Final Regulatory Impact Analysis (FRIA)

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration

Requirements for Foreign and Domestic
Establishment Registration and Listing for
Human Drugs, Including Drugs that Are
Regulated Under a Biologics License
Application, and Animal Drugs
Docket No. FDA-2005-N-0464

Final Regulatory Impact Analysis
Final Regulatory Flexibility Analysis
Unfunded Mandates Reform Act Analysis

Economics Staff
Office of Planning
Office of Policy, Planning, Legislation, and Analysis
Office of the Commissioner
August 2016

Table of Contents
I.

Introduction and Summary ..................................................................................................... 3
A.

Introduction ...................................................................................................................... 3

B.

Summary .......................................................................................................................... 4

II.

Regulatory Impact Analysis .................................................................................................... 8
A.

Background and Need for Regulation .............................................................................. 8
1.

Background................................................................................................................... 8

2.

Need for the Rule ........................................................................................................ 10

B.

Response to Comments on the Preliminary Impact Analysis of the Proposed Rule...... 10

C.

Who is Affected? ............................................................................................................ 15

D.

Benefits of the Final Rule............................................................................................... 16

E.

Incremental Costs of the Final Rule ............................................................................... 17
1.
Estimated Impact on Registration and Listing of Drugs and Biological Products
Subject to Part 207................................................................................................................ 18
2.
Estimated Impact on Registration and Listing of Human-Blood Products Subject to
Part 607 ................................................................................................................................ 23
3.
Estimated Impact on Registration and Listing for Human-Cell and Tissue Products
(HCT/P) Subject to Part 1271............................................................................................... 24
4.

Summary of Total Costs.............................................................................................. 25

F. Alternatives to the Final Rule ............................................................................................ 26

G.
III.

1.

Certification of No-Changes and Assignment of NDC Numbers ............................... 26

2.

No New Regulatory Action ......................................................................................... 27
International Effects ....................................................................................................... 27
Regulatory Flexibility Analysis ......................................................................................... 27

A.

Small Part-207 Registrants ............................................................................................. 28

B.

Small Part-607 and Part-1271 Registrants ..................................................................... 29

IV. References............................................................................................................................... 30

I.

Introduction and Summary
A.

Introduction

We have examined the impacts of the final rule under Executive Order 12866, Executive
Order 13563, the Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4). Executive Orders 12866 and 13563 direct us to assess all
costs and benefits of available regulatory alternatives and, when regulation is necessary, to select
regulatory approaches that maximize net benefits (including potential economic, environmental,
public health and safety, and other advantages; distributive impacts; and equity). We have
developed a comprehensive Economic Analysis of Impacts that assesses the impacts of the final
rule. We believe that this final rule is not a significant regulatory action as defined by Executive
Order 12866.
The Regulatory Flexibility Act requires us to analyze regulatory options that would
minimize any significant impact of a rule on small entities. Because the final requirements will
not impose a significant burden on a substantial number of small entities (annualized costs
represent at most, 0.01 percent of sales for small firms, and 0.002 percent for large firms, on
average), we certify that the final rule will not have a significant economic impact on a
substantial number of small entities.
The Unfunded Mandates Reform Act of 1995 (section 202(a)) requires us to prepare a
written statement, which includes an assessment of anticipated costs and benefits, before issuing
"any rule that includes any Federal mandate that may result in the expenditure by State, local,
and tribal governments, in the aggregate, or by the private sector, of $100,000,000 or more
(adjusted annually for inflation) in any one year." The current threshold after adjustment for
3

inflation is $146 million, using the most current (2015) Implicit Price Deflator for the Gross
Domestic Product. This final rule will not result in an expenditure in any year that meets or
exceeds this amount.
B.

Summary

The final rule clarifies and codifies the Congressionally-mandated requirements in the
Food and Drug Administration Amendments Act of 2007 (FDAAA) (Public Law 110-85) and
the Food and Drug Administration Safety and Innovation Act of 2012 (FDASIA), and adds a few
additional requirements to the information needed to list products.
The final rule will affect firms that either register establishments or list products under
the following parts of Title 21 of the Code of Federal Regulations.


Part 207 concerns human drugs, human drugs that are biological products, and animal

drugs; throughout this document we use the terms “part-207 products” when referring to drug
products and “part-207 registrants” when referring to firms required to register or list under this
part.


Part 607 concerns human blood and blood products; throughout this document we use the

terms “part-607 products” when referring to blood and blood products and “part-607 registrants”
when referring to firms required to register or list under this part.


Part 1271 concerns human cells, tissues, and cellular tissue-based products; throughout

this document we use the terms “part-1271 products” when referring to these products and “part1271 registrants” when referring to firms required to register or list under this part.
For part-207 registrants, we estimate the incremental cost of complying with additional
4

requirements beyond what FDAAA and FDASIA require. Most establishments have submitted
registration and listing information electronically since 2009 as required by FDAAA and
implemented largely through guidance FDA published in June 2009. Moreover, FDASIA
requires domestic and foreign registrants to supply additional information including a unique
facility identifier and point of contact email address when registering and listing. Therefore, in
the final regulatory impact analysis we do not include the costs and savings of changing from
paper submissions to electronic submissions of registration and listing information.
Part-207 registrants required to list will incur incremental costs to: (1) submit either the
names and unique facility identifiers (UFIs) of all establishments involved in the production of
each unfinished drug received by the registrant for use in the production of the drug being listed
or the properly assigned and listed NDC for such unfinished drug; (2) list all inactive
ingredients; (3) list legacy products; and (4) certify annually there have been no changes to drugs
listings during the previous year. In addition, all affected firms will spend time to read and
understand the final rule, and to update standard operating procedures (SOPs).
Part-607 and part-1271 registrants will incur the incremental cost to migrate from paper
submissions to electronic submissions. Note that although these registrants are also required to
list their products, they will not incur the annual cost of certifying that there are no changes to
product listings. However, all these affected firms will spend time to read and understand the
final rule, and to update SOPs.
Table 1 summarizes the incremental costs of the final rule. We estimate the one-time
costs will equal $59.7 million and annual recurring costs will equal $0.5 million. Over 10 years,
the annualized costs equal $9 million when calculated using a 7-percent discount rate or $7.5
5

million when calculated using a 3-percent discount rate. The largest cost elements will be for
registrants to read and understand the rule, and to revise SOPs.

Table 1.—Summary of Total Incremental Cost of the Final Rule ($ millions)
Recurring
Total costs
Total costs
One-time
costs
annualized at annualized at
Affected firms
costs
(annual)
7%
3%
Drugs and biological
products (part 207)
$48.9
$0.5
$7.5
$6.2
Human-blood products
(part 607)
$5.1
N/A
$0.7
$0.6
Human-cell and tissue
products (part 1271)
$5.7
N/A
$0.8
$0.7
Total
$59.7
$0.5
$9.0
$7.5
Note: Total costs are annualized over a ten-year horizon. Recurring costs include only annual time costs of
certifying there are no changes to listings; these costs are unique to part 207. All estimated represent rounded
2014 dollars.

By codifying the statutory requirements of FDAAA and FDASIA, the final rule clarifies
and completes the modernization of our electronic registration and listing systems. Thus, the
final rule will improve management of the establishment registration and drug listing
requirements and make these processes more efficient and effective for industry and for us. The
final rule also supports implementation of the electronic prescribing provisions of the Medicare
Prescription Drug Improvement and Modernization Act and the availability of current drug
labeling information through DailyMed, a computerized repository of drug information
maintained by the National Library of Medicine.
Table 1A.—Economic Data: Costs and Benefits Statement
Units

Category

Primary
Estimate

Low
Estimate

High
Estimate

($millions)

($millions)

($millions)

6

Year
Dollars

Discount
Rate

Period
Covered

(percent)

(years)

Notes

Benefits
Annualized
Monetized
$
millions/year
Annualized
Quantified

Qualitative

The final rule will complete and codify modernization of the registration and listing
system, thus allowing FDA to identify establishments, specific drugs or ingredients,
to facilitate recalls or information alerts, and to exercise competent oversight of this
important industry.

Costs
Annualized
Costs
Monetized
$
millions/year

$ 9.0

2014

7

10

$ 7.5

2014

3

10

From:

To:

Annualized
Quantified

Qualitative
Transfers
Federal
Annualized
Monetized
$
millions/year
From/To

7

Recurring
costs
include
only
annual
time costs
of
certifying
there are
no changes
to listings;
these costs
are unique
to part-207
registrants.

Other
Annualized
Monetized
$
millions/year
From/To

From:

To:

Effects
State, Local or Tribal Government: No estimated effect.
Small Business: The final rule will have little impact on small businesses; annualized
costs represent at most, 0.01 percent of annual sales for small firms, and 0.002 percent,
for large firms, on average.

II.

Regulatory Impact Analysis
A.

Background and Need for Regulation

1. Background
FDA maintains databases that include the identification of establishments involved in the
manufacturing; preparation; propagation; compounding or processing of drugs, including the
repacking, relabeling, and salvaging of drugs (human and animal prescription and OTC drugs,
which includes human biological products, as well as active pharmaceutical ingredients). The
databases also identify business operations that take place at each establishment (e.g.,
manufacturing, repacking, or relabeling), and a list of each drug being manufactured prepared,
propagated, compounded, or processed for commercial distribution at each site.
After the proposed rule for establishment registration and drug listing was published in
the Federal Register (August 2006; 71 FR 51276), the Food and Drug Administration
Amendments Act of 2007 (FDAAA) (Public Law 110-85) was adopted into law. FDAAA
requires the electronic submission of establishment registration and drug listing information
unless a waiver is granted. To assist in implementing FDAAA, in June 2009, we announced
8

publication of a guidance for industry on “Providing Regulatory Submissions in Electronic
Format—Drug Establishment Registration and Drug Listing”, adopting a standardized Structured
Product Labeling format with coded data fields (June 1, 2009; 74 FR 26248). FDA began
accepting electronic submission of registration and listing information in June 2009. In addition,
the Food and Drug Administration Safety and Innovation Act (FDASIA), enacted in 2012,
required facilities to supply additional information including a unique facility identifier and point
of contact email address when registering and listing. Based on the foregoing and because
establishments have been submitting their registration and listing information electronically for
over five years, we are not including the costs and savings of changing from paper submissions
to electronic submissions of registration and listing information in the final regulatory impact
analysis. Instead, we will estimate the incremental cost of complying with additional
requirements beyond current practice of what FDAAA and FDASIA require.
When we estimated the costs for the proposed rule, we did not quantify compliance costs
for foreign-based registrants. We determined that the costs to foreign registrants should be
included in the impact analysis of the final rule because of the large number of foreign registrants
and because all foreign registrants are required to have U.S. agents, who may input the
registration and listing information on behalf of their foreign client.
Another significant change from the proposed rule is the assignment of the NDC number.
After considering comments, FDA will leave the assignment of the NDC number as current
practice, which eliminates the projected costs that third parties such as retail pharmacy chains
and prescription benefit managers would have incurred, as well as some costs to the
pharmaceutical industry. In this final rule, we clarify the format of the NDC and what changes to
existing products will trigger a need for new NDC numbers. However, we do not anticipate a
9

significant increase in the issuance of NDC numbers because of the changes, or renumbering of
currently marketed products.
2. Need for the Rule
The final rule will clarify and codify the existing regulations and procedures concerning
establishment registration and drug listing. Without the final rule, some current practices of firms
registering establishments and listing products electronically will remain uncodified and may
cause confusion about how to make the electronic submission and what information we require
that firms submit. Some firms now spend time contacting FDA to clarify what information they
need to submit and how to submit it. With more transparency, we expect that firms will avoid
unnecessary inquiries. Moreover, without the final rule some information gaps will remain in
identifying the source of unfinished drugs, in listing of all inactive ingredients, and an
information gap regarding whether some products are still being marketed. Closing these
information gaps and codifying electronic registration and listing is necessary so that FDA can
exercise uniform, consistent, and timely oversight of part-207, part-607, and part-1271
registrants.
B.

Response to Comments on the Preliminary Impact Analysis of the Proposed
Rule

Most of the comments on the regulatory impact analysis of the proposed rule (PRIA)
concerned the assignment of NDC numbers and the requirement they be printed on container
labels. Because these proposed changes are not included in the final rule, the comments are moot
and are not discussed here. We also do not discuss the comments on the analysis of the proposed
implementation of mandatory electronic registration and listing as this was mandated by statute
10

as part of FDAAA and has been in place since 2009. Interested parties were able to comment on
the burden estimates presented in the guidance, “Providing Regulatory Submissions in Electronic
Format--Drug Establishment Registration and Drug Listing” when it was proposed in 2008 (73
FR 39964 - 39968). The remaining comments have been grouped by topic; the order in which
they are discussed is not a reflection of importance.
(Comment) Some manufacturers believed the PRIA did not address the financial impact
on their sector of the industry and disagreed with the agency’s assertion of no significant
economic impact on a substantial number of small businesses. In particular manufacturers of
medical foods and medical devices did not believe we properly addressed the loss of revenue
they could experience if they could not use NDC numbers on their products. Contract
manufacturers felt there should be a separate analysis of their sector of the industry as did
medical gas firms who asserted their numbers were under represented.
(Response) We disagree with the comments. NDC numbers were never intended for use
on medical foods. The medical food industry began using NDCs to simplify reimbursement
payments by insurance companies. There are other mechanisms that can be used for medical
food product reimbursement, and the secondary impact from FDA enforcement of existing rules
is not part of a regulatory impact analysis of new requirements. The Unique Device
Identification System final rule (78 FR 58786) replaces the use of NDC numbers on medical
devices with a Unique Device Identification (UDI) number. The impact of this change was
accounted for in that rule.
The PRIA measured the incremental cost to comply with the new or changed
requirements on a per-establishment and per-listing basis. Most of the data in the analysis of the
proposed rule is not relevant for the final rule because mandatory electronic submission began in
11

June of 2009 with the statutory implementation authorized by FDAAA; however, the
methodology is relevant. We estimated the incremental cost for registration on a per
establishment basis. We included all registered establishments in our estimate, so establishments
in all industry sectors required to register are included in the analysis if they comply with the
requirement. The information required for each establishment is essentially the same. Any
economies of scale for a large firm to register multiple establishments at one time are
economically insignificant. The same is true for the incremental cost to list products. A contract
manufacturer, or a repackager, may have more than one product to list, but the information
required for each product is essentially the same for a contract manufacture and other
manufacturers. In the final rule, a private label distributer can list the products they distribute on
behalf of contract manufacturers but the legal obligation remains the contract manufacturers’.
The Regulatory Flexibility Act requires agencies to assess the regulatory impact on
domestic small entities and to analyze options that would lessen the burden on small entities.
The Small Business Administration (SBA) defines a drug manufacturer as small if it employs
fewer than 750 people and a biological products entity as small if it employs fewer than 500.
The size of the entity is determined by the total employment of the ultimate parent firm,
which can include companies outside the drug and biological products industries. For example if
a drug manufacturer’s ultimate parent is a financial holding company that employs more than
750 people across a variety of industrial and service sectors, the firm would be considered large
even if employment in drug manufacturing is only 100 employees.
For the proposed rule, we used a crude method, using US Census information and the
Approved Drug Products with Therapeutic Equivalence Evaluations database (commonly
referred to as the FDA’s Orange Book) to characterize the number and size of the effected firms
12

and used US Census data from the 2002 Economic Census and County Business Patterns for the
financial information in the regulatory flexibility analysis. The Census data are reported by North
American Industry Classification System codes (NAICS). Depending on the survey, the
economic data are collected on an establishment or firm level. Companies, whose primary
NAICS code is not a drug or biologic manufacturer would not be included in the financial survey
data. For example, the primary NAICS code for many small medical gas companies is not
pharmaceutical preparations manufacturing (NAICS 325412), so these establishments are not
included in the Census data for NAICS 325412. Including the financial data for medical gas
establishments in the analysis would be optimal, but we are not aware of publically available
data that would capture this information. While the financial information characterizing the
industry did not included the medical gas sector, medical gas establishments were included in the
burden estimates.
The regulatory impact analysis for this final rule uses Dun and Bradstreet information on
total employment of the ultimate parent company to determine the size of entities affected by the
rule, but we still use the Census data for NAICS 325412 and 325414 for the financial
information because of limitations of available data.
There were a number of comments regarding the burden of submitting certain
information in listing in particular batch information, inactive ingredients, and certifying that
there has been no change to a listing.
(Comment) Some comments noted that batch information is already included in annual
reports for products that require applications so the information is a duplication of effort. They
also noted that this information can change often and adds an additional element that needs to be
tracked and updated.
13

(Response) After considering the comments, FDA has decided not include the batch
information requirement in the final rule.
(Comment) Some comments suggested FDA reconsider the requirement or frequency of
the requirement to certify that no change is necessary for listings every June and December.
Using the 0.25-hour estimate from the proposed rule for the time required to verify and certify a
listing, one company with 800 products calculated that it would take 114 hours (around 14, 8hour, days) twice a year to comply with the requirement assuming about 60 percent of their total
products did not require updates in June and December. Another company with over 7,000
products said it would take 6 months to validate and certify their listings with no changes. They
suggested making the requirement every 2 years rather than biannually. Another comment
suggested that changing the requirement to certifying by establishment rather than by listing,
would result in a savings of $1 million per year.
(Response) After considering the comments, we have revised the requirement for no
change certification from a per-listing basis to an establishment basis. Rather than certifying each
June and December that there is no change to a listing, registrants can certify by establishment
that the electronically listed products are up to date when they annually renew their registration.
(Comment) Some comments regarding submitting inactive ingredients as part of listing
stated it was unnecessary, burdensome, and in some cases would result in the release of
information a company considered proprietary. They noted that inactive ingredients are included
in human and animal drug applications and OTC products are required to list them on their label.
Some manufacturers of animal drugs claimed that inactive ingredients are not customarily
supplied on the label and were concerned with the release of proprietary information.

14

(Response) Although inactive ingredients are identified in product applications and
labels, the information is not easily accessible and the names are not standardized. Listing is the
only mechanism by which FDA has quick access to ingredient information across all products.
Entering the inactive ingredients using defined terminology increases the accuracy and the
efficiency of data searches. We use the information in listing to inform many processes FDA
uses for protecting public health, including surveillance for serious drug adverse reactions,
inspection of facilities used for drug manufacturing and processing, and monitoring drug
products imported into the United States. To prevent public disclosure of information a registrant
views as confidential, an inactive ingredient can be designated as confidential during the listing
process.
C.

Who is Affected?

The final rule affects part-207 registrants that manufacture or process human and animal
drugs and human drugs that are also biological products. Part-207 registrants include
manufacturers and processers of human prescription and over-the-counter (OTC) drugs;
manufacturers of human biological products; manufacturers of animal drugs; and manufacturers
of human cells, tissues, and cellular and tissue-based products (HCT/Ps) regulated under section
351 of the Public Health Service Act. The final rule will also affect private label drug distributors
who need labeler codes.
The final rule also affects part-607 registrants and part-1271 registrants. Part-607 registrants
include manufacturers of blood and blood products. Part-1271 registrants include manufacturers
of HCT/Ps that are regulated under section 361 of the Public Health Service Act, but not under

15

section 351 of the Public Health Service Act. Table 2 describes the number and types of
establishments, and the number of listings affected by the final rule.
Table 2.—Number and Type of Establishments Required to Register and List
Total number of
Number of
Number of
Number of
Affected
establishments
domestic
establishments
listings
firms
establishments
required to list
Drugs,
biologicals
9,950
6,450
7,300
136,000
(part 207)
Human-blood
2,700
2,509
2,700
2,616
(part 607)
Human-cell
and tissue
2,800
2,620
2,800
10,000
(part 1271)
Note: some registrants have more than one establishment they register. As a result, there are 5,900 registrants that
account for all establishments required to register and list. Part 207 concerns human drugs, human drugs that are
biological products, and animal drugs.

D.

Benefits of the Final Rule

By codifying the statutory requirements of FDAAA and FDASIA, the final rule clarifies
and completes the modernization of our electronic registration and listing systems. Thus, one
benefit of the final rule is to improve management of the establishment registration and drug
listing requirements and make these processes more efficient and effective for industry and for
us. Maintaining a comprehensive electronic registration and listing system supports
implementation of the electronic prescribing provisions of the Medicare Prescription Drug
Improvement and Modernization Act. Because registrants submit electronic copies of the drug
labeling with their drug listings, this rule also ensures the availability of current drug information
through DailyMed, a computerized repository of drug labeling maintained by the National
Library of Medicine.
Establishment registration information helps FDA identify who is manufacturing,
repacking, relabeling, and salvaging drugs and where those operations are performed. Quickly
16

accessible electronic information about each establishment in the supply chain will help inform
our enforcement efforts and improve our oversight of the entire drug supply chain.
Drug listing information also gives FDA a current inventory of drugs manufactured,
repacked, relabeled, or salvaged for commercial distribution. Under current practices, registrants
would only update listings when the listing information has changed. Consequently, some
registrants have never submitted listings in an electronic format. We have identified about
80,000 drugs listed in our legacy system not currently listed in our electronic system. However,
we anticipate that registrants no longer market the majority of these drugs. By requiring
electronic listings for all marketed drugs, the final rule will modernize our electronic system and
close this data gap.
Because the final rule primarily codifies current business practices, we anticipate that
most of the benefits of modern electronic registration and listing systems were achieved as firms
implemented electronic submissions in response to the FDAAA and FDASIA legislation. The
incremental changes required by the final rule will yield benefits in addition to those already
achieved. However, we lack sufficient information to quantify these marginal benefits.
E.

Incremental Costs of the Final Rule

The final rule will have different incremental costs depending on current practice and on
the different burden for part- 207, part-607, and part-1271 registrants. We use an hourly wage of
$66.50 from the Bureau of Labor Statistics corresponding to management occupations in
pharmaceutical and medicine manufacturing (Ref. 1). We multiply this base wage by a factor of
two to adjust for benefits and overhead. The result is an adjusted wage of $133, which we use
across all incremental cost categories.

17

1.
Estimated Impact on Registration and Listing of Drugs and Biological Products Subject
to Part 207
For part-207 registrants there will not be incremental costs associated with initial,
updating, or renewal of registration for establishments when the rule becomes final. The final
rule codifies current registration requirements authorized under FDAAA and FDASIA. By
contrast, the requirements in §207.49 that will increase the burden for these firms are the
identification of source product1 of the drug being listed, and for some, the submission of all
inactive ingredients in the listed drug. However, most incremental costs are one-time costs
except for the annually recurring costs of certification of no changes. Table 3 summarizes the
estimated costs, and a description of each item follows this table.
Table 3.—Detailed Incremental Costs for Part-207 Registration and Listing
($ millions)
Number of
Number of
Incremental costs
Frequency
hours per
Cost estimate
units affected
unit
Identify source of
unfinished drugs
Once
0.25
93,700 listings
$3.1
(from NDCs)
Listing inactive
Once
0.25
40,800 listings
$1.4
ingredients
Listing legacy
Once
2.5
26,300 listings
$8.7
products
Read and understand
5,900
Once
21
$16.5
the final rule
registrants
Revise SOPs for all
5,900
Once
19
$14.9
other requirements
registrants
Revising SOPs for
2,950
Once
11
$4.3
reusing NDCs
registrants
Certification of norecurring
7,300
0.5
$0.5
change
annually
establishments
Total costs (part 207)
$49.4
1

For a finished drug formulation, identification source will be the NDC for the active ingredient; for repackages this
will be the NDC number of the finished drug manufacturer.

18

One-time costs
Registrants will have to submit either the names and unique facility identifiers (UFIs) of
all establishments involved in the production of each unfinished drug received by the registrant
for use in the production of the drug being listed or the properly assigned and listed NDC for
such unfinished drug. If the registrant provides a properly assigned and listed NDC for
unfinished drug(s) it uses to produce the listed drug (sometimes referred to as “source NDCs”),
the registrant does not need to provide names and UFIs of the upstream establishments. We
estimate it will take about 15 minutes (equivalent to 0.25 hours) per listing to gather and enter
the information for source NDCs. This requirement applies to 93,700 product listings at most.
Using an average wage of $133, the total one-time cost for this requirement is $3.1 million (0.25
hours x 93,700 product listings x $133 wage).
Some registrants may have incremental costs associated with submitting a product’s
inactive ingredients. We asked for, but did not require, this information on the paper forms and
most registrants are submitting inactive ingredients electronically now. However, the list of
inactive ingredients may not be complete in all listings. We do not know how many products
have incomplete inactive ingredient submissions but believe an upper bound estimate is 25 to 30
percent. With the exception of some OTC-animal drugs, inactive ingredients are listed in the
content of labeling, and in all cases the information is readily available. We estimate it will take
about 15 minutes to obtain the information from the product label or from other records and enter
it into our systems electronically. There are about 136,000 total listings under part 207, and thus
40,800 listings (30 percent) may need to add some, or all, inactive ingredients. We estimate the
one-time cost for this requirement is $1.4 million (40,800 listings x 0.25 hours x $133 wage).
19

Registrants will also incur one-time costs to read and understand the changes to the
registration and listing requirements and revise their standard operating procedures (SOPs). We
consider that reading and understanding is more complex for firms that are affected the most by
the final rule, and so we estimate that it will take 21 hours for each of the 5,900 part-207
registrants to revise their SOPs. We estimate a one-time cost of $16.5 million (5,900 registrants x
21 hours x $133 wage).
All registrants will have to revise their SOPs to describe how to identify and list sources
of unfinished drugs, list inactive ingredients, and certify no change to their listings; we assume
general registration and listing is already in their SOPs. For registrants with multiple
establishments there is an economy of scales in drafting much of the standardized procedures and
individualizing them where needed. Based on our experience with such requirements, and also
based on a report by the Eastern Research Group (Ref. 2), we estimate SOPs will require 19
hours on average for moderate changes. There are approximately 5,900 registrants affected by
these requirements, and using the 19 hour average, we estimate one-time costs of $14.9 million
(5,900 registrants x 19 hours x $133 wage) to revise SOPs for all these requirements.2
Some registrants will also have to change SOPs regarding the assignment of NDCs. We
believe these requirements may impact about 50 percent of registrants. The changes to sections
207.33, 207.35, and 207.37 clarify current policy and most establishments should not need to
make any changes to their procedures. Firms that recycled NDC numbers after the original
product was off the market for five years will have to make changes to their procedures but they
will not have to change existing product-NDC numbers. Some firms may also have to modify

2

The 5,900 registrants include all registrants whether or not they need to list, but excludes wholesale distributors
and third-party logistic providers not required to register.

20

their procedures regarding what product changes result in the assignment of a new NDC code.
We consider this revision to SOPs a small revision, and so we estimate that it will take 11 hours
to make this revision; the one-time cost to modify SOPs for the NDC requirements is $ 4.3
million (5,900 registrants x 50 percent x 11 hours x $133 wage). Note that our estimate is an
upper bound because firms that will revise their SOPs for identifying sources of unfinished drugs
and for listing inactive ingredients will also have to focus their attention on SOP revisions.
The final rule will result in a one-time cost for legacy products. With this rule all product
listings will have to be transmitted to FDA electronically to satisfy the listing requirement. When
electronic registration and listing became mandatory in 2009, many registrants migrated all of
their product listings to the new system, whereas others waited until a product listing needed to
be updated before it was submitted electronically. Our legacy database has about 80,000 NDC
product codes (submitted on paper forms under part 207 and not yet the subject of an electronic
submission); 53 percent are prescription drugs, 42 percent are OTC drugs and the remaining are
bulk products. We do not believe that all of these legacy products are still in commercial
distribution but those that are will need their listings migrated to our electronic systems within 2
years after the publication of the final rule.
To derive the number of product that will be migrated we eliminated all prescription and
bulk drugs from the legacy data, thus only OTC drugs would incur migration costs. For
prescription drugs to be reimbursed under Medicare and Medicaid, the NDC number needs to be
contained in the National NDC Directory maintained by FDA. The legacy NDCs are not in that
directory. Bulk drug manufactures had a greater incentive to migrate their product listings
because the NDC is used to identify ingredients in applications and for identifying the active

21

pharmaceutical ingredient when it is imported and exported; having the product listed
electronically helps ensure smoother processing.
To estimate the number of legacy products that will have to list electronically we applied
a 4 percent attrition rate over 6 years to the 2008 count of NDCs (80,000). Historically, about 20
to 25 percent of product listings are updated each year and 4 to 6 percent are withdrawn. Thus,
we expect there would be 62,621 legacy products in total by 2015. However, only 42 percent of
these products would require being entered and updated in our system, this amounts to 26,300
products that will need to be listed electronically.3 We consider this estimate to be an upperbound because it is unlikely that so many products would not have needed updates in the past 5
years but it is possible. It will take about 2 hours to enter the currently required information plus
an additional one-half hour to comply with the new requirements. The total one-time cost for the
electronic listing of the legacy products is $8.7 million (26,300 products x 2.5 hours x $133
wage).
Recurring costs
An annually recurring cost that affects all registrants is the additional costs to certify that
there was no change to a listing that was not updated or withdrawn. Section 207.57(b)(2)
requires registrants to certify that the listings that were not updated are correct each year when
they renew their registration. We estimate that it will take about 30 minutes to verify records and
electronically certify per establishment. Based on our registration data there are about 7,300

3

The 4 percent annual attrition rate means that 96 percent (100 minus 4 percent annual attrition) of NDCs remain
for the subsequent year and so forth. Therefore, to calculate the total of legacy products in 2015 based on the count
of 2008 (six-year span) we use the formula: 80,000 x (0.96)^6; where 80,000 is the count of legacy products in
2008, 0.96 is the fraction that remains every year, and 6 is the six-year span The result is 62,621, the number of
legacy products we expect to have in 2015. Then, we assume only 42 percent of these products are OTCs, so that
26,301 products (62,621 x 0.42) would have to be updated in our system.

22

establishments with listing obligations. The recurring cost for this requirement is $0.5 million
(7,300 establishments x 0.5 hours x $133 wage).
2.

Estimated Impact on Registration and Listing of Human-Blood Products Subject to Part

607
The final rule clarifies and codifies current practice for domestic and foreign
establishment registration and product listing for human blood and blood products. The final rule
will generate one-time costs only but no recurring costs because registrants will not be required
to make certification of no changes annually. Table 4 summarizes costs for part-607 registration
and listing.
Table 4.—Detailed Incremental Costs for Part-607 Registration and Listing
($ millions)
Number
Number of
Cost
Incremental costs
Frequency of hours
units
estimate
per unit
2,700
Read and understand the final rule
Once
14
$5.0
registrants
Revise SOPs for registration and
27
Once
11
$0.04
listing
registrants
Migrating records to FDA’s
27
Once
1
$0.0
electronic system
registrants
Total costs (part 607)
$5.1
Note: the cost estimate shown as $0.0 million represents $3,591 dollars.

One-time costs
All registrants will incur costs to read and understand the final rule; we estimate this will
take 14 hours per registrant for a total one-time cost of $5 million (2,700 registrants x 14 hours x
$133 wage). We use a 14-hour estimate instead of a 19-hour estimate, as we did for part 207, for
reading and understanding because part-607 registrants face fewer requirements.

23

The only incremental impact on these registrants is that electronic registration and listing
is no longer voluntary. There are approximately 2,700 part-607 registrants but only 1 percent, or
27 establishments, will incur costs to comply with this requirement. Based on the estimated
annual reporting burden for Form FDA 2838, the paper form used to register and list blood
establishments, it will take the registrants about 1 hour to migrate paper records to electronic
registration and listing (80 FR 4933). Establishments will also have to make some minor changes
to their SOPs, which could require about 11 hours per SOP. Thus, we estimate total one-time
cost of $3,591 (27 registrants x 1 hour x $133 wage) plus $39,500 (27 registrants x 11 hour x
$133 wage) to go from paper to electronic submission.
3.

Estimated Impact on Registration and Listing for Human-Cell and Tissue Products

(HCT/P) Subject to Part 1271
The final rule clarifies and codifies registration and listing requirements for
establishments that recover, process, store, label, package, or distribute human-cell and tissue
products. The final rule also makes electronic submission of registration and listing mandatory.
However, the final rule will generate one-time costs only but no recurring costs because these
registrants will not be required to make certification of no changes annually.
Table 5.—Detailed Incremental Costs for Part-1271 Registration and Listing
($ millions)
Number
Number of
Cost
Incremental costs
Frequency of hours
units
estimate
per unit
2,800
Read and understand the final rule
once
14
$5.2
registrants
Revise SOPs for registration and
280
once
11
$0.4
listing
registrants
Migrating records to FDA’s
280
once
1
$0.0
electronic system
registrants
24

Total costs (part 1271)

$5.7

Note: the cost estimate shown as $0.0 million represents $37, 240 dollars.

One-time costs
All registrants will incur some additional costs to read and understand the final rule. We
estimate that this will require about 14 hours per registrant for a total one-time cost of $5.2
million (2,800 registrants x 14 hours x $133 wage).
Currently, of the 2,800 part-1271 registrants, 90 percent submit registration and listing
information electronically already; as a result, only 10 percent of registrants (280 registrants) will
incur additional cost for this requirement. Based on the annual reporting burden for Form FDA
3356, it takes about 45 minutes for an initial registration and listing (79 FR 3824); we round this
number to one hour for consistency across all parts affected by the rule. Registrants will also
need to make minor changes to their SOPs, which could require about 11 hours per registrant.
The total one-time incremental cost for the mandatory electronic submission requirement is
$37,240 (280 registrants x 1 hour x $133 wage) plus $409,640 (280 registrants x 11 hour x $133
wage) to go from paper to electronic submission.
4.

Summary of Total Costs
Table 6 lists the total costs of the rule; this table sums all the different incremental costs

from Tables 3, 4, and 5 according to category and frequency. The total cost equal $48.9 million
in one-time costs and $0.5 million in annually-recurring costs for part-207 registrants; $5.1
million in one-time costs for part-607 registrants; and $5.7 million in one-time costs for part1271 registrants. The total annualized costs for all affected parties results in $9 million at a 7percent discount rate over 10 years or $7.5 million annualized at 3 percent over 10 years.
Table 6.—Summary of Total Incremental Cost of the Final Rule ($ millions)
25

Affected firms
Drugs and biological
products (part 207)
Human-blood products
(part 607)
Human-cell and tissue
products (part 1271)
Total

One-time
costs

Recurring
costs
(annual)

Total costs
annualized at
7%

Total costs
annualized at
3%

$48.9

$0.5

$7.5

$6.2

$5.1

N/A

$0.7

$0.6

$5.7
$59.7

N/A
$0.5

$0.8
$9.0

$0.7
$7.5

Note: Total costs are annualized over a ten-year horizon. Recurring costs include only annual time costs of
certifying there are no changes to listings; these costs are unique to part 207.

F.
1.

Alternatives to the Final Rule

Certification of No-Changes and Assignment of NDC Numbers
In this final rule we eliminated some of the most burdensome product listing

requirements we had proposed in 2006 (71 FR 51276). As discussed in the response to
comments, we had proposed to collect batch information and require registrants that did not
make changes to a listed product in June or December to certify that the product listing was upto-date. The requirement of batch information would have increased the number of listings that
needed to be updated each June and December. We changed the certification of no change from
a product based certification to an establishment based requirement. Certification of accuracy of
electronic listings that have not required updates will now be done annually when the
establishment renews its registration. With this change the number of certifications decreased
from about 100,000 listings to about 10,000 certifications by establishment.
One alternative to the final rule is to require certification of no changes every two years
instead of annually. However, the cost of certifying no changes to listings is relatively small,
$66.5 dollars per establishment, and the aggregate benefit is an annually-updated system of all
listed products.

26

We also eliminate the proposed change in the assignment of the NDC number. We had
proposed that FDA would begin assigning random NDC numbers to new products. Instead we
have clarified and codified our current practice.
2.

No New Regulatory Action
This alternative is the baseline against which we measure the costs and benefits of the

other regulatory alternatives. Under this alternative most registrants would continue to register
electronically, but the data gaps in listing all inactive ingredients, listing source NDCs, and
certification of no change to legacy products would continue.
G.

International Effects

If a foreign establishment distributes an API only outside the United States (i.e., to an
establishment that manufacturers finished drugs outside the United States), that foreign
establishment is not thereby directly obligated by this final rule to register its establishment and
list the API. This is true even if a finished drug containing that API is eventually imported into
the United States. However, the establishment that manufactures the finished drug to be
imported or offered for import into the United States has an obligation to register and list that
finished drug. Based on matching registration and listing records to Dun and Bradstreet data, the
majority, 65 percent, of establishments required to register and list are domestic. We also expect
that foreign and domestic firms marketing drugs in the US will face the same requirements.
III.

Regulatory Flexibility Analysis
FDA has examined the economic implications of the final rule as required by the

Regulatory Flexibility Act. If a rule will have a significant economic impact on a substantial
27

number of small entities, the Regulatory Flexibility Act requires agencies to analyze regulatory
options that would lessen the economic effect of the rule on small entities. Because the costs
associated with this rule are expected to be minimal, this final rule would not impose a
significant economic impact on a substantial number of small entities. We estimate incremental
costs from the final rule will represent 0.01 percent of annual sales for small part-207 registrants
and 0.002 percent for large part-207 registrants, on average. The incremental costs are also small
for part-607 and part-1271 registrants.
Part-207 registrants are identified by NAICS 325412 for Pharmaceutical-Preparations
Manufacturing and NAICS 325414 for Biological-Product Manufacturing. A manufacturer is
small if it employs fewer than 750 employees for pharmaceuticals and fewer than 500 employees
for biological product manufacturing. Part-607 and part-1271 registrants are identified by
NAICS 621991, and according to SBA definitions, an entity in this category is considered small
if annual receipts are less than $32.5 million.
A.

Small Part-207 Registrants

From the total 9,950 part-207 registrants, there are 6,450 domestic human-drug, animaldrug, and biological-product establishments. Furthermore, 36 percent of these domestic
establishments are small. To determine firm size, we match establishments from our electronic
registration and listing database to employment and sales data from Dun & Bradstreet (D&B),4
who classify small businesses according to the SBA guidelines. The impact of the final rule will

4

Dun & Bradstreet data provide information on both the specific establishment and the parent corporation. Because
the costs of compliance would ultimately be reflected on the parent corporation, we use the classification of small
firm at the corporate level. In addition, our sample for small firms consists of all parent firms with domestic
establishments regardless of location of parent.

28

vary depending on the number of product listings an establishment has, whether they have
previously submitted inactive ingredients, and if and how many legacy products they need to list.
To shed light on the cost per establishment, consider that the upper bound of annualized
costs is $7.5 million for part 207 (total costs annualized with a 7-percent discount rate, from
Table 1). A simple calculation, dividing this cost by the number of establishments required to
list, 7,300, yields an annualized average cost per establishment of $1,021 dollars. We compare
this average cost to average annual sales by firm size. Based on Dun & Bradstreet data, average
annual sales for small firms range from $8 to $8.2 million; average annual sales for large firms
range from $56.8 to $358.7 million.5 Thus, the annualized costs of the rule represent, at most,
0.01 percent of annual sales for small firms, and 0.002 percent for large firms on average. Our
estimates represent average effects, and although some small firms with multiple product listings
could incur costs above our average cost estimate, we anticipate that such firms would also have
revenues above average sales.
B.

Small Part-607 and Part-1271 Registrants

Although most part-607 and part-1271 registrants are small, we anticipate the final rule
will not impose significant costs on a significant number of them. The 2007 Census report for
Blood and Organ Banks (NAICS 621991) shows that 86 percent of these firms receive below
$10 million in annual revenues (Ref. 3). According to SBA definitions for NAICS 621991, an
entity in this category is considered small if annual receipts are less than $32.5 million. Thus, it
is possible that some of the 14 percent of firms above the $10 million cutoff may be small.
5

Lower bounds of estimated sales use all domestic observations including observations with zero reported sales,
whereas upper bounds use only establishments that have non-zero entries, about half of them.

29

Therefore, instead of certifying that 86 percent of firms are small, we anticipate that around 90
percent of all part-607 and part-1271 registrants are small entities. However, only 1 percent of
part-607 registrants, and 10 percent of part-1271 registrants were still using paper forms to
register and list. In addition, the one-time cost per registrant is $1,878 on average ($5.1 million
one-time costs divided by 2,700 establishments, from Tables 1 and 2) for part-607 registrants.
Similarly, for part-1271 registrants, the one-time cost per registrant is $2,022 on average ($5.7
million one-time costs divided by 2,800 registrants). Lastly, because these registrants do not have
to certify if there are no changes to their listings, they will not face recurring costs.
IV. References
1. U.S. Department of Labor, Bureau of Labor Statistics, Occupational Employment
Statistics, “May 2013 National Industry-Specific Occupational Employment and Wage
Estimates: NAICS 325400 - Pharmaceutical and Medicine Manufacturing,” (available at
http://www.bls.gov/oes/current/naics4_325400.htm#11-0000).
2. Eastern Research Group, Inc., “Economic Threshold and Regulatory Flexibility
Assessment of Proposed Changes to the Current Good Manufacturing Practice
Regulations for Manufacturing, Processing, Packing, or Holding Drugs (21 CFR 210 &
211),” pp. 24, 1995.
3. U.S. Census Bureau. American Fact Finder, EC0762SSSZ1, “Health Care and Social
Assistance: Subject Series - Estab and Firm Size: Receipts/Revenue Size of
Establishments for the United States: 2007 Economic Census of the United States,”
(available at
http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ECN_2
007_US_62SSSZ1&prodType=table), 2007.

30