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User Fees for the FCN Program – Vigilance Required

June 7, 2012

Now that Congress has reauthorized the Prescription Drug User Fee Act (PDUFA), further attention may be given, at least by the White House, to other possible revenues enhancers for federal agencies, including the Food and Drug Administration (FDA). In addition to prescription drugs, the Obama Administration budget included several user fee programs for Fiscal Year 2013. Among them is a line estimate for approximately $5 million in fees to fund the Food Contact Notification (FCN) Program. The FCN program has allowed FDA to clear the use of about a thousand food contact materials over the last dozen years.

The FCN Program, which has been in place since early 2000, is viewed as highly successful by both industry and FDA. Its continuation is not guaranteed from year-to-year, however; the Federal Food, Drug, and Cosmetic Act provides that the FCN Program shall only operate in years when sufficient funds have been appropriated by Congress. In other words, the FCN Program is dependent upon sufficient funding being available to support the Program's activities. While industry did not object, in principle, to the concept of implementing reasonable user fees to support the Program at its inception, there are several potential problems that could arise if such fees were to be implemented now, and especially at the levels suggested.

First, there is just the basic philosophical issue of justifying payment of user fees for a program designed to benefit public health and welfare. Many think that such programs, which do not involve the granting of special benefits to the recipients, as does a licensing program, ought to be paid through general revenues and not special levies. In addition, there is a widely held perception that the payment of fees by industry to review new food-contact materials might undermine the credibility of the Agency's safety determinations in the public eye.

Third, under the current proposal being circulated at FDA, user fees would include not only a one-time upfront fee, but also an annual maintenance fee as well. The annual maintenance fee would be charged per FCN to companies that hold an effective Notification. What's more, because FDA's regulations currently do not have a procedure in place to withdraw an effective Notification on grounds other than safety, once an FCN becomes effective, the annual maintenance fee would effectively become a tax levied on a Notifier in perpetuity. Such fees would discourage companies from filing FCNs for fear that future markets may not support the costs involved with maintaining the effective FCN on FDA's inventory. This could stifle innovation and product development.

There are other problems with a user fee-funded FCN Program. As has happened with other fee-based programs at FDA and agencies such as the Environmental Protection Agency (EPA), once imposed, it is as sure as the sun rising that the initial fees charged will only increase over time. The current annual cost to administer the FCN Program totals approximately $10 million dollars, according to FDA. Thus, the proposed user fee program would only cover a portion of the funds needed for the Agency to carry out its safety reviews of new food-contact materials. Do you suspect that future government administrations might try to make-up that difference?

In many of the years since the FCN Program's inception, the President's budget either has proposed user fees or elimination of the Program. In response, industry and other interested stakeholders have successfully convinced Congress to authorize funding to continue the Program. A similar effort is underway again this year, and likely will be required every year here on out. That being said, vigilance on the part of industry will be necessary if it is to prevent the institution of such a user fee program.