1. Proposed Rule for Preventive Controls for Animal Food 1 Preliminary Regulatory Impact Analysis U.S. Food and Drug Administration

2. Benefits of Proposed Rule Reducing adulterated animal food incidents would: –Reduce the risk of serious illness and death to animals –Reduce the risk of adverse health effects to humans handling animal food, and –Reduce the risk of consuming human food derived from animals that consumed contaminated food 2

3. Fewer Illnesses The Preventive Controls for Animal Food rule is not expected to prevent all illnesses associated with animal food contamination. It is expected to reduce some portion of contamination events. 3

4. Three options for definition of very small business: (based on size of qualified facilities – exempt from preventive controls section) –Option 1: < $500k –Option 2: < $1 million –Option 3: < $2.5 million 4 Analysis of Economic Impacts

5. Total Domestic Costs 5 Total annualized domestic costs –$500k : $95 million –$1 million : $89 million –$2.5 million : $65 million –Average Annualized Cost: $17,700 per facility* (* facilities subject to both GMPs and preventive controls handling only animal food)

6. 6 Total Foreign Costs Total annualized foreign costs –$500k : $34 million –$1 million : $30 million –$2.5 million : $22 million

7. 7 Major Costs to Facilities Subject to Hazard Analysis and Preventive Controls Requirements Major costs are for: –Hazard analysis –Process controls –Various sanitation controls –Monitoring and verification activities –Corrective actions

8. 8 Costs to Qualified Facilities Total annualized cost under each option –$500k : $2.7 million –$1 million : $3.6 million –$2.5 million : $6.8 million –Average Annualized Cost: $1,800 per facility Learn about rule Attest to qualified status One-time label change Additional labor for GMPs

9. 9 Domestic Facility Count The rule covers most facilities required to register with FDA –We estimate 6,300 domestic facilities –Includes most FDA-regulated animal food establishments in the U.S. –Another 6,800 domestic facilities handle foods for both humans and animals

10. 10 Qualified Facilities From FDA Animal Food Facilities Registrations and Census data reported sales –1,500 facilities below $500,000 annually –2,000 facilities below $1 million annually, and –3,800 facilities below $2.5 million annually

11. 11 Foreign Facility Count We estimate 1,800 foreign facilities that only handle animal food –FDA’s Food Facility Registration database –Includes foreign facilities that have registered since 2010 –Most foreign facilities that import to the U.S. must satisfy the requirements of this rule –Another 3,900 foreign facilities registered as handling foods for both humans and animals

12. 12 Example of an Estimated Cost to a Facility Hazard analysis –Initial cost to conduct hazard analysis and create a written report 24 hours x average cost of $88/hour –Annual costs to update hazard analysis 50% of initial cost

13. 13 Primary Data Sources ERG Report – Cost analysis of draft rule FDA Food Registration Database CVM/FDA subject matter experts Food GMP Survey – current/baseline industry practices

14. 14 Primary Data Sources (cont.) Industry experts – expert elicitation about food industry practices Bureau of Labor Statistics, occupational employment statistics for animal food industry (2012) Economic Census data (2007) for facility sizes

15. Public data on current industry practices What it will cost to comply with the rule – individual provision cost estimates Costs to facilities handling human and animal foods Impact to foreign facilities 15 Some Areas for Your Comments

16. Whether the rule will accomplish intended risk reduction Which option to use – number of qualified facilities Alternative regulatory options 16 Some Areas for Your Comments (cont.)

17. Available at: http://www.fda.gov/downloads/Food/Guida nceRegulation/FSMA/UCM366905.pdf 17 Preliminary Regulatory Impact Analysis