PDUFA: Information About Reauthorization

Published by the Government Accountability Office on 1997-07-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

GAO   General Accounting Offlce
      Washington, D.C. 20648

      Heal@ EMucation and Human !Services Division


      July 21, 1997

      The Honorable James Jeffords
      Committee on Labor and Human Resources
      United States Senate

      Dear Chairman Jeffords:

      Subject:       PDUFA:

      The Prescription Drug User Fee Act of 1992 (PDUFA) authorizes the Food and
      Drug Administration (FDA) to collect fees from the prescription drug industry
      to augment FDA’s base resources. Such fees are credited to the appropriation
      account for FDA’s salaries and expenses. FDA is to use these additional funds,
      to expedite its review of human drug applications so that prescription drug
      products can reach the marketplace more quickly. Unless reauthorized by the
      Congress, the act and the user fee program under PDLJFA, including FDA’s
      authority to collect fees, expire at the end of this fiscal year. Your Committee
      is currently considering reauthorizing the act.

      You understand that, if PDUFA were not reauthorized, FDA staff would be
      subject to a reduction in force (RIF), and that, according to regulations
      promulgated by the Office of Personnel Management (OPM), FDA must give
      notice to employees 60 days before a RIF.’ Thus, even though the authorization
      for collecting fees does not expire until October 1, 1997, RIF notices are
      currently slated to be issued on August 1, 1997. User fees currently fund 700
      full-time equivalents (FTE) dispersed over 1,977 employees. In addition, you
      understand that FDA has a carry-over account that would provide for an orderly
      transition should PDUFA not be reauthorized. In your letter of July 17, 1997,
      you asked us to answer several questions about the account and its implications
      regarding RIF notices. We have responded to your questions in the following

      ‘The Director of OPM, at the request of an agency head, is authorized to
      approve a notice period of less than 60 days but at least 30 days, when a
      RIF is caused by circumstances not reasonably foreseeable.
                                  GAO/HEHS-97-1SOR      PDUF’A Reauthorization

We obtained most of the information to answer your questions from FDA’s
Office of Financial Management. We also examined FDA’s legal authority,
applicable regulations, and other relevant documents. Due to the short
turnaround time for this request, we did not verify the estimates FDA gave us.
With this exception, we conducted our work in accordance with generally
accepted government auditing standards.

1.    What is the current   balance   in the carry-over   account?

      No “carry-over account” exists. Jf, at the end of the fiscal year, the funds
      available under the user fee program have exceeded program obligations,
      the balance is “carried over” to the next fiscal year. The enclosure,
      reprinted from the fiscal year 1996 PDUFA Financial Report to Congress,
      shows the revenues, obligations, and balances by fiscal year for the first
      4 years of the program. FDA began fiscal year 1997 with a carry-over of
      $27,517,075(total balance minus total accounts receivable). The precise
      amount that will be carried over from fiscal year 1997 cannot be
      determined until the fiscal year ends. FDA officials estimate, however,
      that funds carried over will total about $24 million.
       FDA expects additional user fee revenues in fiscal year 1998, even if the
       user fee program is not reauthorized. Because the drug companies pay
       only half of the application fee upon submission of the drug application
       and the remainder after FDA issues an action letter related to the
       application, FDA officials believe that fees for submissions received in
       previous years (estimated at approximately $10 million) will come due
       and be collectable in fiscal year 1998, even without PDUFA
       reauthorization. FDA does not have an estimate of the rate of those
       collections throughout the fiscal year.

2.     What is the purpose of the carry-over account? Is it in any part to
       provide adequate funds to close down the program if it is not

       PDUPA funds carried over from the previous fiscal year may be used to
       fund the obligations of the subsequent fiscal year. FDA believes and we
       agree that if the user fee program were not reauthorized, funds carried
       over from the final year of the program (fiscal year 1997) could be used
       to cover costs associated with the expiration of PDUFA authority,
       including the cost of terminating staff.

                            GAOMEHS-97-190R         PDUF‘A Reauthorization

3.    Does the carry over account contain funds that would permit the
      agency to delay issuing RIF notices (currently   slated for August 1,
      to meet the 60-day requirement)?    If so, what is the latest date
      that the FDA could issue such notices and still fulfilI its
      obligations under OPM regulations?

      If the user fee program is not reauthorized, F’DA could use some portion
      of the funds carried over from fiscal year 1997 to effect an orderly
      shutdown of the program. Any funds not needed for closing down the
      program would presumably be available to continue daily operations,
      delaying the need to issue RIP notices for the time period during which
      operations would continue.

      Because FDA has developed only very preliminary estimates for the cost
      of closing down the user fee program, however, it is not possible to
      estimate how long FDA could continue operations into fiscal year 1998
      using funds carried over from fiscal year 1997. Moreover, to the extent
      that FDA chooses to make them available, FDA could use funds fiorn its
      agencywide salaries and expenses account. We therefore cannot
      determine the latest date that FDA could issue RIP notices and sGll fulHl
      its obligations under OPM regulations.

      If FDA were to assume that the user fee program would be reauthorized
      and therefore no shutdown or RIP would be necessary, it could use the
      funds carried over from fiscal year 1997 to continue operations for some
      time. FDA estimates that its daily average user fee program obligations
      for fiscal year 1998 would be about $206,000. Without shutdown costs,
      the program could operate for more than 3 months with estimated funds
      carried over of $24 million. The risk of proceeding on this assumption,
      however, is that if the program were not reauthorized, FDA could have
      insufficient user fee funds for closing the program down. Funds to effect
      an orderly shutdown of the program would then have to come from
      elsewhere. If funds were not available, however, an even larger RIP
      might be necessary than would be necessary if planned for in advance.

We discussed the information contained in this correspondence with FDA
officials, who agreed with most of the information. They pointed out, however,
that although several factors affect the cost of shutting down the user fee
program, their very preliminary estimates indicated that it will require a
significant portion of the $24 million funds carried over. We have incorporated
FDA’s technical suggestions where appropriate.

3                         GAOIHEHS-97-190R        PDUFA Reauthorization

As agreed with your office, unless you publicly announce its contents earlier,
we plan no further distribution of this report until 14 days from the date of this
letter. At that time, we will send copies to interested parties and make copies
available to others on request.

If you have any questions about this correspondence, please tail me at (202)
512-6543 or Michele Orza at (202) 512-9228. Other major contributors to this
study included Bertha Dong, Barry Bedrick, and Julian Klazkin.

Sincerely yours,

Bernice Steinhardt
Director, Health Services Quality and Public Health Issues

 4                          GAO/HEHS-97-190R         PDUFA    Reauthorization
               ENCLOSURE                                                                      ENCLOSURE
                                  FDA’S STATEMENT OF USER

                            FY 1993         FY 1994         FY 1995          FY 1996                 Total
    Fees collected,        $28,531,996                                                          $28,531,996
    FY 1993
    Fees collected,           5,707,994    $48,022,250                                            53,730,244
    FY 1994
    Fees collected,           1,153,500       6,466,800    $63,333,200                            70,953,500
    FY 1995
    Fees collected,            416,000        1,774,200     12,253,800       $67,874,400         82,318,400
    FY 1996
    Total fees              35,809,490      56,263,250      75,587,OOO        67,874,400        235,534,140
    Accounts                   116,000         206,400         676,000            1,004,700          2,003,lOO
    Total                 $35,925,490     $56,469,650     $76,263,000       $68,879,100       $237,537,240
    Fees obligated,         (8,949,OOO)                                                          (8,949,OOO)
    FY 1993
    Fees obligated,        (25,290,990)    (14,660,030)                                         (39;951,020)
    FY 1994
    Fees obligated,         (1,153,500)    (39,829,020)    (33,081,495)                         (74,064,015)
    F-Y 1995
    Fees obligated,          (416,000)      (1,774,200)    (42,505,505)      (40,357,325)       (85,053,030)
    FY 1996
    Total                  (35,809,490)    (56,263,250)    (75,587,OOO)      (40,357,325)      (208,017,065)
    Balance       as of      $116,000        $206,400        $676,000       $28,521,775        $29,520,175


5                                            GAO/HEHS-97-19OR             PDUFA    Reauthorization
      : .’

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