81 FR 50528 - Outsourcing Facility Fee Rates for Fiscal Year 2017

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration

Federal Register Volume 81, Issue 147 (August 1, 2016)

Page Range		50528-50531
FR Document		2016-18093
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.
Federal Register, Volume 81 Issue 147 (Monday, August 1, 2016)
[Federal Register Volume 81, Number 147 (Monday, August 1, 2016)]
[Notices]
[Pages 50528-50531]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-18093]


-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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
----------------------------------------------------------------------------------------------------------------
             Fiscal year                     2013               2014               2015          3-Year average
----------------------------------------------------------------------------------------------------------------
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%
----------------------------------------------------------------------------------------------------------------

    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
----------------------------------------------------------------------------------------------------------------
             Fiscal year                     2013               2014               2015          3-Year average
----------------------------------------------------------------------------------------------------------------
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%
----------------------------------------------------------------------------------------------------------------

    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
----------------------------------------------------------------------------------------------------------------
                Year                         2013               2014               2015          3-Year average
----------------------------------------------------------------------------------------------------------------
Annual CPI..........................            232.957            236.736            237.017  .................
Annual Percent Change...............            1.4648%            1.6222%            0.1187%            1.0686%
----------------------------------------------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \1\ FDA intends to eliminate this adjustment step from the 
calculation going forward by crediting fees from the most recent 
completed fiscal year.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Qualified Small Business Establishment Fee...................     $5,279
Non-Small Business Establishment Fee.........................     16,852
Re-inspection Fee............................................     15,837
------------------------------------------------------------------------

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
50528 Federal Register / Vol. 81, No. 147 / Monday, August 1, 2016 / Notices

paying the fee would be the party that FDA to assess and collect an annual section 501(a)(2)(B) of the FD&C Act (21
received the recall order. establishment fee from outsourcing U.S.C. 351(a)(2)(B)) concerning current
facilities, as well as a re-inspection fee good manufacturing practice
C. How much will this fee be?
for each re-inspection of an outsourcing requirements for drugs.
The fee is based on the number of facility. This document establishes the Section 744K of the FD&C Act (21
direct hours spent on taking action in FY 2017 rates for the small business U.S.C. 379j–62) authorizes FDA to
response to the firm’s failure to comply establishment fee ($5,279), the non- assess and collect the following fees
with a recall order. Types of activities small business establishment fee associated with outsourcing facilities:
could include conducting recall audit ($16,852), and the re-inspection fee (1) An annual establishment fee from
checks, reviewing periodic status ($15,837) for outsourcing facilities; each outsourcing facility and (2) a re-
reports, analyzing the status reports and provides information on how the fees inspection fee from each outsourcing
the results of the audit checks, for FY 2017 were determined; and facility subject to a re-inspection (see
conducting inspections, traveling to and describes the payment procedures section 744K(a)(1) of the FD&C Act).
from locations, and monitoring product outsourcing facilities should follow. Under statutorily defined conditions, a
disposition. The direct hours spent on These fee rates are effective October 1, qualified applicant may pay a reduced
each such recall will be billed at the 2016, and will remain in effect through small business establishment fee (see
appropriate hourly rate shown in table September 30, 2017. section 744K(c)(4) of the FD&C Act).
2 of this document. FDA announced in the Federal
FOR FURTHER INFORMATION CONTACT: For
Register of November 24, 2014 (79 FR
V. How must the fees be paid? more information on human drug
69856), the availability of a final
An invoice will be sent to the compounding and outsourcing facility
guidance for industry entitled ‘‘Fees for
responsible party for paying the fee after fees, visit FDA’s Web site at: http://
Human Drug Compounding Outsourcing
FDA completes the work on which the www.fda.gov/Drugs/Guidance
Facilities Under Sections 503B and
invoice is based. Payment must be made ComplianceRegulatoryInformation/ 744K of the FD&C Act.’’ The guidance
within 90 days of the invoice date in PharmacyCompounding/default.htm. provides additional information on the
U.S. currency by check, bank draft, or For questions relating to this notice: annual fees for outsourcing facilities
U.S. postal money order payable to the Monica R. Vega, Office of Financial and adjustments required by law, re-
order of the Food and Drug Management, Food and Drug inspection fees, how to submit payment,
Administration. Detailed payment Administration, 8455 Colesville Rd., the effect of failure to pay fees, and how
information will be included with the COLE–14202J, Silver Spring, MD to qualify as a small business to obtain
invoice when it is issued. 20993–0002, 301–796–2127. a reduction of the annual establishment
SUPPLEMENTARY INFORMATION: fee. This guidance can be accessed on
VI. What are the consequences of not FDA’s Web site at: http://www.fda.gov/
paying these fees? I. Background
downloads/Drugs/GuidanceCompliance
Under section 743(e)(2) of the FD&C On November 27, 2013, President RegulatoryInformation/Guidances/
Act, any fee that is not paid within 30 Obama signed the Drug Quality and UCM391102.pdf.
days after it is due shall be treated as a Security Act (DQSA), legislation that
claim of the U.S. Government subject to contains important provisions relating II. Fees for FY 2017
provisions of subchapter II of chapter 37 to the oversight of compounding of A. Methodology for Calculating FY 2017
of title 31, United States Code. human drugs. Title I of this law, the Adjustment Factors
Compounding Quality Act, created a
Dated: July 27, 2016. 1. Inflation Adjustment Factor
new section 503B in the FD&C Act (21
Leslie Kux,
U.S.C. 353b). Under section 503B of the Section 744K(c)(2) of the FD&C Act
Associate Commissioner for Policy. FD&C Act, a human drug compounder specifies the annual inflation
[FR Doc. 2016–18089 Filed 7–29–16; 8:45 am] can become an ‘‘outsourcing facility.’’ adjustment for outsourcing facility fees.
BILLING CODE 4164–01–P Outsourcing facilities, as defined in The inflation adjustment has two
section 503B(d)(4) of the FD&C Act, are components: One based on FDA’s
facilities that meet all of the conditions payroll costs and one based on FDA’s
DEPARTMENT OF HEALTH AND described in section 503B(a), including non-payroll costs for the first three of
HUMAN SERVICES registering with FDA as an outsourcing the four previous fiscal years. The
facility and paying an annual payroll component of the annual
Food and Drug Administration
establishment fee. If the conditions of inflation adjustment is calculated by
[Docket No. FDA–2016–N–0007] section 503B are met, a drug taking the average change in the FDA’s
compounded by or under the direct per-full time equivalent (FTE) personnel
Outsourcing Facility Fee Rates for supervision of a licensed pharmacist in compensation and benefits (PC&B) in
Fiscal Year 2017 an outsourcing facility is exempt from the first three of the four previous fiscal
AGENCY: Food and Drug Administration, three sections of the FD&C Act: (1) years (see section 744K(c)(2)(A)(ii) of
HHS. Section 502(f)(1) (21 U.S.C. 352(f)(1)) the FD&C Act). FDA’s total annual
ACTION: Notice. concerning the labeling of drugs with spending on PC&B is divided by the
adequate directions for use; (2) section total number of FTEs per fiscal year to
SUMMARY: The Food and Drug 505 (21 U.S.C. 355) concerning the determine the average PC&B per FTE.
Administration (FDA) is announcing the approval of human drug products under Table 1 summarizes the actual cost
sradovich on DSK3GMQ082PROD with NOTICES

fiscal year (FY) 2017 rates for the new drug applications (NDAs) or and FTE data for the specified fiscal
establishment and re-inspection fees abbreviated new drug applications years, and provides the percent change
related to entities that compound (ANDAs); and (3) section 582 (21 U.S.C. from the previous fiscal year and the
human drugs and elect to register as 360eee–1) concerning drug supply chain average percent change over the first
outsourcing facilities under the Federal security requirements. Drugs three of the four fiscal years preceding
Food, Drug, and Cosmetic Act (the compounded in outsourcing facilities FY 2017. The 3-year average is 1.8759
FD&C Act). The FD&C Act authorizes are not exempt from the requirements of percent.

VerDate Sep<11>2014 20:16 Jul 29, 2016 Jkt 238001 PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 E:\FR\FM\01AUN1.SGM 01AUN1
Federal Register / Vol. 81, No. 147 / Monday, August 1, 2016 / Notices 50529

TABLE 1—FDA PC&BS EACH YEAR AND PERCENT CHANGE
Fiscal year 2013 2014 2015 3-Year average

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%

Section 744K(c)(2)(A)(ii) of the FD&C of PC&B to total costs of an average FDA
Act specifies that this 1.8759 percent FTE for the same three fiscal years.
should be multiplied by the proportion

TABLE 2—FDA PC&BS AS A PERCENT OF FDA TOTAL COSTS OF AN AVERAGE FTE
Fiscal year 2013 2014 2015 3-Year average

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%

The payroll adjustment is 1.8759 (U.S. City Average; Not Seasonally CPI for U.S. cities. These data are
percent multiplied by 47.9108 percent, Adjusted; All items; Annual Index) for published by the Bureau of Labor
or 0.8988 percent. the first 3 years of the preceding 4 years Statistics and can be found on its Web
Section 744K(c)(2)(A)(iii) of the FD&C of available data, multiplied by the site: http://data.bls.gov/cgi-bin/
Act specifies that the portion of the proportion of all non-PC&B costs to total surveymost?cu. The data can be viewed
inflation adjustment for non-payroll costs of an average FDA FTE for the by checking the box marked ‘‘U.S. All
costs for FY 2017 is equal to the average same period. items, 1982–84=100—CUUR0000SA0’’
annual percent change in the Consumer Table 2 provides the summary data and then selecting ‘‘Retrieve Data’’.
Price Index (CPI) for urban consumers for the percent change in the specified

TABLE 3—ANNUAL AND 3-YEAR AVERAGE PERCENT CHANGE IN U.S. CITY AVERAGE CPI
Year 2013 2014 2015 3-Year average

Annual CPI ............................................................................... 232.957 236.736 237.017 ..............................
Annual Percent Change .......................................................... 1.4648% 1.6222% 0.1187% 1.0686%

Section 744K(c)(2)(A)(iii) of the FD&C Federal Register of August 3, 2015 (80 the small business adjustment factor for
Act specifies that this 1.0686 percent FR 46007). The result of this a fiscal year, FDA shall provide for the
should be multiplied by the proportion multiplication of the inflation factors for crediting of fees from the previous year
of all non-PC&B costs to total costs of an the 2 years since FY 2015 (1.014554 × to the next year if FDA overestimated
average FTE for the same three fiscal 1.040646) becomes the inflation the amount of the small business
years. The proportion of all non-PC&B adjustment for FY 2017. For FY 2017, adjustment factor for such previous
costs to total costs of an average FDA the inflation adjustment is 5.5792 fiscal year.
FTE for FYs 2013 to 2015 is 52.0892 percent (rounded). We then add one, Therefore, to calculate the small
percent (100 percent ¥ 47.9108 percent making the FY 2017 inflation business adjustment to the
= 52.0892 percent). Therefore, the non- adjustment factor 1.055792. establishment fee for non-small
pay adjustment is 1.0686 percent times businesses for FY 2017, FDA must
52.0892 percent, or 0.5566 percent. 2. Small Business Adjustment Factor
estimate: (1) The number of outsourcing
The PC&B component (0.8988 Section 744K(c)(3) of the FD&C Act facilities that will pay the reduced fee
percent) is added to the non-PC&B specifies that in addition to the inflation for small businesses for FY 2017 and (2)
component (0.5566 percent), for a total adjustment factor, the establishment fee the total fee revenue it would have
inflation adjustment of 1.4554 percent for non-small businesses is to be further collected if no entity had qualified for
(rounded). Section 744K(c)(2)(A)(i) of adjusted for a small business adjustment the small business exception (i.e., if
the FD&C Act specifies that one is factor. Section 744K(c)(3)(B) of the each entity that registers as an
added to that figure, making the FD&C Act provides that the small outsourcing facility for FY 2017 were to
inflation adjustment 1.014554. business adjustment factor is the pay the inflation-adjusted fee amount of
Section 744K(c)(2)(B) of the FD&C Act adjustment to the establishment fee for $15,837).
sradovich on DSK3GMQ082PROD with NOTICES

provides for this inflation adjustment to non-small businesses that is necessary With respect to (1), FDA estimates
be compounded after FY 2015. This to achieve total fees equaling the that seven entities will qualify for small
factor for FY 2017 (1.4554 percent) is amount that FDA would have collected business exceptions and will pay the
compounded by adding one to it, and if no entity qualified for the small reduced fee for FY 2017. With respect
then multiplying it by one plus the business exception in section 744K(c)(4) to (2), to estimate the total number of
inflation adjustment factor for FY 2016 of the FD&C Act. Additionally, section entities that will register as outsourcing
(4.0646 percent), as published in the 744K(c)(5)(A) states that in establishing facilities for FY 2017, FDA used data

VerDate Sep<11>2014 20:16 Jul 29, 2016 Jkt 238001 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 E:\FR\FM\01AUN1.SGM 01AUN1
50530 Federal Register / Vol. 81, No. 147 / Monday, August 1, 2016 / Notices

submitted by outsourcing facilities total target collection amount ($995,020 744K(c)(4)(A) and (c)(1)(A) of the FD&C
through the voluntary registration ¥ $974,610). $20,410 divided by the Act). The inflation adjustment factor for
process, which began in December 2013. total number of registrants in FY 2015 FY 2017 is 1.055792. See section II.A.1
Accordingly, FDA estimates that 72 paying Standard Establishment Fee (63) for the methodology used to calculate
outsourcing facilities, including seven equals $324. the FY 2017 inflation adjustment factor.
small businesses, will be registered with The difference between the small Therefore, the establishment fee for a
FDA in FY 2017. business adjustment factor used in FY qualified small business for FY 2017 is
If the projected 72 outsourcing 2015 and the small business adjustment one third of $15,837, which equals
facilities paid the full inflation-adjusted factor that would have been used had $5,279 (rounded to the nearest dollar).
fee of $15,837, this would result in total FDA estimated perfectly, is $810 ($1,134
revenue of $1,140,264 in FY 2017 ¥ $324). The $810 is then multiplied by 2. Establishment Fee for Non-Small
($15,837 × 72). However, seven of the the number of actual registrants who Businesses
entities that are expected to register as paid the standard fee for FY 2015 (63), Under section 744K(c) of the FD&C
outsourcing facilities for FY 2017 are which provides us a total excess Act, the amount of the establishment fee
projected to qualify for the small collection of $51,025 (rounded down to for a non-small business is equal to
business exception and to pay one-third the nearest $5) in FY 2015. $15,000 multiplied by the inflation
of the full fee ($5,279 × 7), totaling When calculating the small business adjustment factor for that fiscal year,
$36,953 instead of paying the full fee adjustment factor for FY 2016, FDA plus the small business adjustment
($15,837 × 7), which would total estimated the excess collection for FY factor for that fiscal year, and plus or
$110,859. This would leave a potential 2015 because that fiscal year was not minus an adjustment factor to account
shortfall of $73,906 ($110,859 ¥ complete.1 FDA estimated that the for over- or under-collections due to the
$36,953). excess collection would be $43,094 and small business adjustment factor in the
Additionally, section 744K(c)(5)(A) of credited that amount to the fee prior year. The inflation adjustment
the FD&C Act states that in establishing calculation for FY 2016. The difference factor for FY 2017 is 1.055792. The
the small business adjustment factor for between the estimated excess collection small business adjustment amount for
a fiscal year, FDA shall provide for the applied as a credit to FY 2016 revenue FY 2017 is $1,015. See section II.A.2 for
crediting of fees from the previous year ($43,094) and the actual excess the methodology used to calculate the
to the next year if FDA overestimated collection of $51,025 results in a small small business adjustment factor for FY
the amount of the small business business adjustment credit for FY 2017 2017. Therefore, the establishment fee
adjustment factor for such previous of $7,931 ($51,025 ¥ $43,094). for a non-small business for FY 2017 is
fiscal year. FDA has determined that it Therefore, to calculate the small $15,000 multiplied by 1.055792 plus
is appropriate to credit excess fees business adjustment factor for FY 2017, $1,015, which equals $16,852 (rounded
collected from the last completed fiscal FDA subtracts $7,931 from the projected to the nearest dollar).
year, due to the inability to conclusively shortfall of $73,906 for FY 2017 to arrive
3. Re-Inspection Fee
determine the amount of excess fees at the numerator for the small business
from the fiscal year that is in progress adjustment amount, which equals Section 744K(c)(1)(B) of the FD&C Act
at the time this calculation is made. $65,975. This number divided by 65 provides that the amount of the FY 2017
This crediting is done by comparing the (the number of expected non-small re-inspection fee is equal to $15,000,
small business adjustment factor for the businesses for FY 2017) is the small multiplied by the inflation adjustment
last completed fiscal year, FY 2015 business adjustment amount for FY factor for that fiscal year. The inflation
($1,134), to what would have been the 2017, which is $1,015. adjustment factor for FY 2017 is
small business adjustment factor for FY 1.055792. Therefore, the re-inspection
B. FY 2017 Rates for Small Business fee for FY 2017 is $15,000 multiplied by
2015 ($324) if FDA had estimated Establishment Fee, Non-Small Business
perfectly. 1.055792, which equals $15,837
Establishment Fee, and Re-Inspection (rounded to the nearest dollar). There is
The calculation for what the small
Fee no reduction in this fee for small
business adjustment would have been if
FDA had estimated perfectly begins by 1. Establishment Fee for Qualified Small businesses.
determining the total target collections Businesses 2 C. Summary of FY 2017 Fee Rates
(15,000 × [inflation adjustment factor] × The amount of the establishment fee
[number of registrants]). For the most for a qualified small business fee is TABLE 4—OUTSOURCING FACILITY
recent complete fiscal year, FY 2015, equal to $15,000 multiplied by the
this was $995,020 ($15,308 × 65). The
FEES
inflation adjustment factor for that fiscal
actual FY 2015 revenue from the 65 year, divided by three (see section Qualified Small Business Estab-
total registrants (i.e., 63 registrants lishment Fee ............................. $5,279
paying FY 2015 non-small business 1 FDAintends to eliminate this adjustment step Non-Small Business Establish-
establishment fee and two small from the calculation going forward by crediting fees ment Fee ................................... 16,852
business registrants) paying from the most recent completed fiscal year. Re-inspection Fee ........................ 15,837
2 To qualify for a small business reduction of the
establishment fees is $974,610. $974,610
FY 2017 establishment fee, entities had to submit
is calculated as follows: [FY 2015 Non- their exception requests by April 30, 2016. See III. Fee Payment Options and
Small Business Establishment Fee] × section 744K(c)(4)(B) of the FD&C Act. Although the Procedures
[total number of registrants in FY 2015 time for requesting a small business exception for
paying Non-Small Business FY 2017 has now passed, an entity that wishes to A. Establishment Fee
sradovich on DSK3GMQ082PROD with NOTICES

request a small business exception for FY 2018
Establishment Fee] + [FY 2015 Small should consult section 744K(c)(4) of the FD&C Act
Once an entity submits registration
Business Establishment Fee] × [total and section III.D of FDA’s guidance for industry information and FDA has determined
number of small business registrants in entitled ‘‘Fees for Human Drug Compounding that the information is complete, the
FY 2015 paying Small Business Outsourcing Facilities Under Sections 503B and entity will incur the annual
744K of the FD&C Act,’’ which can be accessed on
Establishment Fee]. $15,308 × 63 + FDA’s Web site at http://www.fda.gov/downloads/
establishment fee. FDA will send an
$5,103 × 2 = $974,610. This left a drugs/guidancecomplianceregulatoryinformation/ invoice to the entity, via email to the
shortfall of $20,410 from the estimated guidances/ucm391102.pdf. email address indicated in the

VerDate Sep<11>2014 20:16 Jul 29, 2016 Jkt 238001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\01AUN1.SGM 01AUN1
Document Created: 2016-07-30 06:25:49
Document Modified: 2016-07-30 06:25:49
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Notice.
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.
FR Citation		81 FR 50528
81 FR 50528 - Outsourcing Facility Fee Rates for Fiscal Year 2017

DEPARTMENT OF HEALTH AND HUMAN SERVICESFood and Drug Administration

Federal Register Volume 81, Issue 147 (August 1, 2016)

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
