Medical Device Daily Washington Editor

WASHINGTON — As FDA and industry work on the device user fee schedule for FY08, the Government Accountability Office (GAO) reported on its analysis of the current threshold for small business status under the device user fee program, the current version of which will expire at the end of September.

The original threshold for eligibility to participate in the small business fee program — set by the Medical Device User Fee and Modernization Act of 2002 — was for companies grossing $30 million or less per year, but the Medical Device User Fee Stabilization Act of 2005 pushed that threshold to $100 million in annual revenues.

The March 30 GAO letter, addressed to Rep. Joe Barton (R-Texas), ranking minority member of the House Energy and Commerce Committee, notes that the report was offered to assist Congress in determining "whether changes to the threshold for small business qualification are needed."

The GAO numbers indicate that in FY06, about 95% of the 697 firms that applied and qualified for the small business fee reduction had receipts of less than $30 million, and all but six of the remaining 41 companies had grossed less than $70 million.

On the other side of the GAO analysis, 155 of the 258 publicly traded companies that were denied the small business relief "had annual revenues that were higher than $500 million." But 56 companies that took in less than $100 million were refused.

GAO said that it did not "determine why these companies were not qualified." In its qualifying procedures, FDA typically analyzes whether an applicant firm is a subsidiary of a larger organization whose receipts would disqualify the parent firm.

Ed Ludwig, president/CEO of Becton-Dickinson (Franklin Lakes, New Jersey) and chairman of the board of the Advanced Medical Technology Association (AdvaMed; Washington), said recently that the agency and industry representatives had forged an agreement in principal on user fees for FY08, but the agency has yet to publish the proposed fee schedule (Medical Device Daily, Feb. 28).

Mark Leahey, executive director of the Medical Device Manufacturers Association (MDMA; Washington), told Medical Device Daily that the report "indicates that some of the concerns raised over the threshold" have not played out in terms of reducing the agency's ability to collect user fees, but the boost in the threshold "has had a big impact on firms."

He added that "it was good public policy to increase the threshold" for the exemption.

At press time, the agency had not responded to calls for comment, but Lisa Miller, a member of the minority staff of the Energy and Commerce Committee, told MDD that the committee would hold hearings on the PDUFA small business limits after the Easter break.

One of the still-outstanding issues in negotiations between the agency and industry may be that of a fee "trigger."

MDUFMA required Congress to appropriate a certain level of funding specifically to the Center for Devices and Radiological Health (CDRH) before the agency could collect user fees from device makers. In recent testimony to the Senate Health, Education, Labor and Pensions (HELP) Committee, FDA chief Andrew von Eschenbach discussed the drug user fee program and apparently mentioned the device user fee program during his testimony.

In a March 21 letter to von Eschenbach, Sen. Orrin Hatch (R-Utah), a member of the HELP Committee, wrote that the FDA chief had erroneously stated that "the medical device industry has always operated under a Food and Drug Administration-wide appropriations trigger."

Hatch noted that he was under the impression that the House Appropriations Committee had always tied device user fees to funds appropriated specifically for CDRH and that "a trigger linked to agency-wide funding could cause device companies to subsidize shortfalls in other areas of the agency." Hatch added that while "there may be a spending trigger in the FDA's preferred version of a MDUFMA agreement, I do not believe that it alone provides the same guarantee to industry that the current appropriations trigger does."

NIH ethics cases reopened

Congressional dissatisfaction with the resolution of ethics investigations of more than 100 NIH scientists has bubbled to the surface, and the Office of Inspector General (OIG) at the Department of Health and Human Services recently reported that it will take another look at those cases.

Daniel Levinson, the inspector general at HHS, also said in a March 23 letter to Rep. John Dingell (D-Michigan), the chairman of the House Energy and Commerce Committee, that his office will sponsor "a Conflict-of-Interest Summit on May 30," an event that he said will draw attendance from several agencies as well as the Department of Justice, and will provoke "robust discussion of conflict-of-interest issues."

The first round of investigations commenced in 2003 when the committee identified 81 members of NIH's scientific staff and grantees who were working under consulting agreements that were not reported to the committee. NIH's subsequent investigation uncovered another 22 cases, but the NIH investigation cleared 37 of the original 81 cases.

In a statement, Dingell said last week that even if "only a few of those cases result in criminal prosecution, it is clear that NIH bungled the investigation the first time around."

Among the original 103 cases was that of Trey Sunderland, MD, alleged to have taken in more than $280,000 in fees from Pfizer (New York) in connection with thousands of samples of spinal fluid and plasma from Alzheimer's patients that he shipped to the drug maker. Sunderland pleaded the Fifth in a Congressional appearance last year, but then pleaded guilty to criminal conflict of interest in a U.S. district court last December.

According to Levinson, his office has started monthly meetings between its Special Investigations Unit and the various HHS agencies "to discuss individual cases and referrals." OIG has also published a referral form that will "enable OIG investigators and attorneys to quickly determine whether a potential criminal violation exists and to return non-criminal matters to" the agency in question for follow-up.

Levinson also indicated that his office is examining "the way in which NIH oversees conflict-of-interest" for extramural grantees. Because most of NIH appropriated funding is distributed to grantees, and because grantees are not subject to the same federal ethics rules as in-house NIH scientists, "OIG determined that this project was an important next step in examining NIH conflict of interest," according to Levinson.