
[Federal Register Volume 81, Number 147 (Monday, August 1, 2016)]
[Notices]
[Pages 50528-50531]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18093]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2016-N-0007]


Outsourcing Facility Fee Rates for Fiscal Year 2017

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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SUMMARY: The Food and Drug Administration (FDA) is announcing the 
fiscal year (FY) 2017 rates for the establishment and re-inspection 
fees related to entities that compound human drugs and elect to 
register as outsourcing facilities 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, as 
well as a re-inspection fee for each re-inspection of an outsourcing 
facility. This document establishes the FY 2017 rates for the small 
business establishment fee ($5,279), the non-small business 
establishment fee ($16,852), and the re-inspection fee ($15,837) for 
outsourcing facilities; provides information on how the fees for FY 
2017 were determined; and describes the payment procedures outsourcing 
facilities should follow. These fee rates are effective October 1, 
2016, and will remain in effect through September 30, 2017.

FOR FURTHER INFORMATION CONTACT: For more information on human drug 
compounding and outsourcing facility fees, visit FDA's Web site at: 
http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/PharmacyCompounding/default.htm.
    For questions relating to this notice: Monica R. Vega, Office of 
Financial Management, Food and Drug Administration, 8455 Colesville 
Rd., COLE-14202J, Silver Spring, MD 20993-0002, 301-796-2127.

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, created a new section 503B in 
the FD&C Act (21 U.S.C. 353b). Under section 503B of the FD&C Act, 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 the conditions of 
section 503B are met, a drug compounded by or under the direct 
supervision of a licensed pharmacist in an outsourcing facility is 
exempt from three 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; (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); and (3) section 582 (21 
U.S.C. 360eee-1) concerning drug supply chain security requirements. 
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 
requirements 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: (1) An annual establishment fee from each outsourcing 
facility and (2) a re-inspection fee from each outsourcing facility 
subject to a re-inspection (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).
    FDA announced in the Federal Register of November 24, 2014 (79 FR 
69856), the availability of a final guidance for industry entitled 
``Fees for Human Drug Compounding Outsourcing Facilities Under Sections 
503B and 744K of the FD&C Act.'' The guidance provides additional 
information on the annual fees for outsourcing facilities and 
adjustments required by law, re-inspection 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 
guidance can be accessed on FDA's Web site at: http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/UCM391102.pdf.

II. Fees for FY 2017

A. Methodology for Calculating FY 2017 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-payroll costs for the first three of the four previous fiscal 
years. 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 three of the four previous fiscal years (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 fiscal year to determine the 
average PC&B per FTE.
    Table 1 summarizes the actual cost and FTE data for the specified 
fiscal years, and provides the percent change from the previous fiscal 
year and the average percent change over the first three of the four 
fiscal years preceding FY 2017. The 3-year average is 1.8759 percent.

[[Page 50529]]



                                 Table 1--FDA PC&Bs Each Year and Percent Change
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             Fiscal year                     2013               2014               2015          3-Year average
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Total PC&B..........................     $1,927,703,000     $2,054,937,000     $2,232,304,000  .................
Total FTE...........................             13,974             14,555             15,484  .................
PC&B per FTE........................           $137,949           $141,184           $144,168  .................
Percent change from previous year...            1.1690%            2.3451%            2.1136%            1.8759%
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    Section 744K(c)(2)(A)(ii) of the FD&C Act specifies that this 
1.8759 percent should be multiplied by the proportion of PC&B to total 
costs of an average FDA FTE for the same three fiscal years.

                      Table 2--FDA PC&Bs as a Percent of FDA Total Costs of an Average FTE
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             Fiscal year                     2013               2014               2015          3-Year average
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Total PC&B..........................     $1,927,703,000     $2,054,937,000     $2,232,304,000  .................
Total Costs.........................     $4,151,343,000     $4,298,476,000     $4,510,565,000  .................
PC&B Percent........................           46.4356%           47.8062%           49.4906%           47.9108%
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    The payroll adjustment is 1.8759 percent multiplied by 47.9108 
percent, or 0.8988 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 2017 
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 non-PC&B costs to total costs of an average FDA FTE for the same 
period.
    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: http://data.bls.gov/cgi-bin/surveymost?cu. The data can be viewed by checking 
the box marked ``U.S. All items, 1982-84=100--CUUR0000SA0'' and then 
selecting ``Retrieve Data''.

                   Table 3--Annual and 3-Year Average Percent Change in U.S. City Average CPI
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                Year                         2013               2014               2015          3-Year average
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Annual CPI..........................            232.957            236.736            237.017  .................
Annual Percent Change...............            1.4648%            1.6222%            0.1187%            1.0686%
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    Section 744K(c)(2)(A)(iii) of the FD&C Act specifies that this 
1.0686 percent should be multiplied by the proportion of all non-PC&B 
costs to total costs of an average FTE for the same three fiscal years. 
The proportion of all non-PC&B costs to total costs of an average FDA 
FTE for FYs 2013 to 2015 is 52.0892 percent (100 percent - 47.9108 
percent = 52.0892 percent). Therefore, the non-pay adjustment is 1.0686 
percent times 52.0892 percent, or 0.5566 percent.
    The PC&B component (0.8988 percent) is added to the non-PC&B 
component (0.5566 percent), for a total inflation adjustment of 1.4554 
percent (rounded). Section 744K(c)(2)(A)(i) of the FD&C Act specifies 
that one is added to that figure, making the inflation adjustment 
1.014554.
    Section 744K(c)(2)(B) of the FD&C Act provides for this inflation 
adjustment to be compounded after FY 2015. This factor for FY 2017 
(1.4554 percent) is compounded by adding one to it, and then 
multiplying it by one plus the inflation adjustment factor for FY 2016 
(4.0646 percent), as published in the Federal Register of August 3, 
2015 (80 FR 46007). The result of this multiplication of the inflation 
factors for the 2 years since FY 2015 (1.014554 x 1.040646) becomes the 
inflation adjustment for FY 2017. For FY 2017, the inflation adjustment 
is 5.5792 percent (rounded). We then add one, making the FY 2017 
inflation adjustment factor 1.055792.
2. Small Business Adjustment Factor
    Section 744K(c)(3) of the FD&C Act specifies that in addition to 
the inflation 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) of the FD&C Act 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 amount that FDA would have collected if no entity 
qualified for the small business exception in section 744K(c)(4) of the 
FD&C Act. Additionally, section 744K(c)(5)(A) states that in 
establishing the small business adjustment factor for a fiscal year, 
FDA shall provide for the crediting of fees from the previous year to 
the next year if FDA overestimated the amount of the small business 
adjustment factor for such previous fiscal year.
    Therefore, to calculate the small business adjustment to the 
establishment fee for non-small businesses for FY 2017, FDA must 
estimate: (1) The number of outsourcing facilities that will pay the 
reduced fee for small businesses for FY 2017 and (2) the total fee 
revenue it would have collected if no entity had qualified for the 
small business exception (i.e., if each entity that registers as an 
outsourcing facility for FY 2017 were to pay the inflation-adjusted fee 
amount of $15,837).
    With respect to (1), FDA estimates that seven entities will qualify 
for small business exceptions and will pay the reduced fee for FY 2017. 
With respect to (2), to estimate the total number of entities that will 
register as outsourcing facilities for FY 2017, FDA used data

[[Page 50530]]

submitted by outsourcing facilities through the voluntary registration 
process, which began in December 2013. Accordingly, FDA estimates that 
72 outsourcing facilities, including seven small businesses, will be 
registered with FDA in FY 2017.
    If the projected 72 outsourcing facilities paid the full inflation-
adjusted fee of $15,837, this would result in total revenue of 
$1,140,264 in FY 2017 ($15,837 x 72). However, seven of the entities 
that are expected to register as outsourcing facilities for FY 2017 are 
projected to qualify for the small business exception and to pay one-
third of the full fee ($5,279 x 7), totaling $36,953 instead of paying 
the full fee ($15,837 x 7), which would total $110,859. This would 
leave a potential shortfall of $73,906 ($110,859 - $36,953).
    Additionally, section 744K(c)(5)(A) of the FD&C Act states that in 
establishing the small business adjustment factor for a fiscal year, 
FDA shall provide for the crediting of fees from the previous year to 
the next year if FDA overestimated the amount of the small business 
adjustment factor for such previous fiscal year. FDA has determined 
that it is appropriate to credit excess fees collected from the last 
completed fiscal year, due to the inability to conclusively determine 
the amount of excess fees from the fiscal year that is in progress at 
the time this calculation is made. This crediting is done by comparing 
the small business adjustment factor for the last completed fiscal 
year, FY 2015 ($1,134), to what would have been the small business 
adjustment factor for FY 2015 ($324) if FDA had estimated perfectly.
    The calculation for what the small business adjustment would have 
been if FDA had estimated perfectly begins by determining the total 
target collections (15,000 x [inflation adjustment factor] x [number of 
registrants]). For the most recent complete fiscal year, FY 2015, this 
was $995,020 ($15,308 x 65). The actual FY 2015 revenue from the 65 
total registrants (i.e., 63 registrants paying FY 2015 non-small 
business establishment fee and two small business registrants) paying 
establishment fees is $974,610. $974,610 is calculated as follows: [FY 
2015 Non-Small Business Establishment Fee] x [total number of 
registrants in FY 2015 paying Non-Small Business Establishment Fee] + 
[FY 2015 Small Business Establishment Fee] x [total number of small 
business registrants in FY 2015 paying Small Business Establishment 
Fee]. $15,308 x 63 + $5,103 x 2 = $974,610. This left a shortfall of 
$20,410 from the estimated total target collection amount ($995,020 - 
$974,610). $20,410 divided by the total number of registrants in FY 
2015 paying Standard Establishment Fee (63) equals $324.
    The difference between the small business adjustment factor used in 
FY 2015 and the small business adjustment factor that would have been 
used had FDA estimated perfectly, is $810 ($1,134 - $324). The $810 is 
then multiplied by the number of actual registrants who paid the 
standard fee for FY 2015 (63), which provides us a total excess 
collection of $51,025 (rounded down to the nearest $5) in FY 2015.
    When calculating the small business adjustment factor for FY 2016, 
FDA estimated the excess collection for FY 2015 because that fiscal 
year was not complete.\1\ FDA estimated that the excess collection 
would be $43,094 and credited that amount to the fee calculation for FY 
2016. The difference between the estimated excess collection applied as 
a credit to FY 2016 revenue ($43,094) and the actual excess collection 
of $51,025 results in a small business adjustment credit for FY 2017 of 
$7,931 ($51,025 - $43,094).
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    \1\ FDA intends to eliminate this adjustment step from the 
calculation going forward by crediting fees from the most recent 
completed fiscal year.
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    Therefore, to calculate the small business adjustment factor for FY 
2017, FDA subtracts $7,931 from the projected shortfall of $73,906 for 
FY 2017 to arrive at the numerator for the small business adjustment 
amount, which equals $65,975. This number divided by 65 (the number of 
expected non-small businesses for FY 2017) is the small business 
adjustment amount for FY 2017, which is $1,015.

B. FY 2017 Rates for Small Business Establishment Fee, Non-Small 
Business Establishment Fee, and Re-Inspection Fee

1. Establishment Fee for Qualified Small Businesses \2\
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    \2\ To qualify for a small business reduction of the FY 2017 
establishment fee, entities had to submit their exception requests 
by April 30, 2016. See section 744K(c)(4)(B) of the FD&C Act. 
Although the time for requesting a small business exception for FY 
2017 has now passed, an entity that wishes to request a small 
business exception for FY 2018 should consult section 744K(c)(4) of 
the FD&C Act and section III.D of FDA's 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) of the FD&C Act). The inflation adjustment factor for FY 2017 
is 1.055792. See section II.A.1 for the methodology used to calculate 
the FY 2017 inflation adjustment factor. Therefore, the establishment 
fee for a qualified small business for FY 2017 is one third of $15,837, 
which equals $5,279 (rounded to the nearest dollar).
2. Establishment Fee for Non-Small Businesses
    Under section 744K(c) of the FD&C Act, the amount of the 
establishment fee for a non-small business 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, and 
plus or minus an adjustment factor to account for over- or under-
collections due to the small business adjustment factor in the prior 
year. The inflation adjustment factor for FY 2017 is 1.055792. The 
small business adjustment amount for FY 2017 is $1,015. See section 
II.A.2 for the methodology used to calculate the small business 
adjustment factor for FY 2017. Therefore, the establishment fee for a 
non-small business for FY 2017 is $15,000 multiplied by 1.055792 plus 
$1,015, which equals $16,852 (rounded to the nearest dollar).
3. Re-Inspection Fee
    Section 744K(c)(1)(B) of the FD&C Act provides that the amount of 
the FY 2017 re-inspection fee is equal to $15,000, multiplied by the 
inflation adjustment factor for that fiscal year. The inflation 
adjustment factor for FY 2017 is 1.055792. Therefore, the re-inspection 
fee for FY 2017 is $15,000 multiplied by 1.055792, which equals $15,837 
(rounded to the nearest dollar). There is no reduction in this fee for 
small businesses.

C. Summary of FY 2017 Fee Rates

                   Table 4--Outsourcing Facility Fees
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Qualified Small Business Establishment Fee...................     $5,279
Non-Small Business Establishment Fee.........................     16,852
Re-inspection Fee............................................     15,837
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III. Fee Payment Options and Procedures

A. Establishment Fee

    Once an entity submits registration information and FDA has 
determined that the information 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

[[Page 50531]]

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 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 outsourcing facilities pay all 
fees immediately upon receiving an invoice. If an entity does not pay 
the full invoiced amount within 15 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 2016 and wish to 
maintain their status as an outsourcing facility in FY 2017 must 
register during the annual registration period that lasts from October 
1, 2016, to December 31, 2016. Failure to register and complete payment 
by December 31, 2016, will result in a loss of status as an outsourcing 
facility on January 1, 2017. Entities should submit their registration 
information no later than December 10, 2016, to allow enough time for 
review of the registration information, invoicing, and payment of fees 
before the end of the registration period.

B. Re-Inspection Fee

    FDA will issue invoices for each re-inspection after the conclusion 
of the re-inspection, via email to the email address indicated in the 
registration file or via regular mail if email is not an option. 
Invoices must be paid within 30 days.

C. Fee Payment Procedures

    1. The preferred payment method is online using electronic check 
(Automated Clearing House (ACH) also known as eCheck) or credit card 
(Discover, VISA, MasterCard, American Express). Secure electronic 
payments can be submitted using the User Fees Payment Portal at https://userfees.fda.gov/pay. Once you search for your invoice, click ``Pay 
Now'' to be redirected to Pay.gov. Note that electronic payment options 
are based on the balance due. Payment by credit card is available for 
balances less than $25,000. If the balance exceeds this amount, only 
the ACH option is available. Payments must be drawn on U.S bank 
accounts as well as U.S. credit cards.
    2. 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 
979033, St. Louis, MO 63197-9000. 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 979033, 1005 Convention Plaza, St. 
Louis, MO 63101. (Note: This U.S. Bank address is for courier delivery 
only. If you have any questions concerning courier delivery contact the 
U.S. Bank at 314-418-4013).
    3. 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 Rd., 14th Floor, Silver Spring, MD 
20993-0002. 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 27, 2016.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2016-18093 Filed 7-29-16; 8:45 am]
 BILLING CODE 4164-01-P


