Medical-device makers must be ignoring their lobbyists. What else could explain the Medical Device User Fee and Modernization Act, more commonly called MDUFMA (ma-doof-ma). Though called a “user fee,” MDUFMA is actually a tax, and in fact a double tax after income taxes, that medical-device companies pay the FDA to cover the Agency's budget shortfalls. No competent lobbyist would have said it's a good idea.

MDUFMA is a little like corporate welfare in reverse. For instance, look how government agencies treat other industries. If you were soybean farmers, 70% of your product's value would come from the Dept. of Agriculture, according to Farmers Weekly. If you built solar panels and wind mills, many governments would provide hefty tax credits to customers for products that otherwise would take decades to pay back. And if you were in the oil business, your effective income-tax rate would be only 11%, compared to an 18% average for non-oil industry firms.

But medical firms are different. Their products improve and save lives. Why should that bestow the honor of being stuck with MDUFMA? It's a little like Exxon-Mobile making up for the DOE budget shortfalls.

MDUFMA has worked well only for the FDA. The fees were supposed to be “predictable,” but the Agency let them get out of hand. For instance, PMA (premarket approvals, for products unlike others on the market) fees for large companies started at $154,000 in 2002 and ratcheted up to $281,000 this year. That is an 82% increase in the five years. (To the FDA's credit, it waives the fee for the first product from small companies.) High fees tend to make management second guess decisions to forge ahead with new designs. What's more, FDA observers say PMA reviews have slowed. In 2002, 49% of PMAs were issued in 180 FDA days. The rate dropped to 39% by 2005, according to one insider.

The good news is that the FDA recognizes the unfairness of the current situation and is working with organizations, such as Medical Device Manufacturers Association (MDMA) to restructure the fees and show a little hustle, or what passes for hustle in Washington. For instance, the goal once was to review 37% of PMAs in 150 FDA days. MDUFMA 2 boosts that to 60%. “We have established a structure that would lower the overall fees across the board in exchange for new fees,” says Mark Leahey, MDMA executive director. “There will be annual registration fees of about $1,700 in exchange for PMAs dropping from $281,000 to about $5,000.” The 510(k)s (fees and approvals for versions of similar products) drop about 40%. Tables at www.fda.gov/cdrh/mdufma/mdufmaii-comparison.html list fees for 2007 to 2012.

“What's more, the FDA has promised to be more proactive,” adds Leahey. “For instance, if the FDA finds an omission or two when a company submits a 510(k), regulators will email or phone the company to resolve issues in the first 90 days.” Sadly, that was not always the case and the FDA's lack of cooperation stalled approvals.

To be fair, the FDA is stretched thin, especially since the discovery of China exporting flawed products and tainted foods. But it is the FDA's responsibility to petition Congress for proper funding and it should be Congress' job to spend taxpayer dollars where they do the most good. That's asking a lot from a House that seems content giving away thousands to nonexistent organizations (www.politico.com/blogs/thecrypt/0707/Whats_in_your_wallet.html) and without remorse.

MDUFMA 2 is a good start. But it does not take us from a place where double taxation is an acceptable solution to fiscal irresponsibility. What are your ideas for properly funding the FDA?