This article identifies the strategic implications of the FDA user fee increases resulting from MDUFA IV starting in FY 2018.
You didn’t know the FDA user fee increased?
In August, the FDA publishes the new FDA user fee schedule for the next fiscal year, which begins on October 1. Last year the FDA published an updated small business guidance document in early August that included the fee schedule. This year, the release of the FY 2018 FDA user fee schedule was delayed until the end of August, because the re-authorization of user fees was not approved until August 18, 2017.
The MDUFA IV user fee schedule was negotiated in October of 2016, and the new user fee schedule proposed to increase the user fees to $999.5 million. That negotiated plan called for an increase in standard fees for 510k submissions while keeping small business fees lower. The final enacted MDUFA IV user fees follow this plan. There is a significant difference between PMA fees and 510k fees in the new fee schedule. There was a 33% increase for all PMA-related standard and small business fees. However, standard 510k fees increased by 125%, while small business fees for a 510k increased by 13%. The establishment registration fees increased by 37%, and there is still no discounted registration fee for small businesses. Finally, the biggest change is there will now be a fee for De Novo applications.
Implications of the De Novo FDA user fee increase
Congress authorized the MDUFA III fees in 2012 for five years, and there were no fees associated with De Novo applications. In 2012, the Food and Drug Administration Safety and Innovation Act (FDASIA) also streamlined the De Novo application process. The purpose of having no fees, and for streamlining the process, was to encourage medical device innovation. However, only 40% of De Novo application reviews were completed within 150 days during 2015 and 2016. The balance of the applications required 200 to 600+ days to complete. Negotiations between the FDA and industry in 2016 resulted in an agreement to trade an increase in FDA user fees for a decrease in the review time required for 510k clearance. However, the FDA also committed to decreasing the De Novo application review time to less than 150 days as follows:
Unfortunately, the agreed FDA user fee for De Novo applications in MDUFA IV for FY 2018 is $93,229 as a standard fee and $23,307 for small businesses. During the past five years, during MDUFA III, companies that felt they had a potential De Novo application would try to persuade the FDA that a borderline 510k submission should be a De Novo application instead. However, under MDUFA IV, you will be more likely to persuade the FDA that a borderline classification should be considered for a 510k submission instead of a De Novo application.
Also, you should plan your De Novo application more carefully than you might have for a free application. Pre-submission meeting requests should always be submitted during the development process, and these pre-sub requests should be submitted at least 90 days before your design freeze. Special consideration should also be devoted to risk analysis and gathering preliminary data to demonstrate the effectiveness of the risk controls you select to ensure that the clinical benefits of your device outweigh the residual risks of the device after implementing risk controls. Ideally, you will gather enough evidence to create a draft special controls guidance document to submit to the FDA as a supplement to your pre-submission meeting.
If you are planning a De Novo application for FY 2018, you should expect your FDA reviewer to pay special attention to ensuring that there are no unnecessary delays in the review process. You should also monitor the FDA’s new final guidance webpage for the release of a final guidance document for De Novo applications. The draft guidance was released on August 14, 2014. Creating final guidance will probably be a priority for FY 2018.
Implications of the 510k FDA user fee increase
The standard FDA user fee for a 510k increased 125% from $4,690 to $10,566. However, the absolute dollar amount of a 510k submission is still less than the cost of biocompatibility testing or sterilization validation. Therefore, the increase should not significantly decrease the number of submissions. However, the small business fee has only been increased by 13%. Therefore, if you are a small business (i.e., income < $100 million), you should complete an application for small business qualification as soon as you can (i.e., October 1, 2017) to make sure that you are eligible for the discounted fee when you submit your next 510k submission. If you need help preparing your small business qualification form, there will be a webinar on this topic Friday, September 8, 2017.
When you are planning a 510k submission, you should also determine if your device product classification is eligible for third party review. In the past, the increased cost of the third party review made submission of a 510k to a third party reviewer unattractive. However, the fees for third-party reviews range from $9,000 to $12,000 typically. Therefore, there may be no difference in the fee for a third party review unless your company is a qualified small business.
Implications of MDUFA IV FDA user fee increase
The increase in the annual establishment registration fee is 37% for medical device firms to $4,624. If you are already registered as a medical device firm, you should increase your annual budget for the establishment registration fee accordingly. If you are about to launch a new product, remember that you are required to register and list your product within 30 days of distribution of your product. Therefore, if shipments are going to begin in September, you don’t need to register until October (i.e., after the start of the new fiscal year). Therefore, you may be able to avoid paying the FY 2017 establishment registration and only pay the FY 2018 establishment registration. This would not be the case for foreign firms that need to import the product prior to distribution.
What you can do about MDUFA IV fee increases now.
You may not be able to change the user fee schedule for FY 2018, but there are three things you can do now to improve your situation. First, if you are a small business, you can speak to your accounting department and get them to provide a copy of the FY 2016 tax return so that you can complete the small business qualification form on October 1. Second, you should contact Regulatory Technology Services and the Third Party Review Group to obtain a quote for a third-party review of your 510k submission instead of submitting directly to the FDA. Third, you should add a reminder to your calendar for August 1, 2018, to start reviewing the FDA website and other sources for an FY 2019 FDA user fee schedule.
Learning how to submit a small business qualification form
If you have not completed a small business qualification form before, you can learn how to prepare your application for small business qualification by registering for my webinar on Friday, September 8, 2017.