Guidance for Industry

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Guidance for Industry
Fees for Human Drug Compounding Outsourcing Facilities Under Sections 503B and 744K of the FD&C Act


















U.S. Department of Health and Human Services
Food and Drug Administration
Center for Drug Evaluation and Research (CDER)
User Fees 
August 2014
Guidance for Industry
Fees for Human Drug Compounding Outsourcing Facilities Under Sections 503B and 744K of the FD&C Act

Additional copies are available from:

Office of Communications
Division of Drug Information, WO51, Room 2201
Center for Drug Evaluation and Research
Food and Drug Administration
10903 New Hampshire Avenue, Silver Spring, MD 20993
Phone : 301-796-3400 ; Fax : 301-847-8714
[email protected]
http://www.fda.gov/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/default.htm

or

Office of Policy
Office of the Commissionner
Food and Drug Administration
10903 New Hampshire Avenue
Silver Spring, MD 20993
Phone : 301-796-4830







U.S. Department of Health and Human Services
Food and Drug Administration
Center for Drug Evaluation and Research (CDER)
User Fees

August 2014

TABLE OF CONTENTS

I.	INTRODUCTION	1
II.	BACKGROUND	2
III.	FEES	2
A.	Annual Establishment Fee	2
1.	Entities that Registered Before October 1, 2014	3
2.	Entities that Register Outside of the Annual Registration Period	3
B.	Adjustment Factors	4
1.	Inflation Adjustment Factor	4
2.	Small Business Adjustment Factor	4
C.	Reinspection Fee	5
1.	In General	5
2.	Small Business Reinspection Fees	5
D.	How to Qualify for a Small Business Reduction	6
1.	Which Entities Qualify for a Small Business Reduction?	6
2.	Content and Format of Request	6
3.	Timing of Requests	7
E.	How and When to Pay	7
1.	Annual Establishment Registration Fees	7
2.	Reinspection Fees	8
IV.	EFFECT OF FAILURE TO PAY FEES	8
V.	REFUNDS AND DISPUTE RESOLUTION	9
A.	Refunds	9
B.	Dispute Resolution	9
1.	Reconsideration Requests	9
2.	Appeal Request	10
APPENDIX 1:  FORM 3908	11





Guidance for Industry1
Fees for Human Drug Compounding
Outsourcing Facilities Under
Sections 503B and 744K of the FD&C Act



This guidance represents the Food and Drug Administration’s (FDA or the Agency) current thinking on this topic. It does not create or confer any rights for or on any person and does not operate to bind FDA or the public. You can use an alternative approach if the approach satisfies the requirements of the applicable statutes and regulations. If you want to discuss an alternative approach, contact the FDA staff responsible for implementing this guidance. If you cannot identify the appropriate FDA staff, call the appropriate number listed on the title page of this guidance. 




    I. INTRODUCTION 

This guidance is intended for entities that compound human drugs and elect to register as outsourcing facilities under section 503B of the Federal Food, Drug, and Cosmetic Act (FD&C Act), which was added by the Drug Quality and Security Act (DQSA).2  Once an entity has elected to register as an outsourcing facility, it must pay certain fees to be registered as an outsourcing facility.3 

This guidance describes the types and amounts of fees that outsourcing facilities must pay, the adjustments to fees required by law, how outsourcing facilities can submit payment to FDA, the consequences of outsourcing facilities’ failure to pay fees, and how an outsourcing facility can qualify as a small business to obtain a reduction in fees.  FDA has issued separate guidances on registration and reporting requirements for outsourcing facilities.4  

FDA’s guidance documents, including this guidance, do not establish legally enforceable responsibilities. Instead, guidances describe the Agency’s current thinking on a topic and should be viewed only as recommendations, unless specific regulatory or statutory requirements are cited or otherwise applicable. The use of the word should in FDA guidances means that something is suggested or recommended, but not required.


    II. BACKGROUND

On November 27, 2013, the President signed the DQSA into law.  The DQSA added a new section 503B to the FD&C Act, creating a category of entities called outsourcing facilities.5 Outsourcing facilities, as defined in section 503B(d)(4) of the FD&C Act, are facilities that meet all of the requirements described in section 503B(a), including registering with FDA as an outsourcing facility and paying an annual establishment fee.  If these requirements are satisfied, a drug compounded by or under the direct supervision of a licensed pharmacist in an outsourcing facility is exempt from two sections of the FD&C Act: (1) Section 502(f)(1) (21 U.S.C. 352(f)(1)) (concerning the labeling of drugs with adequate directions for use) and (2) section 505 (21 U.S.C. 355) (concerning the approval of human drug products under new drug applications (NDAs) or abbreviated new drug applications (ANDAs)).  

Drugs compounded in outsourcing facilities are not exempt from the requirements of section 501(a)(2)(B) of the FD&C Act (21 U.S.C. 351(a)(2)(B)) (concerning current good manufacturing practice for drugs).  The fee provisions for outsourcing facilities in the FD&C Act, as enacted by the DQSA, are described in more detail below.


III.	FEES

A.	Annual Establishment Fee

Beginning in fiscal year (FY) 2015, facilities that elect to register with FDA under section 503B of the FD&C Act must pay an annual establishment fee.6  Each year, the registration period for outsourcing facilities begins on October 1 and ends on December 31.7  The annual establishment fee is paid at the time of registration and is equal to the sum of $15,000, multiplied by the inflation adjustment factor (described in Section III.B.1), plus the small business adjustment factor (described in Section III.B.2).8  The fee calculation is reflected in the following equation:

Establishment fee = $15,000 x inflation adjustment factor + small business adjustment factor

FDA will publish a notice in the Federal Register announcing the amount of the establishment fee to be collected in a given FY (based on the calculation set forth above) no later than 60 calendar days before the start of that FY.9 

Upon receiving registration information from a facility that elects to register as an outsourcing facility, FDA will send an invoice for the fee (see Section III.E.1 for information on invoicing and instructions for submitting payments).  For a given FY, an outsourcing facility will not be considered registered for purposes of section 503B(b) until the annual establishment fee is paid.10 

1.	Entities that Registered Before October 1, 2014

Outsourcing facilities that registered before October 1, 2014, do not have to pay a fee for FY 2014.  To maintain their status as outsourcing facilities in FY 2015, however, those entities will have to register during the FY 2015 registration period (October 1 - December 31, 2014) and pay the relevant fees in accordance with the instructions in Section III.E.1 of this guidance.  Failure to pay the fee by December 31, 2014, will result in an entity losing its status as an outsourcing facility.  FDA will remove the entity from the list of registered outsourcing facilities,11 and drugs compounded at the facility will no longer qualify for the exemptions under section 503B(a), unless and until the firm re-registers and pays all required fees.12  Registration and payment of the annual fee must be repeated every FY.13 

2.	Entities that Register Outside of the Annual Registration Period

Entities that elect to register as outsourcing facilities can register outside of the annual registration period (October 1 to December 31 of each year).  Registration is encouraged and can be done at any time during the year.  Registration, regardless of when completed, will last until the end of the official registration period for the year of registration (December 31).  For example, if an outsourcing facility registers on May 1, 2014, the registration will expire on December 31, 2014, and the outsourcing facility will need to register for the following FY during the annual registration period of that year (October 1, 2014 – December 31, 2014). 14

Registration, whether within or outside of the annual registration period, will incur a full registration fee, including relevant adjustments.  An entity must complete payment of the registration fee before it will be considered registered for purposes of section 503B(b),15 and drugs compounded in that facility before registration and payment of fees will not qualify for the exemptions for products compounded by registered outsourcing facilities under section 503B(a).16  See Section IV of this guidance for additional discussion on the consequences of an entity’s failure to register and pay fees.

B.	Adjustment Factors 

1.	Inflation Adjustment Factor

The inflation adjustment factor is a statutorily mandated increase of the annual establishment fee. The inflation adjustment factor is equal to the sum of
    • 1; plus— 
    • the average annual percentage change in the cost, per full-time equivalent (FTE) position at FDA, of all personnel compensation and benefits paid for those FTE positions for the first three years of the preceding four fiscal years, multiplied by the proportion of personnel compensation and benefits costs to total costs of an average FTE position at FDA for the first three years of the preceding four fiscal years; plus—
    • the average annual percentage change in the Consumer Price Index for urban consumers for the first three years of the preceding four years of available data multiplied by the proportion of all costs other than personnel compensation and benefit costs to total costs of an average FTE position at FDA for the first three of the preceding four fiscal years.17  

The inflation adjustment will compound every year.18  In other words, the inflation adjustment factor determined in one FY will be added to the total inflation-adjusted fee from the preceding FY.  FDA will calculate the inflation adjustment factor before each FY, and the adjusted fee will be published in the Federal Register.19 

2.	Small Business Adjustment Factor

Certain small businesses (see Section III.D.1) can qualify for a reduction of the annual establishment fee.20  Entities that qualify as small businesses under section 744K(c)(4) of the FD&C Act are required to pay only one-third of the annual establishment fee, or $5,000 multiplied by the inflation adjustment factor.21  This is referred to as a small business reduction. Entities that do not qualify for a small business reduction will pay a small business adjustment factor, equal to the total amount lost from each outsourcing facility that was granted a small business reduction divided among all outsourcing facilities not granted such a reduction.22 

FDA will establish the small business adjustment factor every FY based on its best estimate of the number of small businesses that will pay a reduced fee for that year and the positive adjustment to the establishment fee of the remaining entities needed to achieve total fees equaling the amount FDA would have collected if no entity qualified for the small business reduction.  The estimate of the number of small businesses and the amount of the small business adjustment factor will be published in the Federal Register at least 60 days before the start of each FY.23

C.	Reinspection Fee

1.	In General

Under section 744K of the FD&C Act, beginning in FY 2015, an outsourcing facility will be assessed a reinspection fee each time it is subject to a reinspection.24  Reinspection is defined as: 

one or more inspections conducted under section 704 subsequent to an inspection conducted under such provision which identified noncompliance materially related to an applicable requirement of this Act, specifically to determine whether compliance has been achieved to the Secretary’s satisfaction.25

The reinspection fee is designed to reimburse FDA when it must visit a particular outsourcing facility more than once because of noncompliance identified during a previous inspection.  The reinspection fee assessed will be the reinspection fee for the fiscal year in which the reinspection takes place.26  Moreover, a reinspection fee will be incurred for each reinspection that occurs until FDA finds that the noncompliant conditions have been adequately addressed.27 

The reinspection fee will be equal to $15,000 multiplied by the inflation adjustment factor.28  The inflation-adjusted reinspection fee for each FY will be published in the Federal Register not later than 60 calendar days before the start of each FY.29 

2.	Small Business Reinspection Fees

Section 744K of the FD&C Act provides a small business reduction for only the annual establishment fee, not for the reinspection fee.30  Therefore, an outsourcing facility that is subject to reinspection will be charged the full inflation-adjusted reinspection fee for each reinspection even if the facility qualifies as a small business. 

D.	How to Qualify for a Small Business Reduction

1.	Which Entities Qualify for a Small Business Reduction?

An entity with gross annual sales totaling $1,000,000 or less in the 12 months ending on April 1 of the FY immediately preceding the FY in which the annual establishment fee is assessed may qualify for a small business reduction.31  Gross annual sales is defined as the “total worldwide gross annual sales, in United States dollars, for an outsourcing facility, including the sales of all of the affiliates of the outsourcing facility.”32  Sales include sales of all products, whether they are compounding-related or not.  Sales are not limited to sales of drugs.  Affiliate is defined as a “business entity that has a relationship with a second business entity if, directly or indirectly—(A) one business entity controls, or has the power to control, the other business entity; or (B) a third party controls, or has power to control, both of the business entities.”33

Entities that seek a small business reduction of the annual establishment fee must make a request for such a reduction by April 30 of the year preceding the fiscal year for which the entity is seeking a reduced fee.34 

2.	Content and Format of Request

To qualify for a small business reduction of the annual establishment fee, an entity must submit to FDA a written request for such a reduction and a certification that the entity meets the requirements for the reduction.35  The request must be submitted in a format specified by FDA in this guidance, and it must be submitted every year that the firm seeks to qualify as a small business.36  The format for submitting requests for a small business reduction of the annual establishment fee is Form 3908, attached as Appendix 1.37  The completed form should be submitted via email to [email protected], with the subject line containing “Outsourcing Facility Small Business Reduction Request.”

If an outsourcing facility does not have email access, it can mail a request to FDA via the carrier of its choice.  For the most updated physical mailing address, visit this website: http://www.fda.gov/aboutfda/centersoffices/officeofmedicalproductsandtobacco/cder/ucm382846.htm.
3.	Timing of Requests

Pursuant to section 744K(c)(4)(B) of the FD&C Act, an entity seeking a small business reduction must submit to FDA a written request for such a reduction no later than April 30 of the year immediately preceding the FY for which the fee reduction is sought,38 even if the entity has qualified for the small business reduction for the previous FY.  For example, an entity seeking a small business reduction for FY 201539 must submit its complete written small business reduction request no later than April 30, 2014. 

FDA will accept small business reduction requests until April 30 of each year.  FDA will review reduction requests, consulting with relevant Agency officials as appropriate.  FDA may request additional information from applicants during the review period.  FDA will respond to reduction requests in a timely fashion, based on available resources and collection time for additional information, though, in general, intends to advise the requesting entity of its decision within 60 calendar days of receipt of the request.  FDA intends to send a letter to the entity, via email (or regular mail if the request was by regular mail), notifying it of FDA’s decision.  Entities granted a reduction should maintain a copy of the letter for their records.

E.	How and When to Pay

1.	Annual Establishment Registration Fees 

Once an entity submits its registration information and FDA has reviewed the information and determined that it is complete, the entity will incur the annual establishment fee.40  FDA will send an invoice to the entity via email, to the email address indicated in the registration file, or via regular mail if email is not an option.  The invoice will contain information about the obligations incurred; the amount owed, including the small business reduction if the entity has qualified for that reduction; and instructions for paying the fee.  To facilitate timely payment of fees and registration, FDA expects to send invoices no later than three business days after receiving a registration submission.  Because entities will not be considered to be registered as outsourcing facilities until payment is received, FDA suggests that entities pay the invoiced amount immediately upon receiving the 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.

Entities that intend to submit registrations during the annual registration period that lasts from October 1 to December 31 should submit their registration information no later than December 10 of each year to allow enough time for review of the registration information, invoicing, and payment of fees before the end of the registration period.  As discussed in Section IV, an entity that does not pay its annual establishment fee will not be considered registered as an outsourcing facility for that FY.  Entities that have submitted registration information, but have not completed the payment process by December 31, the end of the registration period, will be removed from the list of registered outsourcing facilities as of January 1 of that FY41, and drugs compounded at the facility will not qualify for the exemptions under section 503B(a),42 unless and until the firm has re-registered and paid the fee.  

 2.	Reinspection Fees43

After FDA conducts a reinspection, it will send an invoice to the entity via email, to the email address indicated in the registration file, or via regular mail if email is not an option.  The invoice will contain information about the obligation incurred, the amount owed, and instructions for paying the fee.  The invoiced amount should be paid immediately to avoid statutory penalties.44 (See Section IV).  Once an entity has incurred a reinspection fee, the obligation to pay the fee cannot be discharged except through payment of the fee, unless FDA adjusts the invoice to reflect that no fee is due as a result of a reconsideration decision or successful appeal (see Section V).  If FDA does not receive the reinspection fee within 30 calendar days after invoicing, the fee obligation will be treated as a claim of the United States Government, subject to the provisions of subchapter II of Chapter 37 of Title 31, United States Code.45  Interest and fees will accrue until the obligation is satisfied. 


IV.	EFFECT OF FAILURE TO PAY FEES

An entity that does not pay its adjusted annual establishment fee for a given FY will not be considered registered as an outsourcing facility under section 503B of the FD&C Act for that FY.46  The facility will be considered registered, for purposes of section 503B(b), when it pays the total adjusted annual establishment fee for that FY.47 

Outsourcing facilities that registered in FY 2014 and wish to maintain their status as an outsourcing facility in FY 2015 must register during the FY 2015 registration period, which lasts from October 1, 2014, to December 31, 2014.  Failure to register and complete payment by December 31, 2014, will result in the loss of status as an outsourcing facility on January 1, 2015.48 

Entities that submit registrations outside of the annual registration period must pay all relevant fees to be deemed registered.  Failure to pay fees will result in the facility being deemed not registered for purposes of section 503B(b).49

Establishment and reinspection fees must be paid in their entirety.50  A shortfall in any amount will subject the facility to all relevant penalties.

All drugs manufactured, prepared, propagated, compounded, or processed by an outsourcing facility that has not paid the full amount of the required establishment fee or any applicable reinspection fee, will be deemed misbranded under section 502 of the FD&C Act.51  Such drugs will continue to be deemed misbranded until the fees owed by that outsourcing facility have been paid in full.  The outsourcing facility cannot distribute misbranded drugs in interstate commerce.52  In addition, because one of the requirements of section 503B(a) of the FD&C Act is the payment of fees, drugs compounded in a facility that has failed to pay fees are also considered to be unapproved new drugs subject to the premarket approval requirements of section 505 of the FD&C Act.53


V.	REFUNDS AND DISPUTE RESOLUTION

A.	Refunds

Section 744K of the FD&C Act makes no provision for the refund of fees associated with registration and reinspection of outsourcing facilities.  Therefore, FDA has determined that fees paid pursuant to sections 503B and 744K of the FD&C Act will not be refunded, even if an entity that has registered as an outsourcing facility subsequently withdraws its registration as an outsourcing facility. 

B.	Dispute Resolution

1.	Reconsideration Requests

Disputes that arise between an outsourcing facility and FDA about an FDA decision related to the fee provisions of sections 503B and 744K of the FD&C Act will be handled by CDER’s Division of User Fee Management and Budget Formulation, pursuant to 21 CFR 10.75.  For example, if an outsourcing facility maintains that FDA denied its small business reduction request in error, it may request a reconsideration of that decision.  Similarly, if an outsourcing facility believes that it was assessed a reinspection fee in error, it may request a reconsideration of that decision. 

FDA recommends that requests for reconsideration state the outsourcing facility’s rationale for its position that the decision was in error and include any additional information that is relevant to the outsourcing facility’s argument.  A request for reconsideration should be made within 30 days of the issuance of FDA’s decision.  FDA will issue a reconsideration decision, affirming or denying the outsourcing facility’s request and setting forth the basis for the decision.  FDA expects to issue a decision on most reconsideration requests within four months of receiving the request.

All requests for reconsideration should be sent via email to the Director of the Division of User Fee Management and Budget Formulation, at [email protected], with the subject title “Request for Reconsideration of Agency Decision – Outsourcing Facility Fee Determination.”

If an outsourcing facility does not have email access, it can mail a request to FDA via the carrier of its choice. For the most updated physical mailing address, visit this website: http://www.fda.gov/aboutfda/centersoffices/officeofmedicalproductsandtobacco/cder/ucm382846.htm 

2.	Appeal Request

If a request is denied upon reconsideration, the outsourcing facility can choose to appeal the denial in accordance with the procedures laid out in 21 CFR 10.75.  Requests for appeal should be made within 30 days of the issuance of FDA’s decision at the reconsideration stage.  The following information should be included in the appeal request:

    • The original Agency decision

    • The request for reconsideration

    • The decision on the reconsideration request

    • Argument in support of the outsourcing facility’s belief that the prior conclusions were in error

The appeal request should also contain particular references to information or analyses already submitted to FDA that the applicant believes is relevant to its position.  No new information should be presented in the request for an appeal.  All requests for appeals should be submitted in writing to the Director of CDER’s Office of Management, at [email protected], with the subject title “Appeal of Agency’s Decision at Reconsideration – Outsourcing Facility Fee Determination.”

If an outsourcing facility does not have email access, it can mail a request to FDA via the carrier of its choice.  For the most updated physical mailing address, visit this website: http://www.fda.gov/aboutfda/centersoffices/officeofmedicalproductsandtobacco/cder/ucm382846.htm.

APPENDIX 1:  FORM 3908