia Christensen.
Sincerely,
Steven Lieberman
(For Dan L. Crippen, Director).
Enclosure.
H.R. 3580--Medical Device User Fee and Modernization Act
Summary: H.R. 3580 would amend the Federal Food, Drug, and
Cosmetic Act to change the regulatory and approval process for
medical devices. It would authorize the Food and Drug
Administration (FDA) to collect fees to cover the cost of
expending the review of applications for approval to market
medical devices. Such fees would be collected and made
available for obligation only to the extent, and in the amount,
provided in advance in appropriation acts.
H.R. 3580 would expand and reauthorize certain activities
related to FDA's regulation of medical devices. It would allow
FDA to accredit third parties to inspect U.S. manufacturing
facilities of medical devices and to establish new labeling and
data requirements for manufacturers that reprocess single-use
devices. Regulated products that do not comply with FDA's
labeling requirements would be deemed misbranded and firms
would be subject to civil penalties.
H.R. 3580 also would authorize the creation of an office
within FDA to oversee the review of applications for
``combination products'' and would authorize additional
appropriations for FDA's surveillance of medical devices on the
market.
CBO estimates that implementing H.R. 3580 would have a
negligible effect on spending in 2003 and cost $36 million over
the 2003-2007 period, assuming the appropriation of the
necessary amounts. This estimate assumes that compliance with
new labeling requirements would be widespread; thus, CBO
estimates that revenues from civil monetary penalties would be
negligible.
FDA's authority to assess user fees and operate the third-
party inspection program would lapse unless appropriations for
certain FDA activities reach specified levels. But the bill
would not explicitly authorize additional funding, and the
spending that would result is not included in CBO's estimate of
the bill's costs. CBO estimates that $78 million in additional
appropriations above baseline levels would be necessary between
2003 and 2007 to avoid early terminations of the user fee
program. A total of $5 million in additional funding over the
five-year period would be necessary to maintain the third-party
inspection program. Additional outlays would total $77 million.
Changes made to the regulation of medical levels by the
bill could affect the prices of medical devices on the market
over the next five years. If so, the costs of federal health
programs that pay for medical devices would be affected.
Although the direction of the potential effect of various
provisions of H.R. 3580 on the average price of medical devices
is highly uncertain, CBO anticipates that the magnitude of any
such effect would likely be small.
H.R. 3580 would place a number of requirements on the
manufacturers of medical devices, including the payment of
fees. In some cases, state, local, or tribal governments could
be manufacturers of those devices. Thus, those requirements
would be both private-sector and intergovernmental mandates as
defined in the Unfunded Mandates Reform Act (UMRA). Because
many of those requirements would depend on future actions of
the Secretary of Health and Human Services (HHS), however, CBO
cannot determine whether their direct cost to the private
sector would exceed the annual threshold specified in UMRA
($115 million in 2002, adjusted annually for inflation) in any
of the first five years the mandates would be effective. CBO
estimates that the costs of those mandates to state, local, and
tribal governments would be minimal.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 3580 is shown in the following table.
The costs of this legislation fall within budget function 550
(health).
Basis of estimate: For this estimate, CBO assumes that the
bill will be enacted in the fall of 2002 and that outlays will
follow historical spending rates for the authorized activities.
Where H.R. 3580 specifies the amounts authorized to be
appropriated, CBO assumes that such appropriations will be
made. Where appropriations of such sums as necessary are
authorized, CBO assumes that the estimated amounts will be
provided for each fiscal year.
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By fiscal year, in millions of dollars--
--------------------------------------------
2003 2004 2005 2006 2007
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CHANGES IN SPENDING SUBJECT TO APPROPRIATION
Food and Drug Administration:
Estimated authorization level.................................. 6 11 11 13 13
Estimated outlays.............................................. 5 9 11 12 13
Collection of user fees:
Estimated authorization level.................................. -25 -29 -33 -38 -48
Estimated outlays.............................................. -25 -29 -33 -38 -48
Spending of user fees:
Estimated authorization level.................................. 25 29 33 38 48
Estimated outlays.............................................. 19 27 32 36 45
Other:\1\
Estimated authorization level.................................. 2 0 0 0 0
Estimated outlays.............................................. 1 * * * 0
Total changes:
Estimated authorization level.................................. 8 11 11 13 13
Estimated outlays.............................................. * 7 9 11 10
Memorandum
Additional appropriations for the CDRH necessary to avoid sunset
provisions (user fee and third-party inspection programs):\2\
Estimated authorization level.................................. 18 17 16 16 15
Estimated outlays.............................................. 13 16 16 16 15
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\1\ H.R. 3580 would mandate that the General Accounting Office conduct as a study on information provided to
patients about the benefits and risks of breast implants and the Institute of Medicine report on FDA's
surveillance of devices on the market used on pediatric populations.
\2\ These figures represent CBO's estimates of the minimum levels of additional appropriations (above baseline
levels) that would be necessary for FDA to maintain authority to both collect user fees and allow third-party
inspections of facilities for the manufacture of medical devices. Although the amounts are shown on an annual
basis, the user fee program would sunset if cumulative appropriations do not equal the sum of the minimum
levels for certain years. CBO estimates the cumulative amount would need to reach $64 million by 2006 in order
for the program to continue in that year; an additional $13 million in funding for 2007 would be necessary to
continue the program in that year. A total of $5 million in additional funding over the five-year period would
be necessary to maintain the third-party inspection program.
Notes: *=Less than $500,000.
CDRH=Center for Device and Radiologic Health.
Spending subject to appropriations
H.R. 3580 would extend, expand, and modify activities of
FDA related to the regulation of medical devices. It would also
create a new user fee program, allow third-party review of
manufacturing facilities, establish an office of combination
products in the Center for Device and Radiologic Health (CDRH)
at FDA, and mandate new studies related to medical devices.
Title I
Title I would establish a new user fee program to help
defray FDA's costs of expediting review of device applications.
The user fee program would be authorized through 2007 and would
take effect only to the extent, and in the amount, provided in
advance in appropriation acts. The bill contains a schedule of
appropriation targets, which, if not met or exceeded on a
cumulative basis, would trigger the sunset of the user fee
program before 2007. Title I would also authorize additional
appropriations for FDA's surveillance of medical devices on the
market. CBO estimates that implementing the provisions of title
I would save $4 million in 2003 and cost $15 million over the
2003-2007 period, assuming appropriation of the necessary
amounts.
User Fee Program. H.R. 3580 would require FDA to assess and
collect fees from manufacturers for review of medical device
applications, with the intent of expediting review of device
applications. Aggregate amounts of such fees are specified for
each fiscal year 2003 through 2007; those amounts may be
adjusted for inflation, workload estimates, and other
compensating factors. CBO assumes FDA would collect amounts
specified in the bill increased by the inflation index for
wages and salaries of federal workers. Such fees could be
collected and made available for obligation only to the extent,
and in the amount, provided in advance in appropriation acts.
CBO estimates that establishing the user fee program would
save $6 million in 2003 and $15 million over the 2003-2007
period. Because FDA would have the authority to spend the
collections, the estimated budget authority for collections and
spending offset each other exactly, while the outlays lag
behind collections and result in small savings each year.
FDA's authority to assess fees would expire at the end of
2005 unless cumulative appropriations for salaries and expenses
of CDRH for the 2003-2006 period equal or exceed a specified
amount ($205.7 million) adjusted for inflation. (The 2002
appropriation for CDRH is $181 million.) The bill would
establish a similar requirement for continuing the assessment
of fees in 2007. Because the bill would not explicitly
authorize the appropriation of the amounts needed for FDA to
continue to assess fees, the cost of these additional funds is
not included in CBO's estimate for the bill. CBO estimates that
$78 million in additional appropriations for CDRH, above
baseline levels, would be necessary between 2003 and 2007 to
avoid early termination of the user fee program. Additional
outlays would total $73 million over that period.
Other Provisions. The bill would authorize an increase
above amounts obligated in 2002 of $3 million in 2003, $6
million in 2004, and such sums as necessary thereafter, for FDA
to expand surveillance of medical devices on the market, which
includes tracking and responding to reports of adverse events.
CBO assumes FDA's workload would increase under the bill as
review times are reduced and devices come onto the market more
quickly under the user fee program. The bill also would require
FDA to report to the Congress on its performance under the user
fee program and to consult with academic, manufacturer, and
consumer groups before reauthorization of the program. CBO
estimates that these provisions of title I would cost $2
million in 2003 and $30 million through 2007.
Title II
This title would establish third-party inspections of
facilities that manufacture medical devices and a new office to
oversee combination products (such as products that can be
considered both a drug and a device). Other provisions would
extend third-party review of certain device applications,
modify how FDA reviews applications to market devices, and
require FDA to report to the Congress on certain devices. CBO
estimates that implementing those provisions would cost about
$3 million in 2003 and $18 million over the 2003-2007 period,
assuming the appropriation of the necessary amounts.
Third-Party Accreditation. Title II would establish a
third-party inspection program for U.S. facilities that
manufacture medical devices. To implement the program, FDA
would issue guidance on accreditation criteria and conduct
periodic audits of inspectors. FDA has some experience with
this type of program in Europe, where third parties are allowed
to inspect facilities but the practice is not widespread in all
countries. FDA believes that companies in the United States
would be more inclined to seek a third-party inspection than in
Europe, which could make the program more popular here than
abroad.
The bill would limit to 15 the number of organizations that
FDA could accredit in the first year. But according to FDA,
roughly 110 organizations exist world-wide that could apply for
accreditation. FDA anticipates, however, that some would not
qualify because of the conflict-of-interest standards specified
in the bill.
CBO estimates that implementing this program would cost FDA
less than $1 million in 2003 and $11 million over the 2003-2007
period. We anticipate that 15 organizations would be accredited
in 2003 and 10 additional organizations would be accredited by
2005. We also assume that FDA would train and audit three
people from each accredited organization, as it does in its
European program.
H.R. 3580 would require FDA to maintain its current level
of effort to carry out inspections. In addition, the third-
party accreditation program would lapse if funding for
inspections increases by less than 5 percent per year for any
two consecutive years. (Over the 2003-2007 period, an increase
of 5 percent per year over the 2002 level would add $5 million
to funding above baseline amounts and result in additional
outlays of $4 million.)
Office for Combination Products. Title II would require FDA
to better coordinate its review of combination products. Under
current law, the FDA staff identifies which center within the
agency should take the lead in reviewing combination products,
but it does nothing further to track or facilitate review of
such products. H.R. 3580 would establish a new office to
coordinate review between centers, resolve disputes, and track
the disposition of applications for combination products.
CBO estimates that creating a new office would cost less
than $1 million in 2003 and about $4 million over the 2003-2007
period. This estimate assumes more staff would be needed in the
first two years to establish the data tracking systems and
procedures of the new office.
Other Provisions. Title II would also extend by one year--
through 2007--the authority of FDA to allow third-party review
of premarket notification submissions.\1\ To maintain this
program, CBO assumes FDA would continue to issue guidance to
persons seeking inspection and periodically audit reviewers who
have been approved. The bill also would make permanent expiring
provisions of the Federal Food, Drug, and Cosmetic Act that
limit FDA's ability to hold or deny applications when an
unapproved use of the device has been identified. Provisions of
this title also would require FDA to accept and review partial
applications from device manufacturers, expanding the scope of
a current pilot project.
---------------------------------------------------------------------------
\1\ Before certain devices can be commercially distributed,
manufacturers must submit a ``premarket notification'' to FDA showing
the device to be safe and effective for use, or substantially
equivalent to a device currently deemed to be safe and effective.
``Premarket'' means before the device is introduced into commercial
distribution. FDA requires ``premarket notification'' for most devices
and ``premarket approval'' for class III devices--those that sustain or
support human life. Applications for premarket approval require a
heightened level of scientific review to ensure the safety and
effectiveness of class III devices.
---------------------------------------------------------------------------
FDA would be required to use electronic technology to
accept registrations from device manufacturers, when feasible.
Currently, FDA does not have the data systems in place to
accept electronic versions of 17,000 to 18,000 registrations a
year. Finally, this title would require other administrative
actions by FDA, such as reporting to the Congress on the
timeliness of premarket reviews, including pediatric experts on
review panels, and publishing information on the Internet. CBO
estimates that implementing those provisions would cost less
than $500,000 in 2003 and $1 million over the 2003-2007 period.
Studies. Under title II, the Comptroller General would
conduct a study and report on information provided to patients
who receive breast implants. The Secretary of HHS would be
required to contract with the Institute of Medicine for a study
of the effectiveness of surveillance of devices on the market
that are used by children. CBO estimates those studies would
cost $1 million in 2003 and $2 million over the 2003-2007
period. In addition, the bill would require the National
Institutes of Health (NIH) to support research on breast
implants. CBO estimates that the cost of the provision would be
negligible because NIH recently completed a comprehensive
breast implant study and continues to conduct research in this
area.
Title III
This title would expand labeling and data requirements for
medical devices. First, it would require manufacturers
(including firms reprocessing single-use devices) to place
their names or symbols on all devices. FDA could waive the
requirement if it is not feasible or safe to label. According
to industry and agency representatives, manufacturers of
original devices already identify themselves on their devices,
but firms reprocessing devices usually place their
identification only on the package. In addition, the bill would
require companies that reprocess single-use devices to state on
their packaging that the device had been reprocessed. Products
that do not comply with FDA's labeling requirements would be
deemed misbranded and the firm would be subject to civil
penalties.
Further, firms reprocessing devices would be required to
submit validation data that describe the procedures used to
clean, sterilize, and test the functional performance of most
reprocessed devices. Under current law, class I and some class
II devices are exempt from filing premarket notifications with
the FDA. Under this bill, FDA would be required to identify the
class I and II devices that would no longer be exempt from
filing. (Device classes I, II, and III refer to the level of
CDRH regulation of a given device.) Firms reprocessing those
devices would be required to submit notifications and include
the validation data described in the bill. Firms that have
submitted or will submit premarket notifications for non-exempt
devices would also be required to submit validation data for
those devices.
Firms reprocessing class III devices would be allowed to
submit ``premarket reports'' instead of premarket applications
required under current law. Premarket reports are described in
the bill are similar to premarket applications, except that
they require less detailed information on the manufacturing
specifications of the original device. Currently, the
requirement for original specifications on class III devices
has effectively barred companies from reprocessing class III
devices because original manufacturers are reluctant to share
this information. Firms reprocessing class III devices also
would submit validation data with their premarket reports under
the bill.
CBO believes the workload of FDA would expand in order to
implement these provisions. For example, FDA would have to
issue several guidance documents related to the labeling and
identification of exempt devices. It also would need to review
premarket notifications, reports, and validation data submitted
as a result of the bill. According to FDA, the workload might
be highest initially as currently exempt devices become
nonexempt and asthe agency determines how to review validation
data. CBO estimates that implementing these provisions would cost less
than $1 million in 2003 and $4 million over the 2003-2007 period,
assuming the necessary amounts are appropriated.
Estimated impact on state, local and tribal governments:
H.R. 3580 would place a number of requirements on the
manufacturers of medical devices and also require them to pay
fees to the FDA for approval to market those devices. The bill
would exempt state government entities from fees if the device
will not be distributed commercially. In other cases, any
state, local, or tribal government that manufactures medical
devices would have to pay the fee and comply with other
requirements in the bill. The fee and the other requirements of
the bill would be intergovernmental mandates as defined in
UMRA. However, CBO is unaware of any case in which a state,
local, or tribal entity would be directly responsible for
meeting these requirements or for paying the associated fees.
Consequently, CBO estimates that any costs associated with the
intergovernmental mandates would be minimal. Thus, the
threshold established in UMRA ($58 million in 2002, adjusted
annually for inflation) would not be exceeded.
Estimated impact on the private sector: The bill contains a
number of private-sector mandates as defined in URMA on the
manufacturers of medical devices. Because many of those
requirements would depend on future actions of the Secretary of
HHS, however, CBO cannot determine whether their direct cost
would exceed the annual threshold specified in UMRA ($115
million in 2002, adjusted annually for inflation) in any of the
first five years the mandates would be effective.
Subject to approval in an appropriation act, title I of the
bill would give the Secretary the authority to assess and
collect user fees from manufacturers of medical devices to
defray the cost to the FDA of reviewing applications for
approval to market those devices. In 2003, the fees would be
$139,000 for each premarket application, premarket report, and
panel track supplement that FDA reviews, and about $2,400 for
each premarket notification submission under section 510(k) of
the Federal Food, Drug, and Cosmetic Act. Those fees would
constitute mandates on the manufacturers. CBO estimates that
the direct cost of those mandates would be $25 million in 2003,
rising to about $48 million in 2007.
Section 206 of the bill would require manufacturers of
medical devices to submit their registrations electronically.
Under current law, manufacturers of medical devices are
required to register annually with FDA, and under other
circumstances as specified by law. Those registrations are
submitted on paper forms. Under H.R. 3580, if the Secretary
found that electronic registration was feasible, then
manufacturers would be required to submit all of their
registrations electronically unless the Secretary granted a
waiver to a particular manufacturer. While the requirement to
submit registration electronically, rather than on paper forms,
is a private-sector mandate, CBO cannot estimate its cost
because it is uncertain when, or if, the Secretary would find
that such electronic registration was feasible. FDA currently
receives between 17,000 and 18,000 registrations per year, all
on paper forms. If required to file electronically,
manufacturers would incur a largely one-time cost for changing
to electronic registration, but in the long run, electronic
registrations could be less costly to submit than paper forms.
Section 301 of the bill would require manufacturers of
medical devices to label each device with the name of the
manufacturer or an abbreviation or symbol of the manufacturer,
unless the Secretary determined that compliance with the
requirement was not feasible for the device or would compromise
its safety or effectiveness. Under current law, manufacturers
are required to put their names on the packaging of a device,
but not on the device itself. Thus, the requirement is a
private-sector mandates as defined in UMRA. The mandate would
affect both manufacturers of original equipment and firms that
reprocess single-use devices. According to the FDA, there are
currently about 75,000 types of medical devices on the market,
and about one-third of those are not labeled with the name or
symbol of the original manufacturer. In most cases, this is
because the device is too small to permit the manufacturer to
label it. For this reason, CBO assumes that most manufacturers
of devices that do not currently comply with the requirements
in the bill would be eligible for a waiver. Industry experts
also state that the vast majority of reprocessed medical
devices bear an adhesive or laser-etched label on the device
that identifies the reprocessing firm. Thus, CBO estimates that
the overall cost of complying with the mandate would be small.
Section 302 of the bill contains a number of private-sector
mandates. It would require firms that reprocess single-use
devices to place a statement on the device's label that
identifies the device as a reprocessed device for single use
and identifies the reprocessing firm. According to industry
experts, the labels of most reprocessed single-use devices
already contain this statement; thus, the cost of complying
with this mandate would be minimal.
Section 302 also would require firms that reprocess single-
use devices to submit validation data detail the procedures
used to clean, sterilize, and assess the functional performance
of those devices to demonstrate that the reprocessed device is
substantially equivalent to its predicate device after the
maximum number of times the device will be reprocessed. In the
case of reprocessed single-use devices that, under current law,
are exempt from submitting a premarket notification submission
under section 510(k) of the Federal Food, Drug, and Cosmetic
Act, the bill would require the Secretary to develop a list of
devices that would no longer be exempt because they are
critical or semi-critical single use devices (that is,
theycontact mucous membranes or areas of the body that are sterile
under normal conditions). The manufacturers of those devices would be
required to submit both a premarket notification submission under
section 510(k) and the validation data described above.
Because the Secretary has the authority, under current law,
to determine which devices are exempt from premarket
notification requirements, the provision in the bill that would
require manufacturers to complete a premarket notification
submission is not a new private-sector mandate. However, the
provision in the bill that would require manufacturers to
submit validation data is a new mandate. CBO estimates that
approximately 120 types of reprocessed single-use devices are
currently exempt from premarket notification requirements.
According to the FDA, about 70 of those device types are likely
to meet the definition of critical or semi-critical single-use
devices specified in the bill. If the Secretary revoked the
exemptions of each of those device types, CBO estimates that
the cost of submitting validation data would be approximately
$50 million in the first year that the mandate was effective.
The cost of the mandate could be substantially different,
though, depending upon the actions of the Secretary.
In the case of reprocessed single-use devices that, under
current law, are required to submit a premarket notification
submission under section 510(k) of the act, the Secretary would
review those submissions (including those already approved
prior to enactment of the bill) and publish a list of
reprocessed single-use devices for which validation data, as
described above, is required to ensure that the reprocessed
device is substantially equivalent to a predicate device.
Manufacturers of those devices selected by the Secretary would
be required to submit validation data within nine months. The
requirement to submit validation data is a private-sector
mandate. CBO estimates that there are about 80 types of
reprocessed single-use devices that are required to submit a
premarket notification under current law and, thus, might be
required to submit such validation data if the provision were
to become law. However, since the Secretary would have
discretion to choose which of those devices would require
validation data, CBO cannot estimate the cost of complying with
this mandate.
Estimate prepared by: Federal costs: Shawn Bishop, Julia
Christensen, and Chris Topoleski; impact on state, local, and
tribal governments: Leo Lex, impact on the private sector:
Jennifer Bowman.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
FEDERAL MANDATES STATEMENT
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates Reform
Act.