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and Allocating Costs of Reviewing Medical Device Applications Are 
Consistent with Federal Cost Accounting Standards, and Staffing Levels 
for Reviews Have Generally Increased in Recent Years' which was 
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June 25, 2007: 

The Honorable Joe Barton: 
Ranking Member: 
Committee on Energy and Commerce: 
House of Representatives: 

Subject: Food and Drug Administration: Methodologies for Identifying 
and Allocating Costs of Reviewing Medical Device Applications Are 
Consistent with Federal Cost Accounting Standards, and Staffing Levels 
for Reviews Have Generally Increased in Recent Years: 

Dear Mr. Barton: 

The Food and Drug Administration (FDA) is the agency responsible for 
ensuring the safety and effectiveness of medical devices--such as 
catheters and artificial hearts--marketed in the United States. As part 
of its regulatory responsibilities, FDA reviews applications submitted 
by medical device companies for devices they wish to market, including 
devices that are new or those that include modifications to already 
approved devices. The Medical Device User Fee and Modernization Act of 
2002 (MDUFMA)[Footnote 1] authorized FDA, beginning in fiscal year 
2003, to charge user fees for various types of device applications. 
User fees were intended to provide resources to FDA, to increase 
staffing for medical device reviews and speed the timeliness of 
reviews, in addition to resources otherwise provided through the annual 
appropriations process. 

Under MDUFMA, FDA is required to report to the congressional committees 
of jurisdiction annually on the implementation of the user fee program. 
FDA submitted financial reports that include information such as 
amounts collected from user fees, the costs of reviewing device 
applications, and staffing levels FDA dedicated to the review of 
medical device applications for each fiscal year from 2003 through 
2005.[Footnote 2] In response to industry concerns about the need for 
more cost information, FDA supplemented these MDUFMA financial reports 
by reporting more detailed information on the estimated average cost of 
reviewing medical device applications in those 3 years.[Footnote 3] 

Industry has challenged the appropriateness of the methodologies FDA 
used to identify the total cost of the process for reviewing medical 
device applications and the average costs of reviewing various types of 
applications. Industry has also questioned the degree to which staffing 
of the device review process has increased since the enactment of 
MDUFMA. 

MDUFMA will expire on October 1, 2007, and Congress is currently 
deliberating its reauthorization. You asked us to review FDA's 
methodology for determining costs of the process of reviewing device 
applications, as well as changes in the staff levels dedicated to that 
process since MDUFMA was implemented. We previously provided you with 
revenue information on certain companies participating in the medical 
device user fee program.[Footnote 4] In this report, we evaluate (1) 
whether FDA's methodologies for identifying its annual costs[Footnote 
5] of reviewing device applications and its method for allocating these 
costs among various application types are consistent with federal cost 
accounting standards, and (2) the extent to which staffing levels for 
the process of reviewing device applications have changed since fiscal 
year 2002, the baseline year before MDUFMA went into effect, and how 
these changes in staffing levels have been distributed within FDA. 

To evaluate whether the methodologies used by FDA to identify its 
annual costs of reviewing device applications and to allocate the costs 
used to calculate the average cost of reviewing various application 
types are consistent with federal cost accounting standards, we 
interviewed staff from FDA's Office of Management and Systems who are 
responsible for preparing the annual MDUFMA financial reports to 
Congress. We reviewed the Statement of Federal Financial Accounting 
Standards No. 4 (SFFAS 4): Managerial Cost Accounting Concepts and 
Standards for the Federal Government. We also reviewed the annual 
MDUFMA financial reports to Congress for fiscal years 2003 through 2005 
and the detailed supporting financial data used to prepare the fiscal 
year 2005 report. Using SFFAS 4, we analyzed the cost accounting 
methodology used by FDA to calculate the costs of reviewing device 
applications and the methodology to estimate the average cost of 
reviewing various types of device applications. We limited our analysis 
to the appropriateness of the methodologies in relation to federal cost 
accounting standards. We did not verify the reliability of the data FDA 
used in either methodology. We also did not determine whether the 
amounts of the user fees for medical device applications are 
appropriate. 

To evaluate the extent to which FDA staffing for the process of 
reviewing device applications has changed since MDUFMA went into effect 
in fiscal year 2003, and how these changes in staffing levels were 
distributed within FDA, we interviewed FDA officials involved in the 
process of reviewing device applications and obtained information from 
FDA on annual staffing for the process of reviewing device 
applications. Our analysis reflects data for fiscal year 2002, the 
baseline year before MDUFMA went into effect, and data for fiscal years 
2003 through 2006, the first 4 years MDUFMA was implemented. We measure 
staffing for this analysis as full-time equivalent (FTE) 
employees.[Footnote 6] A measure of one FTE represents 40 hours of work 
per week over the course of a year.[Footnote 7] We assessed the 
reliability of FDA data by conducting interviews with FDA staff to 
better understand how FDA collects and uses these data and by examining 
FDA documents. We determined that the data are adequate for our 
purposes. We conducted our work from November 2006 through June 2007 in 
accordance with generally accepted government auditing standards. 

Results in Brief: 

FDA's methodologies for identifying its annual costs of reviewing 
device applications and for allocating the costs used in calculating 
the average cost of reviewing the various application types are 
consistent with federal cost accounting standards. In this regard, FDA 
took four steps to identify its annual costs. First, it identified 
which of its components were responsible for carrying out the 
activities related to medical device application reviews. Second, it 
developed a methodology to determine the full costs of reviewing device 
applications within each of the responsible components. Third, it used 
an economically feasible, appropriate method to measure the costs by 
identifying direct costs and allocating a reasonable portion of 
indirect costs to the process. Finally, it reported its costs regularly 
and publicly in annual MDUFMA financial reports to the congressional 
committees of jurisdiction. To allocate the annual costs of reviewing 
applications to the various application types, FDA allocated the annual 
MDUFMA costs to different application types, and divided the amount for 
each application type by the number of medical device application 
reviews completed during the year. FDA directly assigned a cost 
category to a particular application type if all of the costs in that 
category related directly to that type of application. For those cost 
categories related to more than one application type, FDA management 
used its judgment appropriately to allocate the costs, consistent with 
federal cost accounting standards. 

From fiscal year 2002, the baseline year before MDUFMA went into 
effect, through fiscal year 2005, staffing for the process of reviewing 
device applications increased. However, staffing decreased slightly in 
fiscal year 2006. From fiscal year 2002 through fiscal year 2005, 
staffing associated with the process of reviewing device applications 
increased from 917 to 1,192 FTEs, or about 30 percent. These increases 
were spread among four components of the agency involved in the process 
of reviewing device applications: the Center for Devices and 
Radiological Health (CDRH), the Center for Biologics Evaluation and 
Research (CBER), the Office of Regulatory Affairs (ORA), and the Office 
of the Commissioner (OC). In fiscal year 2006, FTEs associated with the 
process of reviewing device applications declined to 1,181; FDA 
attributed this slight decrease to a hiring freeze during the prior 
year. 

HHS reviewed a draft of this report and stated the report fairly and 
accurately describes FDA's accounting for the costs of medical device 
reviews and the resources FDA added to the medical device review 
program. 

Background: 

MDUFMA authorizes FDA to assess and collect fees for the review of 
medical device applications and identifies the costs that those fees 
may be used to help recover. These include the costs of activities such 
as: 

* reviewing specific types of device applications, such as a premarket 
application;[Footnote 8] 

* monitoring research conducted in connection with the review of device 
applications; 

* providing technical assistance to device manufacturers in connection 
with the submission of device applications; and: 

* developing guidance, policy documents, or regulations to improve the 
process for the review of device applications. 

Under MDUFMA, FDA must report annually to the Committee on Energy and 
Commerce of the U.S. House of Representatives and the Committee on 
Health, Education, Labor and Pensions of the U.S. Senate on how it is 
implementing the user fee program, among other things. FDA has 
published annual MDUFMA financial reports since fiscal year 2003 that 
elaborate on the amount collected from user fees, the annual cost of 
the process of reviewing device applications, and staff levels 
involved. 

In response to industry concerns about the need for more information 
about the costs FDA incurred to review medical device applications, FDA 
hired a private contractor to develop a methodology to calculate the 
average cost of different application types for fiscal years 2003 
through 2005. 

In calculating the costs associated with reviewing device applications, 
FDA needed to consider not only MDUFMA requirements, but also federal 
financial management requirements and accounting standards. SFFAS 4, 
which became effective in fiscal year 1998, sets forth the fundamental 
elements for managerial cost accounting in government agencies. 

There are five standards in SFFAS 4, four of which are applicable to 
FDA's process for reviewing device applications.[Footnote 9] These 
standards require FDA to do the following: 

* Accumulate and report the costs of activities on a regular basis for 
management information purposes. An agency should report costs in a 
timely manner, on a regular basis, consistently, so that costs can be 
compared over time. This reporting should meet the needs of management 
and the requirements of budgetary and financial reporting. 

* Establish responsibility segments to match costs with outputs. This 
involves identifying the responsibility segments, or components of an 
agency involved in carrying out the activity or program, and collecting 
and reporting cost information for these segments. For example, if an 
office within an agency has the responsibility for inspecting 
facilities or collecting user fees, that office would be considered the 
relevant responsibility segment for those activities. Therefore, the 
agency should collect and report cost information from that office for 
the activities associated with those outputs. 

* Determine and report the full costs of government goods and services, 
including direct and indirect costs. Full costs include direct and 
indirect costs. Direct costs are costs that can be specifically 
identified with an output; they may include salaries and benefits for 
employees working directly on the output, and costs for materials, 
supplies, and facilities used exclusively to produce the output. 
Indirect costs are costs that are not specifically identifiable with 
any output; they may include costs for general administration, research 
and technical support, and operations and maintenance for all an 
agency's buildings and equipment. 

* Use and consistently follow costing methodologies or cost-finding 
techniques most appropriate to the segment's operating environment to 
accumulate and assign costs to outputs. When it is feasible and 
economically practical, the standards state, the best results may be 
obtained by directly measuring costs. For example, an agency could use 
the detailed time-reporting system for its employees to directly 
measure the time employees spend on activities related to the program 
versus activities unrelated to the program. In certain cases, measuring 
costs directly may not be feasible or economically practical. For 
example, it may not be economically feasible or even possible for an 
agency to directly measure the portion of staff or management salaries 
associated with a program. In such circumstances, the standards state 
that costs should be estimated on a reasonable and consistent basis. 
For instance, an agency can calculate the ratio of direct costs for an 
activity to the total direct costs for a program as a basis for 
estimating the applicable indirect costs. 

While each entity's managerial cost accounting should meet SFFAS 4, the 
standards do not specify the degree of complexity or sophistication of 
any managerial cost accounting process. SFFAS 4 gives management the 
flexibility to determine the appropriate detail for its cost accounting 
processes and procedures based on several factors, including (1) the 
nature of the entity's operations, (2) precision desired and needed in 
cost information, (3) practicality of data collection and processing, 
(4) availability of electronic data-handling facilities, (5) cost of 
installing, operating, and maintaining the cost accounting processes, 
and (6) any specific information needs of management. Therefore, 
agencies' cost accounting processes and results may vary and still be 
acceptable under the standards. 

FDA's Methodologies for Identifying Costs of Reviewing Device 
Applications and Allocating Them to Various Application Types Are 
Consistent with Federal Cost Accounting Standards: 

In providing financial information to Congress in its annual MDUFMA 
financial reports, FDA used a methodology to identify the annual cost 
of reviewing device applications that was consistent with federal cost 
accounting standards as set forth in SFFAS 4. In response to industry 
requests for more detailed cost information, FDA developed a 
methodology for allocating the costs it had identified to various types 
of device applications to meet the annual reporting requirements of 
MDUFMA. This allocation was also consistent with SFFAS 4. 

FDA's Methodology for Identifying the Cost of Reviewing Device 
Applications Is Consistent with SFFAS 4: 

FDA complied with SFFAS 4 in the following ways. 

* Consistent with the SFFAS 4 standard for timely, regular cost 
reporting, FDA has reported the costs of the device review program in 
annual MDUFMA financial reports to the congressional committees of 
jurisdiction in fiscal years 2003 through 2005 and made the reports 
available to the public on its Web site. This provided FDA, Congress, 
and the public with the ability to compare the costs of reviewing 
applications for these years. In addition, FDA responded to industry 
requests for more cost information by reporting the estimated average 
cost of device application reviews in fiscal years 2003 through 2005. 

* FDA's methodology for identifying the cost of the process of 
reviewing device applications is consistent with the SFFAS 4 standard 
for identifying responsibility segments. Under MDUFMA, the annual cost 
reported by FDA must include the cost of specific activities associated 
with the process of reviewing device applications. To be consistent 
with SFFAS 4, FDA identified the four components of the agency 
responsible for carrying out these activities. These components are 
CDRH and CBER, which evaluated device applications submitted to FDA; 
ORA, which inspects facilities where devices under review are 
manufactured; and the OC,[Footnote 10] which provides general 
management and oversight of all FDA activities, including the review of 
medical device applications. 

* FDA's methodology is consistent with the SFFAS 4 standard for 
capturing the full costs of the review process--both direct and 
indirect costs--within each of the four components, or responsibility 
segments, involved in the process for reviewing device applications 
under MDUFMA.[Footnote 11] Using this methodology, FDA identified the 
direct and indirect costs in several ways. 

1. Within CDRH, FDA analyzed time charges to identify the direct 
salaries and benefit costs incurred by staff involved in reviewing 
device applications. FDA used a similar procedure to measure these 
costs for CBER's direct review and laboratory components. To identify 
the portion of salaries and benefits incurred by management and 
administrative support personnel to assign to the process for the 
review of device applications, FDA used the average percentage of time 
charged to the process compared to total costs incurred by these units 
for all programs. 

2. FDA also identified a portion of the indirect review and support 
costs[Footnote 12] incurred by CDRH and CBER that are associated with 
reviewing device applications. The portion of these costs that are 
assigned to the process equaled the average percentage of allowable 
costs for the direct review and laboratory components compared to the 
total costs incurred by CDRH and CBER. FDA also allocated certain 
expenses incurred by CDRH and CBER that it paid for centrally, such as 
rent, utilities, and facilities repair and maintenance, based on the 
level of user fee-related costs to total costs of the two centers. 

3. Within ORA, FDA used a time-reporting system to identify the number 
of direct hours devoted to the application review process by its 
inspection, investigations, administrative, and management staff. FDA 
multiplied the total number of staff hours devoted to the process by 
the average salary and benefit cost to arrive at the costs ORA incurred 
for the process. FDA also allocated a portion of ORA's operating and 
rent expenses based on the ratio of total staff years devoted to the 
process compared to total ORA staff years. 

4. FDA determined that the costs incurred by its Office of the 
Commissioner (OC) represent the agency's general and administrative 
costs. FDA calculated the OC's percentage of total costs by dividing 
the total OC costs by the total salary obligations of FDA, excluding 
the OC. FDA then multiplied this percentage by the total salaries (not 
including benefits) applicable to the process in CDRH, CBER, and ORA to 
arrive at the total OC costs, or general and administrative costs 
applicable to the process. 

* Consistent with the SFFAS 4 standard for selecting a methodology that 
is economically feasible and practical, FDA adapted a methodology 
developed by a national accounting firm for a similar FDA 
program.[Footnote 13] The methodology had already been used 
successfully and it allowed FDA to obtain the cost information it 
needed from the financial data produced by its accounting and budgeting 
system, which it uses to prepare its annual financial statements. Using 
this methodology, FDA directly measured costs when doing so was 
economically feasible and met management's needs. For example, FDA used 
quarterly time-reporting data to directly measure the percentage of 
time device reviewers in CDRH and CBER spent on activities related to 
the review of device applications over the course of a fiscal year. FDA 
then applied this percentage of time to the total cost of salaries and 
benefits for device reviewers in CDRH and CBER--the two device review 
centers. FDA also used appropriate and consistent methods to estimate 
costs when direct measurement was not economically feasible. For 
example, within CDRH and CBER, a number of expenses such as rent, 
equipment, and maintenance are paid for from central funds. FDA 
allocated costs that could not be traced to a specific activity, based 
on the ratio of direct costs of device application reviews to total 
costs each center incurred. 

FDA's Methodology for Allocating the Costs Used in Calculating the 
Average Costs of Reviewing the Various Application Types Is Consistent 
with SFFAS 4: 

FDA allocated the annual costs incurred by CDRH and CBER--organized by 
cost categories--to 13 types of applications.[Footnote 14] In addition, 
FDA added an amount to each application type for costs incurred by ORA 
for field inspections and investigations conducted on behalf of the 
review process, and OC for administrative and general support costs. 
For example, in allocating CDRH and CBER costs, FDA directly assigned 
cost categories to a particular application type if all of the costs in 
the categories pertained to that type of application. For those 
categories that pertained to more than one application type, FDA 
management used its knowledge of the device application process to 
allocate costs. This allocation process is consistent with SFFAS 4 
standards for capturing full costs and using a reasonable methodology. 

To calculate the average cost of reviewing various application types, 
FDA divided the annual costs by the number of reviews completed during 
the year for each application type. For example, in fiscal year 2005, 
FDA estimated that of the $177 million costs to review applications, 
$46.1 million, or 26 percent, pertained to premarket approval 
applications (PMA)[Footnote 15]. FDA then divided $46.1 million by the 
53 completed PMAs in fiscal year 2005, which resulted in a calculated 
average cost of $870,400 per PMA. FDA used completed applications 
because the agency wanted to reflect actual performance achieved with 
program dollars. Because FDA's resources and workloads fluctuate from 
year to year, which directly affects unit cost estimates, FDA's 
management suggested that the annual unit cost estimates be viewed as 
benchmarks for future comparisons. 

FDA Staffing for the Process of Reviewing Device Applications Increased 
from Fiscal Years 2002 through 2005, but Decreased Slightly in Fiscal 
Year 2006: 

From fiscal year 2002, the baseline year before MDUFMA went into 
effect, through fiscal year 2005, staffing for the process of reviewing 
device applications increased. However, staffing decreased slightly in 
fiscal year 2006. Specifically, total FTEs for government and contract 
employees combined increased from 917 to 1,192 FTEs, or about 30 
percent, from fiscal year 2002 through fiscal year 2005. (See fig. 1.) 
In fiscal year 2006, total FTEs declined to 1,181. 

Figure 1: FDA Staffing for the Process of Reviewing Medical Device 
Applications from Fiscal Years 2002 through 2006: 

[See PDF for image] 

Source: GAO analysis of FDA data. 

[End of figure] 

According to FDA officials, the lower staffing levels in fiscal year 
2006 are attributed to a hiring freeze.[Footnote 16] In fiscal year 
2005, FDA imposed a hiring freeze on CDRH, the component that reviews 
the largest number of device applications. This freeze led to a delay 
in the hiring process in fiscal year 2006. FDA officials told us that 
the agency froze hiring in CDRH because of uncertainty over FDA's 
authority to assess and collect user fees in fiscal years 2006 and 2007 
due to a provision in MDUFMA.[Footnote 17] In 2005, Congress passed the 
Medical Device User Fee and Stabilization Act of 2005 
(MDUFSA),[Footnote 18] which amended the law, allowing FDA to retain 
its authority to assess and collect user fees in fiscal years 2006 and 
2007. According to FDA officials, the agency resumed hiring in 2006 
following the approval of the fiscal year 2006 federal budget, which 
reflected the changes in MDUFSA. 

The overall increase in staffing for the process of reviewing device 
applications for fiscal year 2002 through 2006 was primarily due to an 
increase in government employees. According to FDA officials, this 
increase was accomplished through the transfer of existing FDA 
employees from other programs and activities, with the remaining staff 
increases from new hires such as temporary or special government 
employees. In addition, FDA used contract employees to increase 
staffing of the process of reviewing device applications. 

Fiscal year 2002 through 2005 increases in FTEs were spread among the 
four FDA components involved in the process of reviewing device 
applications: CDRH, CBER, the ORA, and the OC. The largest increase of 
FTEs occurred in CDRH, with an increase of 188 FTEs. Staffing in the 
three other offices--CBER, ORA, and OC--increased 63, 11, and 2 FTEs 
respectively. (See fig. 2.) The overall decline of 11 FTEs in fiscal 
year 2006 was due primarily to a decline of FTEs in CDRH, which 
decreased by 26 FTEs. OC decreased by 7 FTEs, while CBER and ORA 
increased by 21 and 1, respectively. 

Figure 2: FDA Staffing, by Component, for the Process of Reviewing 
Medical Device Applications from Fiscal Years 2002 through 2006: 

[See PDF for image] 

Source: GAO analysis of FDA data. 

[End of figure] 

Agency Comments: 

HHS reviewed a draft of this report and stated the report fairly and 
accurately describes FDA's accounting for the costs of medical device 
reviews and the resources FDA added to the medical device review 
program (see enc. I). 

As agreed with your office, unless you publicly announce the contents 
of this report earlier, we plan no further distribution of it until 30 
days from the date of this report. At that time, we will send copies of 
this report to the Secretary of Health and Human Services, the 
Commissioner of FDA, appropriate congressional committees, and other 
interested parties. We will also make copies available to others on 
request. In addition, the report will be available at no charge on 
GAO's Web site at http://www.gao.gov. If you or your staff have 
questions about this report, please contact Randall B. Williamson at 
(206) 287-4860 or williamsonr@gao.gov or Robert Martin at (202) 512- 
6131 or martinr@gao.gov. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this report. Key contributors to this report were James 
Musselwhite, Assistant Director; Donald Neff, Assistant Director; Lisa 
Crye; Jessica Morris; and Yorick F. Uzes. 

Sincerely yours, 

Signed by: 

Randall B. Williamson: 
Acting Director, Health Care: 

Signed by: 

Robert E. Martin: 
Director, Financial Management and Assurance: 

[End of section] 

Enclosure - I: Agency Comments from the Department of Health and Human 
Services: 

Office of the Assistant Secretary for Legislation: 
Department Of Health & Human Services: 
Washington, D.C. 20201: 

Jun 18 2007: 

Randall B. Williamson: 
Director, Health Care: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Williamson: 

Enclosed please find the department's comments on the U.S. Government 
Accountability Office's draft report entitled, "Food and Drug 
Administration: Methodologies for Identifying and Allocating Costs of 
Reviewing Medical Device Applications Are Consistent with Federal Cost 
Accounting Standards, and Staffing Levels for Reviews Have Generally 
Increased in Recent Years" (GAO-07-882R). 

We appreciate the opportunity to review and comment on_ this draft 
correspondence before it is published. 

Sincerely, 

Signed for: 

Vincent J. Ventimiglia: 
Assistant Secretary for Legislation: 

Comments Of The Department Of Health And Human Services On The 
Government Accountability Office Draft Report Entitled, "Food And Drug 
Administration: Methodologies For Identifying And Allocating Costs Of 
Reviewing Medical Device Applications Are Consistent With Federal Cost 
Accounting Standards, And Staffing Levels For Reviews Have Generally 
Increased In Recent Years (GAO 07-882R): 

HHS Comments: 

GAO's draft correspondence fairly and accurately describes FDA's 
efforts to provide a reasonable accounting of the costs of medical 
device reviews. The correspondence provides a clear and complete 
explanation of FDA's methodology and our successful efforts to add 
resources to the medical device review program. The report does not 
require any corrections or clarifications. 

[End of section] 

(290571): 

FOOTNOTES 

[1] Pub. L. No. 107-250, 116 Stat. 1588. 

[2] Department of Health and Human Services, Food and Drug 
Administration, FY 2003 MDUFMA Financial Report: Required by the 
Medical Device User Fee and Modernization Act of 2002 (Washington, 
D.C., March 2004); FY 2004 MDUFMA Financial Report: Required by the 
Medical Device User Fee and Modernization Act of 2002 (Washington, 
D.C., March 2005); FY 2005 MDUFMA Financial Report: Required by the 
Medical Device User Fee and Modernization Act of 2002 (Washington, 
D.C., July 2006). 

[3] Dr. Dale R. Geiger, FY 2003 and FY 2004 Unit Costs for the Process 
of Medical Device Review, prepared for the Food and Drug Administration 
(September 2005). Dr. Dale R. Geiger, Extension of Analysis of Unit 
Costs for the Process for the Review of Medical Devices for Fiscal Year 
2005 (July 2006). 

[4] GAO, Food and Drug Administration: Revenue Information on Certain 
Companies Participating in the Medical Device User Fee Program, GAO-07- 
571R (Washington, D.C.: Mar. 30, 2007). 

[5] In this report, costs represent obligations recorded at the end of 
the fiscal years--regardless of whether related expenditures have been 
made--because the cost information in FDA's annual MDUFMA financial 
reports is based on obligations. FDA believes obligations represent a 
reasonable estimate of cost because FDA's financial records have 
historically shown that over 81 percent of obligated amounts are 
expended within 1 year, and 96 percent within 2 years. 

[6] Federal government employee FTEs for all FDA activities from fiscal 
year 2002 through 2006 were 9,468, 10,257, 10,141, 9,910, and 9,698, 
respectively. 

[7] This could measure the time one full-time employee works on a 
regular basis, or it may measure the time more than one employee works 
on a part time basis. For example, if two employees each work 20 hours 
per week on a regular basis, the time they work equals one FTE 
employee. For our analysis of MDUFMA FTE levels, we included both 
federal government employees and contract employees involved in device 
review activities based on the results of a time-reporting survey of 
MDUFMA-related activities that FDA conducted on a quarterly basis. 

[8] A premarket application is a medical device application, for 
example, that is submitted to obtain premarket approval for a Class III 
device, that is, one that supports or sustains human life, is of 
substantial importance in preventing impairment of human health, or 
presents a potential unreasonable risk of illness or injury. 

[9] The fifth standard states that federal agencies should recognize 
the costs of goods and services provided among federal entities, also 
known as the standard for Inter-Entity Costs. According to FDA 
officials, through an interagency service agreement the Department of 
Energy provides some services to FDA related to the process for 
reviewing device applications. Because of the limited nature of this 
agreement, we did not consider it material to FDA's process. Thus we 
did not consider the standard for Inter-Entity Costs to be relevant to 
our evaluation. 

[10] The Office of the Commissioner (OC) includes the following 
offices: (1) Immediate Office of the Commissioner, (2) Office of the 
Chief Counsel, (3) Office of Equal Employment Opportunity and Diversity 
Management, (4) Office of Administrative Law Judge, (5) Office of 
Science and Health Coordination, (6) Office of International Activities 
and Strategic Initiatives, (7) Office of Crisis Management, (8) Office 
of Legislation, (9) Office of External Relations, (10) Office of Policy 
and Planning, and (11) Office of Management. 

[11] FDA's methodology did not capture certain costs related to Civil 
Service Retirement System pension and postretirement health benefits 
that are paid for by the Office of Personnel Management on behalf of 
current and retired federal employees. 

[12] Within CDRH these costs relate to the Office of the Center 
Director, and Office of Management and Operations. Within CBER, these 
costs relate to the Office of the Center Director, Office of 
Management, Office of Information Management, and Office of 
Communications, Training, and Manufacturers Assistance. 

[13] The national accounting firm originally developed the methodology 
for FDA's prescription drug user fee program. 

[14] FDA's original plan was to develop cost information for 15 
different types of application reviews. However, according to FDA 
officials, data quality concerns and limitations in the time-reporting 
process within CDRH limited the scope of cost estimation to 8 
application types in fiscal years 2003 and 2004. As a result of CDRH 
expanding the categories in its time-reporting system and retraining 
reviewers in the methods and importance of time reporting, FDA expanded 
the number of unit cost estimates in fiscal year 2005 to 13 application 
types. FDA has indicated that it is committed to continuing to enhance 
its time-reporting system and increasing the number of future cost 
estimates. 

[15] A premarket approval application is an application to market a 
class III medical device. 

[16] In addition, according to FDA officials, efforts to improve time 
reporting may have contributed to reduced fiscal year 2006 FTE numbers. 
FDA officials stated that the agency improved its measurement of FTEs 
in fiscal year 2006 by using more precise measures that, in some cases, 
eliminated some activities not related to medical device reviews that 
had been included in less precise measures used to calculate FTEs in 
prior years. 

[17] Under MDUFMA, FDA would not have had the authority to continue 
assessing and collecting user fees if total appropriations for fiscal 
years 2003 through 2006, excluding user fees, did not meet specified 
amounts. FDA officials told us that the agency imposed a hiring freeze 
on CDRH on March 3, 2005, because the required total appropriation 
level had not yet been met and the agency did not know if it would have 
the authority to continue to assess and collect user fees.

[18] Pub. L. No. 109-43, 119 Stat. 439.

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