Food and Drug Administration:
Revenue Information on Certain Companies Participating in the Medical Device User Fee Program
GAO-07-571R: Published: Mar 30, 2007. Publicly Released: Mar 30, 2007.
The Food and Drug Administration (FDA) is responsible for approving medical devices--such as catheters and artificial hearts--to provide reasonable assurance of their safety and effectiveness. As part of this responsibility, FDA, an agency within the Department of Health and Human Services (HHS), reviews applications submitted by medical device companies for devices they wish to market in the United States, including devices that are new or those that constitute modifications to already approved devices. Prior to 2002, members of Congress, representatives of the medical device industry, and others expressed concern that FDA lacked the resources necessary to complete such reviews in a timely manner to ensure that patients have access to useful, possibly life-saving, devices. In response, Congress enacted the Medical Device User Fee and Modernization Act of 2002 (MDUFMA), which authorizes FDA to charge user fees for some device applications and not others. Revenues from the user fees, together with additional appropriations that were also authorized by MDUFMA, were intended to provide additional resources to FDA for improving the timeliness of device review. To help ensure that user fees are not financially prohibitive for small medical device companies, MDUFMA provides that companies qualifying as small businesses in a given fiscal year can receive fee discounts and, in certain cases, fee waivers. To qualify as a small business under MDUFMA, a company must submit information to FDA demonstrating that its annual revenues--including the revenues of any affiliate, partner, or parent firm--are at or below a certain threshold. MDUFMA originally set the threshold for small business qualification at $30 million, and in 2005, the threshold was increased to $100 million by the Medical Device User Fee Stabilization Act of 2005 (MDUFSA). All companies qualifying as small businesses under the $100 million threshold pay reduced fees when submitting applications subject to user fees. Originally, MDUFMA also provided that companies qualifying as small businesses receive a fee waiver the first time ever they submit one of certain applications that generally have higher fees. While MDUFSA raised the small business threshold to $100 million, it provided that only companies with annual revenues of $30 million or less could continue to receive fee waivers. FDA's authority to collect user fees will sunset October 1, 2007. Congress asked us to provide annual revenue information for companies participating in the MDUFMA user fee program to assist Congress as it determines whether changes to the threshold for small business qualification are needed. Revenue information is available for companies that qualify as small businesses, which submit annual revenue information to FDA, and publicly traded companies, which register securities with, and submit annual revenue information to, the Securities and Exchange Commission (SEC). In this report, we provide revenue information for (1) companies that qualified as small businesses under the MDUFMA user fee program in fiscal year 2006 and (2) companies publicly traded in the United States that submitted device applications subject to user fees and did not qualify as small businesses under MDUFMA in fiscal year 2006.
Of the 697 companies that qualified as small businesses under the MDUFMA user fee program in fiscal year 2006, 656, or about 95 percent, had revenues at or below $30 million--the threshold for small business qualification originally set by MDUFMA in 2002. Of the 41 companies that had revenues above $30 million but at or below the current threshold of $100 million, 35 had revenues above $30 million but at or below $70 million. Of the 697 companies that qualified as small businesses in fiscal year 2006, two-thirds submitted at least one device application subject to user fees during that year. These companies were responsible for about 20 percent of the approximately 4,500 device applications subject to user fees that were submitted to FDA in fiscal year 2006. We identified annual revenues for 258 publicly traded companies that submitted applications subject to user fees and did not qualify as small businesses in fiscal year 2006. Of these companies, 155, or about 60 percent, had annual revenues that were higher than $500 million. Another 47 companies had annual revenues above $100 million but at or below $500 million. The remaining 56 companies had revenues at or below the current $100 million threshold for small business qualification. We did not determine why these companies were not qualified as small businesses. In total, the 258 publicly traded companies were responsible for about 30 percent of the approximately 4,500 applications subject to user fees that were submitted to FDA in fiscal year 2006.