Discounts Available! Submit a Small Business Certification Request Today for a Reduced Medical Device User Fee

November 15, 2022By Véronique Li, Senior Medical Device Regulation Expert & Philip Won

In our last blog post, we advised medical device companies to consider applying to FDA’s Small Business Program to help with the noticeably higher user fees for FY2023. In this blog post, we provide a primer on user fees and the Small Business Program.

User Fees

User fees are fees that FDA collects from “companies that produce certain products, such as drugs and medical devices, and from some other entities, such as certain accreditation and certification bodies.” These fees supplement the annual funding Congress provides for FDA. These fees are negotiated by FDA and industry every five years. Industry agrees to fee collections in exchange for FDA commitments to meet certain performance goals, such as reaching a decision on a marketing application within a predictable timeline. The user fees, however, do not correlate to the review outcome for the application. While the fees provide funding for a review, meeting the timeline 100% is not guaranteed and the performance goals do account for this potential.

Exemptions or Waivers

FDA allows for the following exemptions or waivers for user fees for medical devices (see here for further information).  Note that the FDA Small Business Program is open to both US and foreign businesses.

Category510(k)PMA, PDP, BLA or Premarket Report (PMR)513(g)De Novo
First application submission fee waiverNo waiverOne-time first submission fee waiver for a small business with gross receipts of sales $30 million or lessNo WaiverNo Waiver
Any application from a State or Federal Government entityExempt from any fee unless the device is to be distributed commerciallyExempt from any fee unless the device is to be distributed commerciallyNo WaiverExempt from any fee unless the device is to be distributed commercially
Any application for a device intended solely for pediatric useExempt from user fee.
Note: changing the intended use from pediatric to adult requires the submission of a new 510(k) and is subject to user fees
Exempt from user fee
Note: if the applicant obtains an exemption under this provision, and later submits a supplement for an adult use, that submission is subject to the fee in effect for an original PMA
No WaiverExempt from user fee
Third-party reviewExempt from FDA user fee.
Note: the third-party charges a fee for its review
Not eligibleNot eligibleNot eligible
BLA for product licensed for further manufacturing use onlyN/AExempt from User feeN/AN/A

Small Business Program

FDA’s Small Business Program reviews requests by medical device companies to be considered small businesses. To qualify as such, the business, including its affiliates, must have gross receipts and sales of less than $100 million for the most recent tax year.

The key benefit to being designated a small business is being eligible for a reduced fee for those medical device submissions that require a user fee. The small business fees for FY 2023 can be found here. Qualified businesses can save anywhere from 50 – 75% off the standard fees. Note that the establishment registration fee is not eligible for a reduced fee or waiver (see here).

Additionally, a small business is eligible for a “first premarket application/report” (e.g., first PMA (including modular PMA), BLA, PDP, or PMR) fee waiver, if the business and its affiliates have gross receipt and sales of no more than $30 million (for details, see Section III.C of the FDA Guidance).

FDA intends to complete its review of a small business certification request within 60 calendar days of receipt. If granted, the company can enjoy the benefits for that fiscal year alone, which runs from October 1 through September 30. The company must apply and be granted the certification for each fiscal year in which they plan to submit a medical device application that requires a user fee. FDA will not accept requests for the next fiscal year before August 1 — so plan accordingly. If you would like to request for FY 2023 status, you can submit an application through September 30, 2023.

Submitting a Small Business Certification Request

To submit a small business certification request:

  1. Collect tax documentation. This should be completed, signed and dated for the most recent tax year for the business and all US affiliates.
  2. Obtain your Organization ID number (Org ID). The Org ID identifies a business in FDA’s user fee website and is automatically generated when an account is created.
  3. Download either Form FDA 3602 (for a business headquartered in the United States) or Form FDA 3602A (for a business headquartered outside the United States).
  4. Send documents to FDA.

If you are a foreign business, we recommend that you allow for additional time to prepare your documents. A business headquartered outside the U.S. will need to submit Form FDA 3602A to their National Taxing Authority first (i.e., the equivalent of the U.S. Internal Revenue Service), who then completes Section III of that form (i.e., National Taxing Authority Certification). If a foreign business has any additional foreign affiliates or US affiliates, a separate certified Section III of Form FDA 3602A for each foreign affiliate or a Federal (U.S.) income tax return for each U.S. affiliate will need to be sent to FDA. When your documents are ready, send them to the following address:

FY 20__ MDUFA Small Business Qualification

Small Business Certification Program

10903 New Hampshire Avenue

Building 66, Room 5305

Silver Spring, MD 20993


Our Observations

FDA guidance makes no mention of exceptions or technicalities—therefore, if you are certified as a small business, don’t wait to submit your marketing application to FDA!

Consider this hypothetical situation for your 510(k) submission that will be mailed to FDA (Standard Fee for FY2022: $12,745, Standard Fee for FY2023: $19,870, Small Business Fee for FY2022: $3,186, Small Business Fee for FY2023: $4,967, see our previous blog for the details). You have been designated as a small business for FY2022 and therefore paid the small business fee of $3,186. You send your 510(k) on the last day of FY2022, with a postmark of Friday, September 30, 2022, believing that your 510(k) would be considered squarely within FY2022. However, it is most likely your submission will be logged in on the next business day (Monday, October 3, 2022) during the new fiscal year 2023. That means the user fee that would have been acceptable on Friday is now insufficient because the new set of medical device user fees have become effective. Now, your 510(k) application is subject to user fee hold.

To make matters worse, your small business certification for FY2022 is now expired as of the first day of FY2023, meaning that you will need to reapply for the small business designation. However, as a small business, you may be anxious to obtain a 510(k) clearance as soon as possible. As a result, you may be inclined to pay the standard fee for FY2023 for a 510(k) submission to get the FDA review started. But in doing so, you have just paid a difference of 524% in user fees over a few days ($3,186 of FY2022 Small Business Fee for a 510(k) vs. $19,870 of FY2023 Standard Fee for a 510(k))!

FDA states that “[p]ayment must be received and processed at the time or before the date the application is sent. If the FDA receives an application without full payment of all required fees, the FDA will consider the application incomplete and will not begin its review.” Payment is accepted by mail, courier, or wire transfer. In our experience, wire transfer is the most efficient but comes with caveats. The submitter must notify FDA when the payment clears. The user fee hold letter states that “[w]hen we [FDA] have been notified that your full user fee payment has been received, review of the submission will resume as of that date.” It is written in the passive voice and does not specify who is to make this notice. There is nothing approaching clear notice that in addition to payment, the user fee payor must also inform FDA—”we made a payment.”  The natural inference is that FDA would receive notice from another part of FDA or the bank receiving the wired funds, namely, the Federal Reserve Bank of New York. In fact, in instructions on submitting payment by wire transfer, the Federal Reserve Bank of New York is the entity tasked with notifying FDA of payment within 1 working day (see here).

That view is consistent with the user fee hold letter that seems to imply that at least some forms of payment result in faster processing and notification: “You now have the option to pay online by credit card. We recommend this form of payment. Credit card payments are directly linked to your user fee cover sheet and are processed the next business day.” This instruction appears to imply that payments that are “directly linked” results in a faster notification, while checks may result in a slower notification.

There is also no directive following this statement in the user fee hold letter as to how the user fee payor should provide notice that FDA had “received” the funds, further strengthening the inference that another entity would be providing notice as FDA notes here.  It does not make sense that the user fee payor would provide notice to FDA, since they would not have direct knowledge of when payment was “received.”  Their knowledge would relate to the date of “sending.”  It is FDA that would have knowledge of whether FDA has “received” funds or has been notified by the bank that funds have been “received.”

Suggestions for Industry

In a recent example, the company paid the user fee before its application was sent on the last day of FY2022, thereby complying with FDA procedures. As long as user fees are paid “at the time or before the date the application is sent,” which was clearly true in this company’s case, FDA should have honored the FY2022 user fees.

However, because FDA did not receive the submission until the first business day of the new fiscal year, it required the company to pay the higher FY2023 fees. “FDA records as the submission receipt date the latter of the following: 1. The date the submission was received by the FDA; or 2. The date the Federal Reserve Bank of New York notifies the FDA that payment has been received.” (Please see here for more information.)

As a result, we ask companies to consider additional time during the transition from one fiscal year to the next. This is particularly important when it is apparent that the company has complied with FDA procedures to pay the user fee before it submits an application within the same fiscal year. This is also especially important when MDUFA is renewed and would alleviate some anxiety over the uncertainty of the timing of the passage of the bill and its impact on user fees.

Currently, FDA allows for two different methods to send submissions for review: eCopy and eSTAR. We previously blogged about the advantages of eSTAR. To reduce the chances of inefficiencies with delivery and processing, we recommend utilizing eSTAR to submit your applications to FDA.

Suggestion for FDA

We also suggest that FDA address the ambiguity about the notice requirement. Wire transfers and credit card payments are inherently “automated.” FDA should not require additional notification from the payor that the user fee has been paid. Therefore, it makes sense that the communications around payment are between the financial institution and FDA and not the payor.

Categories: Medical Devices