
[Federal Register Volume 79, Number 148 (Friday, August 1, 2014)]
[Notices]
[Pages 44805-44807]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18111]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2013-N-0007]


Outsourcing Facility Fee Rates for Fiscal Year 2015

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA or the Agency) is 
announcing the rates for fiscal year (FY) 2015 for the establishment 
and reinspection fees related to human drug compounding outsourcing 
facilities (outsourcing facilities) that elect to register under the 
Federal Food, Drug, and Cosmetic Act (the FD&C Act). The FD&C Act 
authorizes FDA to assess and collect an annual establishment fee from 
outsourcing facilities that have elected to register, as well as a 
reinspection fee for each reinspection of an outsourcing facility. This 
document establishes the FY 2015 rates for the small business 
establishment fee ($5,103), the non-small business establishment fee 
($16,442) and the reinspection fee ($15,308) for outsourcing 
facilities, provides information on how the fees for FY 2015 were 
determined, and describes the payment procedures outsourcing facilities 
should follow.

FOR FURTHER INFORMATION CONTACT:
    For information on pharmacy compounding and pharmacy compounding 
user fees: Visit FDA's Web site at http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/default.htm.
    For questions relating to this notice: Rachel Richter, Office of 
Financial Management Food and Drug Administration, 8455 Colesville Rd., 
COLE-14216, Silver Spring, MD 20933-0002, 301-796-7111.

SUPPLEMENTARY INFORMATION: 

I. Background

    On November 27, 2013, President Obama signed the Drug Quality and 
Security Act (DQSA), legislation that contains important provisions 
relating to the oversight of compounding of human drugs. Title I of 
this law, the Compounding Quality Act, creates a new section 503B in 
the FD&C Act (21 U.S.C. 353b). Under section 503B, a human drug 
compounder can become an ``outsourcing facility.''
    Outsourcing facilities, as defined in section 503B(d)(4) of the 
FD&C Act, are facilities that meet all of the conditions described in 
section 503B(a), including registering with FDA as an outsourcing 
facility and paying an annual establishment fee. If these conditions 
are satisfied, a drug compounded by or under the direct supervision of 
a licensed pharmacist in an outsourcing facility is exempt from two 
sections of the FD&C Act: (1) Section 502(f)(1) (21 U.S.C. 352(f)(1)) 
(concerning the labeling of drugs with adequate directions for use) and 
(2) section 505 (21 U.S.C. 355) (concerning the approval of human drug 
products under new drug applications (NDAs) or abbreviated new drug 
applications (ANDAs)). Drugs compounded in outsourcing facilities are 
not exempt from the requirements of section 501(a)(2)(B) of the FD&C 
Act (21 U.S.C. 351(a)(2)(B)) (concerning current good manufacturing 
practice for drugs).
    Section 744K of the FD&C Act (21 U.S.C. 379j-62) authorizes FDA to 
assess and collect the following fees associated with outsourcing 
facilities that elect to register under section 503B of the FD&C Act: 
(1) An annual establishment fee from each outsourcing facility; and (2) 
a reinspection fee from each outsourcing facility subject to a 
reinspection (see section 744K(a)(1) of the FD&C Act). Under 
statutorily defined conditions, a qualified applicant may pay a reduced 
small business establishment fee (see section 744K(c)(4) of the FD&C 
Act).
    On April 1, 2014, FDA announced in the Federal Register of April 1, 
2014 (79 FR 18297) the availability of a draft guidance for industry 
entitled ``Fees for Human Drug Compounding Outsourcing Facilities Under 
Sections 503B and 744K of the FD&C Act.'' The draft guidance provides 
additional information on the annual fees for registered outsourcing 
facilities and adjustments required by law, reinspection fees, how to 
submit payment, the effect of failure to pay fees and how to qualify as 
a small business to obtain a reduction of the annual establishment fee. 
This draft guidance can be accessed on FDA's Web site at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM391102.pdf.

II. Fees for FY 2015 1
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    \1\ FY 2015 runs from October 1, 2014 through September 30, 
2015.
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A. FY 2015 Rates for Small Business Establishment Fee, Non-Small 
Business Establishment Fee, and Reinspection Fee

1. Establishment Fee for Qualified Small Businesses \2\
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    \2\ To qualify for a small business reduction of the FY 2015 
establishment fee, entities had to submit their exception requests 
by April 30, 2014. See section 744K(c)(4)(B) of the FD&C Act. 
Although the time for requesting a small business exception for FY 
2015 has now passed, an entity that wishes to request a small 
business exception for FY 2016 should consult section 744K(c)(4) of 
the FD&C Act and section III.D of FDA's draft guidance for industry 
entitled ``Fees for Human Drug Compounding Outsourcing Facilities 
Under Sections 503B and 744K of the FD&C Act,'' which can be 
accessed on FDA's Web site at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM391102.pdf.
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    The amount of the establishment fee for a qualified small business 
fee is equal to $15,000 multiplied by the inflation adjustment factor 
for that fiscal year, divided by three (see section 744K(c)(4)(A) and 
(c)(1)(A)). The inflation adjustment factor for FY 2015 is 1.020558. 
See section II.B.1, below, for the methodology used to calculate the FY 
2015 inflation adjustment factor. Therefore, the establishment fee for 
a qualified small business for FY 2015 is one third of $15,308, which 
equals $5,103 (rounded to the nearest dollar).
2. Establishment Fee for Non-Small Businesses
    Under section 744K(c)(1)(A) of the FD&C Act, the amount of the 
establishment fee for a non-small business fee is equal to $15,000 
multiplied by the inflation adjustment factor for that fiscal year, 
plus the small business adjustment factor for that fiscal year. The 
inflation adjustment factor for FY 2015 is 1.020558. (See section 
II.B.1). The small business adjustment amount for FY 2015 is $1,134. 
See section II.B.2, for the methodology used

[[Page 44806]]

to calculate the small business adjustment factor for FY 2015. 
Therefore, the establishment fee for a non-small business for FY 2015 
is $15,000 multiplied by 1.020558, plus $1,134, which equals $16,442.
3. Reinspection Fee
    Section 744K(c)(1)(B) of the FD&C Act provides that the amount of 
the FY 2015 reinspection fee is equal to $15,000, multiplied by the 
inflation adjustment factor for that fiscal year. The inflation 
adjustment factor for FY 2015 is 1.020558. See section II.B.1. 
Therefore, the reinspection fee for FY 2015 is $15,000 multiplied by 
1.020558, which equals $15,308. There is no reduction in this fee for 
small businesses.

B. Methodology for Calculating FY 2015 Adjustment Factors

1. Inflation Adjustment Factor
    Section 744K(c)(2) of the FD&C Act specifies the annual inflation 
adjustment for outsourcing facility fees. The inflation adjustment has 
two components: One based on FDA's payroll costs and one based on FDA's 
non-pay costs for the first 3 years of the 4 previous FYs. The payroll 
component of the annual inflation adjustment is calculated by taking 
the average change in the FDA's per-full time equivalent (FTE) 
personnel compensation and benefits (PC&B) in the first 3 years of the 
4 previous FYs (see section 744K(c)(2)(A)(ii) of the FD&C Act). FDA's 
total annual spending on PC&B is divided by the total number of FTEs 
per FY to determine the average PC&B per FTE. The data on total PC&B 
paid and numbers of FTEs paid, from which the average cost per FTE can 
be derived, are published in FDA's Justification of Estimates for 
Appropriations Committees.
    Table 1 summarizes the actual cost and FTE data for the specified 
FYs, and provides the percent change from the previous FY and the 
average percent change over the first 3 of the 4 FYs preceding FY 2015. 
The 3-year average is 1.8829 percent.

                                Table 1--FDA PC&B's Each Year and Percent Change
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           Fiscal year                   2011                20112               2013           3-Year average
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Total PC&B......................      $1,761,655,000      $1,824,703,000      $1,927,703,000  ..................
Total FTE.......................              13,331              13,382              13,974  ..................
PC&B per FTE....................            $132,147            $136,355            $137,949  ..................
Percent change from previous                 1.2954%             3.1843%             1.1690%             1.8829%
 year...........................
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    Section 744K(c)(2)(A)(ii) of the FD&C Act specifies that this 
1.8829 percent should be multiplied by the proportion of PC&B to total 
costs of an average FTE of FDA for the same 3 FYs.

                      Table 2--FDA PC&B's as a Percent of FDA Total Costs of an Average FTE
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           Fiscal year                   2011                20112               2013           3-Year average
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Total PC&B......................      $1,761,655,000      $1,824,703,000      $1,927,703,000  ..................
Total Costs.....................      $3,333,407,000      $3,550,496,000      $4,151,343,000  ..................
PC&B Percent....................            52.8485%            51.3929%            46.4356%            50.2257%
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    The payroll adjustment is 1.8829 percent multiplied by 50.2257 
percent, or 0.9457 percent.
    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that the 
portion of the inflation adjustment for non-payroll costs for FY 2015 
is equal to the average annual percent change in the Consumer Price 
Index (CPI) for urban consumers (U.S. City Average; Not Seasonally 
Adjusted; All items; Annual Index) for the first 3 years of the 
preceding 4 years of available data, multiplied by the proportion of 
all costs other than PC&B costs to total costs of an average FTE of the 
FDA for the first 3 years of the preceding 4 fiscal years.
    Table 2 provides the summary data for the percent change in the 
specified CPI for U.S. cities. These data are published by the Bureau 
of Labor Statistics and can be found on its Web site at http://data.bls.gov/cgi-bin/surveymost?cu by checking the box marked ``U.S. 
All items, 1982-84 = 100-CUUR0000SA0'' and then clicking on the 
``Retrieve Data'' button.

                   Table 3--Annual and 3-Year Average Percent Change in U.S. City Average CPI
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              Year                       2011                2012                2013           3-Year average
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Annual CPI......................             224.939             229.594             232.957  ..................
Annual percent change...........             3.1565%             2.0694%             1.4648%             2.2302%
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    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that this 
2.2302 percent should be multiplied by the proportion of all costs 
other than PC&B costs to total costs of an average FTE of the FDA for 
the same 3 FYs. The proportion of all costs other than PC&B costs to 
total costs of an average FTE of FDA for FYs 2011-2013 is 49.7743 
percent (100 percent minus 50.2257 percent equals 49.7743 percent). 
Therefore, the non-pay adjustment is 2.2302 percent times 49.7743 
percent, or 1.1101 percent.
    To complete the inflation adjustment, the payroll component (0.9457 
percent) is added to the non-pay component (1.1101 percent), for a 
total inflation adjustment of 2.0558 percent (rounded), and then one is 
added, making 1.020558.
2. Small Business Adjustment Factor
    Section 744K(c)(3) of the FD&C Act specifies that in addition to 
the inflation

[[Page 44807]]

adjustment factor, the establishment fee for non-small businesses is to 
be further adjusted for a small business adjustment factor. Section 
744K(c)(3)(B) provides that the small business adjustment factor is the 
adjustment to the establishment fee for non-small businesses that is 
necessary to achieve total fees equaling the total fees that FDA would 
have collected if no entity qualified for the small business exception 
in section 744K(c)(4) of the FD&C Act.
    Therefore, to calculate the small business adjustment to the 
establishment fee for non-small businesses for FY 2015, FDA must 
estimate: (1) The number of outsourcing facilities that will pay the 
reduced fee for small businesses for FY 2015; and (2) the total fee 
revenue it would have collected if no entity had qualified for the 
small business exception (i.e., if each outsourcing facility that 
registers for FY 2015 were to pay the inflation-adjusted fee amount of 
$15,308). With respect to (1), FDA estimates that 5 entities will 
qualify for small business exceptions for FY 2015. Accordingly, FDA 
estimates that 5 entities will pay the reduced fee for small businesses 
for FY 2015. With respect to (2), to estimate the total number of 
outsourcing facilities that will register for FY 2015, FDA used data 
submitted to date by outsourcing facilities through the voluntary 
registration process, which began in December 2013. Accordingly, FDA 
estimates that 50 outsourcing facilities, including 5 small businesses, 
will register with the Agency in FY 2015.
    If the projected 50 outsourcing facilities paid the full inflation-
adjusted fee of $15,308, this would result in total revenue of $765,400 
in FY 2015 ($15,308 times 50). However, because 5 of the outsourcing 
facilities expected to register for FY 2015 are estimated to qualify 
for the small business exception and will pay one-third of the full fee 
($5,103 x 5), totaling $25,515 instead of paying the full fee ($15,308 
x 5), which totals $76,540, this would leave a shortfall of $51,025 
($76,540 - $25,515). Dividing $51,025 by 45 (the number of estimated 
non-small businesses) yields $1,134 (rounded to the nearest dollar). 
Therefore, the FY 2015 small business adjustment to the establishment 
fee for non-small businesses is $1,134.

C. Summary of FY 2015 Fee Rates

                   Table 4--Outsourcing Facility Fees
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Qualified Small Business Establishment Fee....................    $5,103
Non-Small Business Establishment Fee..........................    16,442
Reinspection Fee..............................................    15,308
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III. Fee Payment Options and Procedures

A. Establishment Fee

    Once an entity submits registration information and FDA has 
reviewed the information and determined that it is complete, the entity 
will incur the annual establishment fee. FDA will send an invoice to 
the entity via email, to the email address indicated in the 
registration file, or via regular mail if email is not an option. The 
invoice will contain information regarding the obligation incurred, the 
amount owed, and payment procedures. A facility will not be deemed 
registered as an outsourcing facility until it has paid the annual 
establishment fee under section 744K of the FD&C Act. Accordingly, it 
is important that facilities seeking to operate as registered 
outsourcing facilities pay all fees immediately upon receiving an 
invoice. If an entity does not pay the full invoiced amount within 
fifteen calendar days after FDA issues the invoice, FDA will consider 
the submission of registration information to have been withdrawn and 
adjust the invoice to reflect that no fee is due.
    Outsourcing facilities that registered in FY 2014 and wish to 
maintain their status as an outsourcing facility in FY 2015 must 
register during the annual registration period that lasts from October 
1, 2014 to December 31, 2014. Failure to register and complete payment 
by December 31, 2014, will result in a loss of status as an outsourcing 
facility on January 1, 2015. Entities should submit their registration 
information no later than December 10, 2014 to allow enough time for 
review of the registration information, invoicing, and payment of fees 
before the end of the registration period.

B. Reinspection Fee

    FDA will issue invoices for each reinspection via email, to the 
email address indicated in the registration file, or via regular mail 
if email is not an option.

C. Fee Payment Procedures

    Entities may remit payments via check or wire transfer.
    1. If paying with a paper check: Checks must be in U.S. currency 
from a U.S. bank and made payable to the Food and Drug Administration. 
Payments can be mailed to: Food and Drug Administration, P.O. Box 
956733, St. Louis, MO 63195-6733. If a check is sent by a courier that 
requests a street address, the courier can deliver the check to: U.S. 
Bank, Attn: Government Lockbox 956733, 1005 Convention Plaza, St. 
Louis, MO 63101. (Note: This U.S. Bank address is for courier delivery 
only; do not send mail to this address.)
    2. If paying with a wire transfer: Use the following account 
information when sending a wire transfer: New York Federal Reserve 
Bank, U.S. Dept of Treasury, TREAS NYC, 33 Liberty St., New York, NY 
10045, Acct. No. 75060099, Routing No. 021030004, SWIFT: FRNYUS33, 
Beneficiary: FDA, 8455 Colesville Road, Silver Spring, MD 20993. The 
originating financial institution may charge a wire transfer fee. An 
outsourcing facility should ask its financial institution about the fee 
and add it to the payment to ensure that the order is fully paid. The 
tax identification number of FDA is 53-0196965.

    Dated: July 25, 2014.
Leslie Kux,
Assistant Commissioner for Policy.
[FR Doc. 2014-18111 Filed 7-31-14; 8:45 am]
BILLING CODE 4160-01-P


