MDUFMA and More
The Reauthorization of the Device User Fee Program Offers Stability, But Experts Advise Vigilance in FDA Dealings
Christopher Delporte, Group Editor
The US Food and Drug Administration has fielded its share of flak in the past few years from elected officials and the public alike. And recently, with the power change in Congress, some would argue that the scrutiny is going to continue—and perhaps even heat up a little bit.
“The Democrats have control of the FDA oversight committee and they are being more consumer protective. It appears that they feel that the FDA may not be protecting Americans as best as they could be over the past few years, and [lawmakers] want to see more action,” Alan Schwartz, vice president of MDI Consultants Inc., an FDA consulting firm based in Great Neck, NY, told Medical Product Outsourcing. “The FDA is being more aggressive than they have been in the past. They’re going to take a much harder stance in demanding compliance from industry. I think the FDA is tightening up their ship a little on what they feel is significant and how companies must comply.”
He went on to say that the agency may be “a little less user-friendly” with medical device companies and not quite as “industry oriented” as it had been in the past.
Comments from certain high-ranking members of Congress would seem to lend credence to Schwartz’s assertions.
Senator Edward Kennedy (D-MA), chairman of the Health, Education, Labor and Pensions (HELP) Committee—whose jurisdiction encompasses most of the agencies within the US Department of Health and Human Services, including the FDA—has said on many occasions that he believes the FDA needs to be more “mindful of its charge” to protect the public’s health.
During recent negotiations to reauthorize the Medical Device User Fee and Modernization Act (MDUFMA), Kennedy reiterated his opinion.
“In this new era of the life sciences, medical advances will continue to bring immense benefits for our citizens. To fulfill the potential of that bright future, we need not only brilliant researchers to develop the drugs of tomorrow, but also strong and vigilant watchdogs for public health to guarantee that new drugs and medical devices are safe and beneficial, and that they actually reach the patients who urgently need them,” the eight-term senator said. “Congress has ample power to restore the luster that FDA has lost in recent years. The legislation we are now considering represents a bipartisan consensus on the best way to get the job done.”
Despite talk of “bipartisan consensus,” some points during negotiations for MDUFMA II (as the most recent iteration of the user fee program often is called) were politics as usual in Washington. There had been rumors that Democrats would—as differences were hammered out—delay passage of the FDA Amendments Act, of which MDUFMA was part along with the pharmaceutical user fee program. A delay would have pushed the reauthorization past MDUFMA’s sunset date of Oct. 1, possibly resulting in the layoff of more than 1,700 FDA personnel.
“Nancy Pelosi and the House Democratic leadership are playing a game of chicken with the American people’s lives,” Sen. Mike Enzi (R-WY), ranking Republican on the HELP Committee, said at the time.
Despite machinations on both sides of the aisle, both the House of Representatives and the Senate eventually voted to pass the legislation and President George W. Bush signed it into law on Sept. 27, reauthorizing the program for the next five years. Along with congressionally appropriated funds, MDUFMA reauthorization will provide the agency with revenue of $287 million by October 2012, according to FDA officials.
MDUFMA: By the Numbers
With MDUFMA II, more predictable fees are established, eliminating the volatile year-to-year fee increases associated with the oft-derided structure of the pervious program. In fact, almost all application fees will remain below 2007 levels through fiscal year 2012.
While the price of device application fees drop significantly in most cases compared to 2007, two new fees—an annual establishment registration fee ($1,706) and an annual fee for periodic reporting on Class III devices (a standard fee of $6,475 or $1,619 for small companies)—are expected to provide about 50% of predictable fee revenue. It is anticipated that these fees will change little year to year. For fiscal year 2008, there also will be standard fees for 30-day notifications and 513(g) classification requests, which previously had been free of charge. The annual establishment fee would apply to device manufacturers, single-use reprocessors and specification developers. Companies would not be considered legally registered with the FDA without paying this fee. The agency hoped that electronic filing and listing would facilitate the collection of the registration fee.
Total user fee revenue will increase approximately 31% from 2007 to 2008, and then 8.5% annually thereafter.
“Certainly, the passage of the Food and Drug Administration Amendments Act of 2007 is critical to the continued success of the device industry. As both FDA and industry learned from MDUFMA I, a drop in the number of applications that the agency received needed to be offset by some enormous fee increases that were not expected and weren’t anticipated by industry,” said Steve Niedelman, executive vice president for Quintiles Consulting, a division of Research Triangle Park, NC-based Quintiles Transnational Corp. “By requiring an annual registration fee of all medical device firms, you are creating a more stable funding base that provides the agency and industry more financial predictability. Hopefully, user fees will not have to waver as much as they had done in the past,” continued Niedelman, a 34-year veteran of the FDA prior to going to work for Quintiles in 2006. “And knowing that there is going to be a steady stream of income to the agency, the FDA can better plan for the necessary resources to provide the level of review that the new law seeks. Stable funding was something that the agency was very much concerned about. Now, industry, to their benefit, will have most of the other user fees significantly reduced to offset the new registration fee.”
For fiscal year 2008, premarket application (PMA) approval and biological license application efficacy supplements fees will be $185,000 ($46,250 under the small-company classification, a 57% drop), a 34% reduction compared to 2007. Panel-track supplement fees will be reduced 51% to $138,750 ($34,688 for small companies, a 68% reduction). The fee for 180-day PMA supplement fees drops 54% to $27,750 ($6,938 for small companies, a 70% reduction). Real-time supplement fees are reduced by 36% to $12,950 (58% less or $3,237 for small companies). The price of 510(k) fees dropped 18% in 2008 to $3,404 ($1,702 for small companies, a 49% reduction).
Performance goals for the Center for Devices and Radiological Health (CDRH) also have been changed. For example, the goals now will focus on the time it takes to make a final decision rather than step-by-step interim goals. Significantly, the goals include for the center to make decisions on 60% of PMAs and panel-track PMA supplements in 180 days and 90% within 295 days, compared to 50% and 80%, respectively, for 2007 under MDUFMA I. For 510(k)s, 90% of applications should be completed within 90 days, compared to 80% in 90 days previously. A total of 98% of 510(k)s should be completed in 150 days under the new plan, which is a new goal beginning in 2008.
Also important for the many startup and midsize device firms in the industry, the small-company threshold established by 2005’s Medical Device User Fee Stabilization Act is maintained at $100 million. Likewise, for companies with less than $30 million in annual revenue, fees are waived for a company’s first-ever PMA application. The new law also makes it easier for foreign companies to register as small businesses. In addition, the FDA soon is expected to release an updated guidance document on how to qualify and apply for small-business status.
“There’s no question that, historically, the smaller medical device manufacturers have felt the crunch of user fees more heavily than the larger firms,” Niedelman added. “Both large and small companies—industry as a whole—should be relatively pleased with the program that was signed into law by the president.”
In addition to the quantitative goals, some qualitative goals established for the CDRH under MDUFMA II include more interactive review of new products, more guidance documents development (which most CDRH staff admit often is not as timely as it should be), quarterly updates, more meetings with industry and a focus on reviewer training.
Another feature of the new law is that it streamlines the agency’s inspection program by allowing third-party firms to inspect for good manufacturing practices, which will free up the agency to concentrate its efforts on the evaluation of high-risk products and facilities, though the agency reserves the right to conduct follow-up inspections at its discretion. Going forward, companies may use a third-party for an unlimited number of inspections without seeking a waiver, rather than only two consecutive inspections under the previous law.
The FDA hopes that increased use of accredited third-party inspection programs also will provide the agency with more data. Firms also may voluntarily submit reports from their third-party inspections assessing conformance with appropriate international quality systems standards, such as ISO, which the FDA would consider when it sets its inspection priorities, according to Thinh Nguyen, associate director, Regulatory Review Programs at CDRH.
Nguyen told attendees at the recent annual conference and exhibition of the Regulatory Affairs Professionals Society that the additional resources secured through MDUFMA will improve the review process, but the review standards will not change, and continued improvements will be obtained by improving internal efficiencies at the FDA while maintaining its current staffing levels.
In addition to the goals, dollars and cents of MDUFMA, the new law also appropriates funds for pediatric device development, calling for the FDA to track and report to Congress on the number and types of devices approved specifically for pediatric conditions. Applications for pediatric-specific devices would be similar to humanitarian device exemptions. An annual appropriation of $6 million for fiscal years 2008 through 2012 will be made available to fund demonstration grants for pediatric devices.
Along with the pediatric provisions, the FDA Amendments Act called for the development of a Unique Device Identification (UDI) system, which has been debated for some time between industry and the FDA. This new system would require the device label (or elsewhere on the product, where appropriate) to bear a unique identifier—such as a barcode or radiofrequency identification tag. The agency expects that the UDI would ensure better traceability of products and, in the long run, help the industry reduce medical errors and liability. Some in the device industry maintain that manufacturers already implement significant and sufficient labeling and tracking procedures and that a UDI mandate would mean additional regulatory burden and increased cost.
Beyond Device Evaluation
While important, user fees are only part of a bigger regulatory puzzle that medical device companies must confront. Niedelman advised that companies must continue to be vigilant and, in many cases, ramp up their attention to quality and Quality System Regulations, or good manufacturing practices, which includes strict monitoring of how contract manufacturers and suppliers affect an OEM’s responsibilities to patients and the FDA.
“There’s a continuing concern that the industry is being lulled into a false sense of complacency, based upon FDA’s resources and their ability to visit firms. Companies need to look at their roles and responsibilities and take quality seriously,” he recommended. “Just because FDA can’t visit as often as they may like or as often as industry would expect, it doesn’t mean that industry shouldn’t be proactive, vigilant and compliant with FDA requirements. That includes compliance with quality system regulations, medical device reporting, corrections and removal requirements, registration and listing, etc. Be mindful that registration and listing requirements for device firms just changed to an annual event from a biannual event—and are due by December 31. The cost of complacency about quality could be enormous, whether as a result of an FDA action, product malfunction or failure, or the potential for negative press that can damage your firm’s reputation.”
He recommended that device companies continually perform internal audits or have them done by consultant, or a combination of both.
“It’s dangerous when a company’s approach is ‘we’ll take our chances and wait for FDA to visit. We have a relatively clean history and we’ll rest on that.’ Margins are very important in the device and healthcare industries, and firms see this kind of preparation as a cost,” Niedelman added. “This isn’t only about FDA compliance. Industry needs to understand that the quality of their products is a reflection on their firm and that patients expect quality and deserve the quality products that are being promoted, sold, used and—in some cases—implanted.”
Niedelman said that based on recent congressional oversight, FDA actions increasingly are being scrutinized on Capitol Hill and there have been hearings on such a variety of topics as imports and food safety. He said that lawmakers’ interest could spill over into the device realm that could result in the pendulum beginning to swing toward a more aggressive enforcement position by the agency.
MDI’s Schwartz claimed that the current mood at the FDA already is more aggressive about enforcement than it was just a few years ago.
“The agency I’m experiencing today is not the same one from just a few years ago,” he said.
In many situations, it boils down to the FDA’s resources and how it chooses to best allocate them for the greater public good, Niedelman said.“FDA has taken on a risk-based approach to best utilize their resources and has decided to spend their time, effort and resources inspecting new firms for which there is no inspection history; companies that manufacture critical life-sustaining, life supporting devices; firms that have made a change to a significant or complex manufacturing process; products that present a challenge to manufacture; or where there have been recent problems associated with a device. This allows FDA to conduct inspections that are more meaningful and garner the most productive information to protect the public health,” he added.
Donald St. Pierre, associate director for Postmarket Transformation at CDRH, agreed with this assertion.
“We’re doing better risk-based work planning for our inspections—and these are not part of the routine inspections. Risk-based planning is not intended to impact routine inspection cycles, but it is intended to say ‘OK, these are the products we know we have problems or issues with because we’ve seen in the MDR [medical device reporting], we read it in the paper, read it in the literature, we’ve heard it at meetings and seen it in premarket applications. It involves putting all the information together to build a work plan based on that information and settle on specific areas,” St. Pierre told MPO. “We don’t have the resources to inspect every company, so you have to pick your battles a little bit better.”
At the moment, corrective and preventive action (CAPA) problems are the most common violations being cited on FDA-483s by the agency, according to Niedelman. He said firms must demonstrate their ability to adequately perform a corrective and preventive action by identifying the true root cause and making sure the correction is being made that will be prevent it from occurring again. (For more detail on CAPA issues, see “It’s Raining CAPAs” on page 26.)
Niedelman advised that the number of warning letters being issued by the FDA on MDR and correction issues also has increased. Medical device reporting is the mechanism the FDA uses to receive significant medical device adverse events from manufacturers, importers and user facilities, so they can be addressed, investigated and corrected in a timely manner.
“I think industry is caught a bit flat-footed at times—certain firms, at least—about these requirements and these issues,” he said.
To accurately determine the number of warning letters issued to device firms during the last few years and establish how the number of letters had changed, MPO contacted the FDA. However, as of press time, there was no response from the agency.
St. Pierre said he expects electronic reporting of MDRs—a big push as part of the agency’s Postmarket Transformation Initiative—would help the industry and the FDA. “MDR reporting is available to people now, and we’d like people to start using it before it becomes mandatory,” he explained, adding that the CDRH currently is working on draft proposed rule that he hopes will be out by February. “It’s not imminent, but it certainly is in the works. So once it does become a reality, we’d like to have a system in place that works for everybody. We need people trying it, using it, testing it.”
St. Pierre said that industry has been instrumental in designing the system thus far and that the information that results from such a system would have immediate benefit in tracking critical device data.
“When we get MDRs and applications submitted electronically, our searches, trending and analysis will improve greatly,” he said. “We’d be able to mine information very effectively. If we get them in electronically, we don’t have to type them in and we can use those resources elsewhere.”
Suppliers and Quality Responsibility
Niedelman said the FDA is beginning to look at supplier controls with a much more critical eye, impacting OEM relationships with their contract manufacturing partners.
“As more companies use third-party providers of raw materials, parts, subassemblies and even finished devices, it is very important that manufacturers have a robust, risk-based supplier control program,” Niedelman advised. “It is critical that contact and contracts with suppliers are tight, ensuring there is constant communication about the products being supplied and any changes to specifications that are upcoming or may be needed. Audits of those programs should be routinely conducted by the manufacturers, qualified independent consultants or a combination of both. That’s really the only way to verify what your supplier is doing and that they’re meeting contractual obligations.”
Critical suppliers need to be audited regularly and there should be no more than a year between audits—perhaps even more often depending upon the significance of the device, he recommended. Often, if an OEM has a sole supplier of a component and the part or assembly serves a critical function, the company may embed a person at the supplier plant to ensure all requirements are being met and everything goes smoothly.
“Tight” vendor contracts are one of the most critical points of a good supplier program, Niedelman said. He advised that contracts should be extremely specific and clearly identify the requirements on both sides. In addition, contracts should be based on the risk of the device and the significance of the component.
“A lot of firms go into supplier controls thinking that all they have to do is comply with the purchasing control requirements of the quality system regulations,” he said. “Performance is based on the quality system requirements that are in place and being practiced at the original equipment manufacturer. They need to have established appropriate acceptance procedures. They must provide traceability of components, subassemblies, etc., and they must perform quality audits of suppliers that are not necessarily available to FDA, as they are considered internal audits. They must have adequate CAPA procedures in place to ensure that they’re able to address any problems that may come up and prevent their reoccurrence. They need to have procedures for handling, storage, distribution and installation of products.”
Niedelman also stressed the importance of change notification.
“Change notification must be part of any good supplier contract,” he said. “Suppliers could make even he most mundane change because of the availability of a raw material, not thinking that it would have an effect on a finished product and it could—even resulting in injury or death.”