GAO Issues Report to Aid in MDUFMA Reauthorization

April 11, 2007

The Government Accountability Office (“GAO”) recently released a report detailing the revenue information from certain companies that participate in the Medical Device User Fee Program (“MDUFMA”).  MDUFMA authorizes FDA to charge user fees to review applications for the clearance or approval of medical devices.  MDUFMA was passed in 2002 out of concern that FDA lacked the resources necessary to review such applications in a timely manner.  FDA’s authority to collect fees under MDUFMA will sunset on October 1, 2007, unless Congress reauthorizes the law.

The GAO report was issued in response to a 2006 letter from Representative Joe Barton (R-TX), the Ranking Minority Member on the House Committee on Energy and Commerce, which requested the revenue information to assist Congress in determining whether changes to MDUFMA’s small business qualification are necessary.  The fees charged under MDUFMA vary, depending on details such as the type of application and the size of the company submitting the application.  For example, in Fiscal Year 2006, fees for Premarket Notifications (for clearance of a device through the 510(k) process) were $3,833, while fees for Premarket Approval (“PMA”) applications were $259,600.  These fees can be reduced or waived if companies filing the applications qualify as small businesses.  When MDUFMA was enacted in 2002, a company could qualify as a small business if its annual revenues (including those of any affiliate, partner, or parent) were $30 million dollars or less.  In 2005, this threshold was increased to $100 million.

Based on GAO’s review of FDA application data and companies’ revenue information, 697 companies qualified as small businesses under MDUFMA in Fiscal Year 2006.  These companies’ applications constituted about 20% of the approximately 4,500 device applications subject to user fees that were submitted to FDA that year.  Ninety-five percent of the small businesses –656– had revenues below the original $30 million small business threshold.  Forty-one companies had revenues above $30 million but below the current $100 million small business threshold; of these, thirty-five companies’ revenues were below $70 million. 

The GAO report also revealed that there were 258 publicly traded companies that submitted device applications subject to user fees in Fiscal Year 2006 that did not qualify as small businesses.  These companies were responsible for about 37% of the approximately 4,500 device applications subject to user fees that were submitted to FDA that year.  Sixty percent of these companies –155– had revenues that exceeded $500 million.  Another forty-seven companies had revenues between $100 million and $500 million; fifty-six companies had revenues below the $100 million small business qualification threshold, but for reasons that were not determined, did not qualify as small businesses. 

By Christine P. Bump

Categories: Medical Devices