[Federal Register Volume 81, Number 212 (Wednesday, November 2, 2016)]
[Notices]
[Pages 76403-76406]
[FR Doc No: 2016-26490]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79187; File No. SR-NYSE-2016-58]

Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Granting Approval of Proposed Rule Change Amending Section 907.00 of
the NYSE Listed Company Manual To Adjust the Timing of Entitlements to
Complimentary Products and Services for Special Purpose Acquisition
Companies

October 28, 2016.

I. Introduction

    On August 26, 2016, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend Section 907.00 of the NYSE Listed Company
Manual (``Manual'') to adjust the timing of entitlements to certain
complimentary products and services for special purpose acquisition
companies. The proposed rule change was published in the Federal
Register on September 13, 2016.\3\ The Commission received no comments
on the proposal. This order grants approval of the proposed rule
change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78782 (September 7,
2016), 81 FR 62937 (September 13, 2016) (``Notice'').
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II. Description of the Proposal

    The Exchange proposed to amend Section 907.00 of the Manual to
adjust the timing of certain entitlements to complimentary products and
services for special purpose acquisition companies (``SPACs'') under
that rule. In its filing, the Exchange stated that a SPAC is a special
purpose company formed for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization, or
similar business combination with one or more operating businesses or
assets.\4\ The Exchange further stated that to qualify for initial
listing, a SPAC must meet the requirements of Sections 102.01A \5\ and
102.06 of the Manual. Section 102.06 of the Manual provides that the
Exchange will consider on a case-by-case basis the appropriateness for
listing of SPACs that conduct an initial public offering of which at
least 90% of the proceeds, together with the proceeds of any other
concurrent sales of the SPAC's equity securities, will be held in a
trust account controlled by an independent custodian until consummation
of a business combination in the form of a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization, or similar
business combination with one or more operating businesses or assets
with a fair market value equal to at least 80% of the net assets held
in trust (a ``Business Combination'' or the ``Business Combination
Condition'').\6\
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    \4\ Id. at 62938.
    \5\ Section 102.01A sets forth the minimum share distribution
criteria for listing, and requires that companies listing in
connection with an initial public offering have at least 400 holders
of 100 shares or more and at least 1,100,000 publicly held shares.
    \6\ See Notice, supra note 3, at 62938. Section 102.06 also
provides, among other things, that the SPAC must be liquidated if no
Business Combination has been consummated within a specified time
period not to exceed three years, and that the Exchange will
promptly commence delisting procedures with respect to any SPAC that
fails to consummate its Business Combination within (i) the time
period specified by its constitutive documents or by contract or
(ii) three years, whichever is shorter.
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    As set forth in Section 907.00 of the Manual, the Exchange offers
complimentary products and services for a period of 24 calendar months
from the date of initial listing to a category of listed companies
defined as ``Eligible New Listings.'' \7\ Under the current rule,
Eligible New Listings are defined as: (i) Any U.S. company that lists
common stock on the Exchange for the first time and any non-U.S.
company that lists an equity security on the Exchange under Section
102.01 or 103.00 of the Manual for the first time, regardless of
whether such U.S. or non-U.S. company conducts an offering; and (ii)
any U.S. or non-U.S. company emerging from a bankruptcy, spinoff (where
a company lists new shares in the absence of a public offering), and
carve-out (where a company carves out a business line or division,
which then conducts a separate initial public offering).
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    \7\ Under Section 907.00 of the Manual the Exchange also offers
certain complimentary products and services to ``Eligible Current
Listings'' that satisfy the requirements of that Section as well as
other products and services that all listed issuers are eligible to
receive.
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    Currently, pursuant to Section 907.00 of the Manual, Eligible New
Listings are eligible for services as either a Tier A or Tier B
company.\8\ Under Tier A, for

Eligible New Listings with a global market value of $400 million or
more, calculated as of the date of listing on the Exchange, the
Exchange offers market surveillance products and services (with a
commercial value of approximately $55,000 annually), market analytics
products and services (with a commercial value of approximately $30,000
annually), web-hosting products and services (with a commercial value
of approximately $16,000 annually), web-casting products and services
(with a commercial value of approximately $6,500 annually), corporate
governance tools (with a commercial value of approximately $50,000
annually), and news distribution products and services (with a
commercial value of approximately $20,000 annually) for a period of 24
calendar months from the date of listing. Under Tier B, for Eligible
New Listings with a global market value of less than $400 million,
calculated as of the date of listing on the Exchange, the Exchange
offers web-hosting products and services (with a commercial value of
approximately $16,000 annually), market analytics products and services
(with a commercial value of approximately $30,000 annually), web-
casting products and services (with a commercial value of approximately
$6,500 annually), corporate governance tools (with a commercial value
of approximately $50,000 annually), and news distribution products and
services (with a commercial value of approximately $20,000 annually)
for a period of 24 calendar months from the date of listing.\9\
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    \8\ The Commission previously found that providing these
services and products to companies in different tiers is consistent
with the Act, explaining that ``[w]hile not all issuers receive the
same level of services, NYSE has stated that trading volume and
market activity are related to the level of services that the listed
companies would use in the absence of the complimentary services
arrangements'' and that ``the criteria for satisfying the tiers are
the same for all issuers.'' See Securities Exchange Act Release No.
65127 (August 12, 2011), 76 FR 51449, 51452 (August 18, 2011)
(approving NYSE-2011-20) (``NYSE 2011 Order'').
    \9\ The Exchange noted that it does not propose to make any
changes in its filing to the values of the various services provided
to eligible listed companies discussed above, which values are
specified in Section 907.00 of the Manual. See Notice, supra note 3,
at 62938.
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    Notwithstanding the foregoing, however, if an Eligible New Listing
begins to use a particular product or service provided for under
Section 907.00 within 30 days of its initial listing date, the
complimentary period begins on the date of first use.
    The Exchange has now proposed to amend Section 907.00 of the Manual
to provide that a SPAC will no longer be deemed to be an Eligible New
Listing at the time of its initial listing, and instead will be deemed
to be an Eligible New Listing at such time as it has completed the
Business Combination Condition, if it remains listed thereafter on the
Exchange. Thus, under the proposal, a SPAC will no longer be eligible
to receive complimentary products and services under Section 907.00 as
an Eligible New Listing at the time of its initial listing, but will
instead be entitled to receive such products and services if and when
it meets the Business Combination Condition. A SPAC that remains listed
on the Exchange after meeting the Business Combination Condition will
be entitled to the complimentary products and services under Section
907.00 as an Eligible New Listing for a period of 24 months from the
date on which it meets the Business Combination Condition.
Notwithstanding the foregoing, however, if such a company begins to use
a particular product or service provided for under Section 907.00
within 30 days of meeting the Business Combination Condition, the
complimentary period for that product or service will begin on the date
of first use.

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act.\10\ Specifically, the Commission believes it is consistent with
the provisions of Sections 6(b)(4) and (5) of the Act, \11\ in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among Exchange
members, issuers, and other persons using the Exchange's facilities,
and is not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers. Moreover, the Commission believes that
the proposed rule change is consistent with Section 6(b)(8) of the Act
\12\ in that it does not impose any burden on competition not necessary
or appropriate in furtherance of the purposes of the Act.
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    \10\ 15 U.S.C. 78f. In approving this proposed rule change, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
    \11\ 15 U.S.C. 78f(b)(4) and (5).
    \12\ 15 U.S.C. 78f(b)(8).
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    The Commission believes that it is consistent with the Act for the
Exchange to adjust the timing of when SPACs are eligible to receive
complimentary products and services under Section 907.00 of the Manual
as Eligible New Listings from the time of initial listing to the time
that it completes a Business Combination Condition. The Exchange
represented that SPACs are unlikely to utilize these complimentary
products and services at the time of initial listing, but would likely
find these products and services useful if they remain listed after
they meet the Business Combination Condition.\13\ The Exchange
explained that at the time of initial listing, SPACs are typically not
focused on their stock price and investor relations to the same degree
as operating companies.\14\ The Exchange stated that the complimentary
products and services provided to Eligible New Listings under Section
907.00 are targeted in large part toward the market-driven concerns of
newly-listed operating companies, and are therefore less useful to
SPACs that have not met the Business Combination Condition.\15\ The
Exchange stated that a SPAC that has met the Business Combination
Condition, on the other hand, is similarly situated to a newly-formed
publicly-traded operating company.\16\ Therefore, the Exchange said
that it believes that the complimentary products and services provided
to Eligible New Listings under Section 907.00 will be as relevant and
attractive to a SPAC that has met the Business Combination Condition as
to the newly-listed operating companies that are generally eligible for
those services.\17\
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    \13\ See Notice, supra note 3, at 62938-39.
    \14\ Id. at 62938. The Exchange stated in its filing that SPACs
raise money on a one-time basis and typically trade at a price that
is very close to their liquidation value. Id.
    \15\ Id.
    \16\ Id.
    \17\ Id.
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    In addition, the Exchange stated that in many cases SPACs will
consider transferring to a new listing venue at the time they meet the
Business Combination Condition, and that the proposed rule change will
enable the Exchange to compete for the retention of these companies by
offering them a package of complimentary products and services that
assist their transition to becoming a publicly listed operating company
for the first time.\18\
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    \18\ Id. at 62939.
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    The Exchange also stated that it recognizes that not all SPACs will
meet the Business Combination Condition and that some listed SPACs will
therefore never become eligible for the additional complimentary
products and services provided to Eligible New Listings under Section
907.00 that would be provided to an otherwise similarly qualified
operating company that is newly-listed on the Exchange.\19\ However,
the Exchange reiterated that, given the specific characteristics of the
SPAC structure, the complimentary products and services provided to
Eligible New Listings under Section 907.00 are generally not of any

particular value to a SPAC prior to meeting the Business Combination
Condition, and the Exchange therefore believes that those SPACs that
never meet the Business Combination Condition and therefore never
qualify for these additional products and services provided to Eligible
New Listings under Section 907.00 will not suffer any meaningful
detriment as a consequence.\20\
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    \19\ Id.
    \20\ Id.
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    As noted in the previous order approving Section 907.00 of the
Manual, Section 6(b)(5) of the Act does not require that all issuers be
treated the same; rather, the Act requires that the rules of an
Exchange not unfairly discriminate between issuers.\21\ In its
proposal, the Exchange has made representations that reasonably justify
treating a SPAC that decides to continue to list on the Exchange after
meeting the Business Combination Condition similar to a newly-listed
operating company. The Commission further notes that a SPAC that
completes the Business Combination Condition will be receiving the same
package of services as an Eligible New Listing and that it will not be
receiving any additional benefits or services by virtue of the proposed
rule change. The Commission notes that the rule proposal delays the
timing of the additional complimentary products and services offered to
an Eligible New Listing to the time the SPAC becomes an operating
company. Up until that time, the listed SPAC is treated like any other
currently listed company in that it would receive the complimentary
products and services that all listed companies receive, and could also
receive additional products and services if it so qualifies under the
provisions for Eligible Current Listings.\22\ The proposal does not
alter these other services that a SPAC could receive when initially
listed.
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    \21\ 15 U.S.C. 78f(b)(5); see also NYSE 2011 Order, supra note
8, at 51452.
    \22\ See Section 907.00 of the Manual; see also NYSE 2011 Order,
supra note 8, at 51450. Under Section 907.00, all listed companies
receive complimentary services through the Exchange's Market Access
Center as well as 24 months of complimentary access to whistleblower
hotline services. See Securities Exchange Act Release No. 76127
(October 9, 2015), 80 FR 62584 (October 16, 2015) (approving NYSE-
2015-36) (``NYSE 2015 Order'').
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    The Commission has previously found that the package of
complimentary products and services offered to Eligible New Listings is
equitably allocated among issuers consistent with Section 6(b)(4) of
the Act and that describing the values of the products and services
adds greater transparency to the Exchange's rules and to the fees
applicable to such companies.\23\ The Commission also previously noted
that describing in the Manual the products and services available to
listed companies and their associated values will ensure that
individual listed companies are not given specially negotiated packages
of products or services to list or remain listed that would raise
unfair discrimination issues under the Act.\24\
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    \23\ See NYSE 2011 Order, supra note 8, at 51452.
    \24\ Id.
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    Based on the foregoing, the Commission believes that the Exchange
has provided a sufficient basis for adjusting the timing of when SPACs
are eligible to qualify for additional complimentary products and
services, as an Eligible New Listing under Section 907.00 of the
Manual, from the time of the SPAC's initial listing to the time that a
SPAC meets the Business Combination Condition, and that this change
does not unfairly discriminate among issuers and is therefore
consistent with the Act. For similar reasons, and as the value of the
services offered are not changing, only the timing of when such
services are provided to a SPAC, we find that the proposal is
consistent with Section 6(b)(4) of the Act.
    The Commission also believes that it is consistent with the Act for
the Exchange to allow the complimentary period for a particular service
as an Eligible New Listing to begin on the date of first use if a SPAC
that has met the Business Combination Condition begins to use the
service within 30 days after the date of meeting the Business
Combination Condition. The Exchange stated in its filing that, in its
experience, it can take companies a period of time to review and
complete necessary contracts and training for the complimentary
products and services under Section 907.00 following their becoming
eligible for those services and that allowing this modest 30 day
period, if the company needs it, will help to ensure that the company
will have the benefit of the full period permitted under the rule to
actually use the services, thereby enabling companies to receive the
full intended benefit.\25\ The Commission notes that Section 907.00
currently allows an Eligible New Listing to begin using services within
30 days of its initial listing date.\26\ As noted in the NYSE 2015
Order, the Commission believes that this would provide only a short
window of additional time to allow companies to finalize their
contracts for the complimentary products and services. The Commission
notes that under the proposed rule this additional 30 day window would
only be available to SPACs that have determined to remain listed on the
Exchange after meeting the Business Combination Condition and thereby
treats such SPACs, at the time they qualify for listing as an operating
company, the same as other newly-listed companies that qualify as
Eligible New Listings under Section 907.00.\27\
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    \25\ See Notice, supra note 3, at 62939.
    \26\ See NYSE 2015 Order, supra note 22.
    \27\ The Commission expects the Exchange to track the start (and
end) date of each free service.
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    The Commission believes that the Exchange is responding to
competitive pressures in the market for listings in making this
proposal. Specifically, the Exchange has represented that in many
cases, SPACs will consider transferring to a new listing venue at the
time they meet the Business Combination Condition, and that the
proposed rule change would enable it to compete for the retention of
these companies by offering them a package of complimentary products
and services that assist their transition to being a publicly listed
operating company for the first time.\28\ Further, the Commission notes
that other exchanges have filed similar rule changes with respect to
the timing of complimentary services offered to SPACs under their
rules,\29\ and the Commission has recently approved one such rule
change.\30\ The Commission also notes that nothing in the Exchange's
rules requires a SPAC to remain listed on the Exchange after it meets
the Business Combination Condition and that such company is free to
list on other markets. Accordingly, the Commission believes that the
proposed rule reflects the current competitive environment for exchange
listings among national securities exchanges, and is appropriate and
consistent with Section 6(b)(8) of the Act.\31\
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    \28\ See Notice, supra note 3, at 56722.
    \29\ See Securities Exchange Act Release No. 78586 (August 16,
2016), 81 FR 56720 (August 22, 2016) (SR-NYSEMKT-2016-62) and
Securities Exchange Act Release No. 79025 (October 3, 2016), 81 FR
69881 (October 7, 2016) (SR-NASDAQ-2016-106).
    \30\ See Securities Exchange Act Release No. 79056 (October 6,
2016), 81 FR 70449 (October 12, 2016) (approving NYSEMKT-2016-62).
    \31\ 15 U.S.C. 78f(b)(8).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\32\ that the proposed rule change (SR-NYSE-2016-58) be, and it
hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).

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    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-26490 Filed 11-1-16; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 81, Number 45 (Tuesday, March 8, 2016)]
[Notices]
[Pages 12174-12175]
[FR Doc No: 2016-05045]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76955A; File No. SR-NYSEArca-2015-93]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of
Designation of a Longer Period for Commission Action on Proposed Rule
Change, as Modified by Amendment No. 1, Relating to Listing and Trading
of Shares of the Cumberland Municipal Bond ETF Under NYSE Arca Equities
Rule 8.600; Correction

March 2, 2016.
AGENCY: Securities and Exchange Commission.

ACTION: Correction.

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SUMMARY: The Securities and Exchange Commission published a document in
the Federal Register on January 27, 2016 (81 FR 4724), concerning a
Notice of Designation of a Longer Period for Commission Action on
Proposed Rule Change, as Modified by Amendment No. 1, Relating to
Listing and Trading of Shares of the Cumberland Municipal Bond ETF
under NYSE Arca Equities Rule 8.600. The document contained a
typographical error.

FOR FURTHER INFORMATION CONTACT: Kristie Diemer, Division of Trading
and Markets, Securities and Exchange

Commission, 100 F Street NE., Washington, DC 20549,<PHONE_NUMBER>.

Correction

    In the Federal Register of January 27, 2016, in FR Doc. 2016-01536,
on page 4724, in the third line in the second column, correct the
reference ``April 27, 2016'' to read ``March 11, 2016.''

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-05045 Filed 3-7-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 76, Number 152 (Monday, August 8, 2011)]
[Proposed Rules]
[Pages 48062-48070]
[FR Doc No: 2011-19957]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

21 CFR Part 882

[Docket No. FDA-2011-N-0504]

Effective Date of Requirement for Premarket Approval for Cranial
Electrotherapy Stimulator

AGENCY: Food and Drug Administration, HHS.

ACTION: Proposed rule.

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SUMMARY: The Food and Drug Administration (FDA) is proposing to require
the filing of a premarket approval application (PMA) or a notice of
completion of a product development protocol (PDP) for the Cranial
Electrotherapy Stimulator. The Agency is also summarizing its proposed
findings regarding the degree of risk of illness or injury designed to
be eliminated or reduced by requiring this device to meet the statute's
approval requirements and the benefits to the public from the use of
the device. In addition, FDA is announcing the opportunity for
interested persons to request that the Agency change the classification
of the cranial electrotherapy stimulator based on new information. This
action implements certain statutory requirements.

DATES: Submit either electronic or written comments by November 7,
2011. Submit requests for a change in classification by August 23,
2011. FDA intends that, if a final rule based on this proposed rule is
issued, anyone who wishes to continue to market the device will need to
submit a PMA within 90 days of the effective date of the final rule.
Please see section XII of this document for the effective date of any
final rule that may publish based on this proposal.

ADDRESSES: You may submit comments, identified by Docket No. FDA-2011-
N-0504 by any of the following methods:

Electronic Submissions

    Submit electronic comments in the following ways:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.

Written Submissions

    Submit written submissions in the following ways:
     Fax:<PHONE_NUMBER>.
     Mail/Hand delivery/Courier (For paper, disk, or CD-ROM
submissions): Division of Dockets Management (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
    Instructions: All submissions received must include the Agency name
and Docket No. FDA-2011-N-0504 for this rulemaking. All comments
received may be posted without change to http://www.regulations.gov,
including any personal information provided. For additional information
on submitting comments, see the ``Comments'' heading of the
SUPPLEMENTARY INFORMATION section of this document.
    Docket: For access to the docket to read background documents or
comments received, go to http://www.regulations.gov and insert the
docket number, found in brackets in the heading of this document, into
the ``Search'' box and follow the prompts and/or go to the Division of
Dockets Management, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Timothy Marjenin, Center for Devices
and Radiological Health, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 66, rm. 2258, Silver Spring, MD 20993-0002, 301-
796-6502, e-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background--Regulatory Authorities

    The Federal Food, Drug, and Cosmetic Act (the FD&C Act), as amended
by the Medical Device Amendments of 1976 (the 1976 amendments) (Pub. L.
94-295), the Safe Medical Devices Act of 1990 (SMDA) (Pub. L. 101-629),
and the Food and Drug Administration Modernization Act of 1997 (FDAMA)
(Pub. L. 105-115), the Medical Device User Fee and Modernization Act of
2002 (MDUFMA) (Pub. L. 107-250), the Medical Devices Technical
Corrections Act (Pub. L. 108-214), and the Food and Drug Administration
Amendments Act of 2007 (Pub. L. 110-85), among other amendments,
establish a comprehensive system for the regulation of medical devices
intended for human use. Section 513 of the FD&C Act (21 U.S.C. 360c)
established three categories (classes) of devices, reflecting the
regulatory controls needed to provide reasonable assurance of their
safety and effectiveness. The three categories of devices are class I
(general controls), class II (special controls), and class III
(premarket approval).
    Under section 513 of the FD&C Act, devices that were in commercial
distribution before the enactment of the 1976 amendments, May 28, 1976
(generally referred to as preamendments devices), are classified after
FDA has: (1) Received a recommendation from a device classification
panel (an FDA advisory committee); (2) published the panel's
recommendation for comment, along with a proposed regulation
classifying the device; and (3) published a final regulation
classifying the device. FDA has classified most preamendments devices
under these procedures.
    Devices that were not in commercial distribution prior to May 28,
1976 (generally referred to as postamendments devices) are
automatically classified by section 513(f) of the FD&C Act into class
III without any FDA rulemaking process. Those devices remain in class
III and require premarket approval unless, and until, the device is
reclassified into class I or II or FDA issues an order finding the
device to be substantially equivalent, in accordance with section
513(i) of the FD&C Act, to a predicate device that does not require
premarket approval. The Agency determines whether new devices are
substantially equivalent to predicate devices by means of premarket
notification procedures in section 510(k) of the FD&C Act (21 U.S.C.
360(k)) and 21 CFR part 807.
    A preamendments device that has been classified into class III may
be marketed by means of premarket notification procedures (510(k)
process) without submission of a PMA) until FDA issues a final
regulation under section 515(b) of the FD&C Act (21 U.S.C. 360e(b))
requiring premarket approval. Section 515(b)(1) of the FD&C Act
establishes the requirement that a preamendments device that FDA has
classified into class III is subject to premarket approval. A
preamendments class III device may be commercially distributed without
an approved PMA or a notice of completion of a PDP until 90 days after
FDA issues a final rule requiring premarket approval for the device, or
30 months after final classification of the device under section 513 of
the FD&C Act, whichever is later. Also, a preamendments device subject
to the rulemaking procedure under section 515(b) of the FD&C Act is not
required to have an approved investigational device exemption (IDE)
(see part 812 (21 CFR part 812)) contemporaneous with its interstate
distribution until the date identified by FDA in the final rule
requiring the submission of a PMA for the device. At that time, an IDE
is required only if a PMA has not been submitted or a PDP completed.
    Section 515(b)(2)(A) of the FD&C Act provides that a proceeding to
issue a final rule to require premarket approval shall be initiated by
publication of a notice of proposed rulemaking containing: (1) The
regulation; (2) proposed findings with respect to the degree of risk of
illness or injury designed to be eliminated or reduced by requiring the
device to have an approved PMA or a declared completed PDP and the
benefit to the public from the use of the device; (3) an opportunity
for the submission of comments on the proposed rule and the proposed
findings; and (4) an opportunity to request a change in the
classification of the device based on new information relevant to the
classification of the device.
    Section 515(b)(2)(B) of the FD&C Act provides that if FDA receives
a request for a change in the classification of the device within 15
days of the publication of the notice, FDA shall, within 60 days of the
publication of the notice, consult with the appropriate FDA advisory
committee and publish a notice denying the request for change in
reclassification or announcing its intent to initiate a proceeding to
reclassify the device under section 513(e) of the FD&C Act. Section
515(b)(3) of the FD&C Act provides that FDA shall, after the close of
the comment period on the proposed rule and consideration of any
comments received, issue a final rule to require premarket approval or
publish a document terminating the proceeding together with the reasons
for such termination. If FDA terminates the proceeding, FDA is required
to initiate reclassification of the device under section 513(e) of the
FD&C Act, unless the reason for termination is that the device is a
banned device under section 516 of the FD&C Act (21 U.S.C. 360f).
    When a proposed rule to require premarket approval for a
preamendments device is finalized, section 501(f)(2)(B) of the FD&C Act
(21 U.S.C. 351(f)(2)(B)) requires that a PMA or notice of completion of
a PDP for any such device be filed within 90 days of the date of
issuance of the final rule or 30 months after the final classification
of the device under section 513 of the FD&C Act, whichever is later. If
a PMA or notice of completion of a PDP is not filed by the later of the
two dates, commercial distribution of the device is required to cease
since the device would be deemed adulterated under section 501(f) of
the FD&C Act.
    The device may, however, be distributed for investigational use if
the manufacturer, importer, or other sponsor of the device complies
with the IDE regulations. If a PMA or notice of completion of a PDP is
not filed by the later of the two dates, and the device does not comply
with IDE regulations, the device is deemed to be adulterated within the
meaning of section 501(f)(1)(A) of the FD&C Act, and subject to seizure
and condemnation under section 304 of the FD&C Act (21 U.S.C. 334) if
its distribution continues. Shipment of devices in interstate commerce
will be subject to injunction under section 302 of the FD&C Act (21
U.S.C. 332), and the individuals responsible for such shipment will be
subject to prosecution under section 303 of the FD&C Act (21 U.S.C.
333). In the past, FDA has requested that manufacturers take action to
prevent the further use of devices for which no PMA or PDP has been
filed and may determine that such a request is appropriate for the
cranial electrotherapy stimulator.
    The FD&C Act does not permit an extension of the 90-day period
after issuance of a final rule within which an application or a notice
is required to be filed. The House Report on the 1976 amendments states
that: ``[t]he thirty month grace period afforded after

classification of a device into class III * * * is sufficient time for
manufacturers and importers to develop the data and conduct the
investigations necessary to support an application for premarket
approval (H. Rept. 94-853, 94th Cong., 2d sess. 42 (1976)).''
    The SMDA added section 515(i) to the FD&C Act requiring FDA to
review the classification of preamendments class III devices for which
no final rule requiring the submission of PMAs has been issued, and to
determine whether or not each device should be reclassified into class
I or class II or remain in class III. For devices remaining in class
III, the SMDA directed FDA to develop a schedule for issuing
regulations to require premarket approval. The SMDA does not, however,
prevent FDA from proceeding immediately to rulemaking under section
515(b) of the FD&C Act on specific devices, in the interest of public
health, independent of the procedures of section 515(i). Proceeding
directly to rulemaking under section 515(b) of the FD&C Act is
consistent with Congress' objective in enacting section 515(i), i.e.,
that preamendments class III devices for which PMAs have not been
previously required either be reclassified to class I or class II or be
subject to the requirements of premarket approval. Moreover, in this
proposal, interested persons are being offered the opportunity to
request reclassification of the cranial electrotherapy stimulator.

II. Dates New Requirements Apply

    In accordance with section 515(b) of the FD&C Act, FDA is proposing
to require that a PMA or a notice of completion of a PDP be filed with
the Agency for the cranial electrotherapy stimulator within 90 days
after issuance of any final rule based on this proposal. An applicant
whose device was legally in commercial distribution before May 28,
1976, or whose device has been found to be substantially equivalent to
such a device, will be permitted to continue marketing such class III
devices during FDA's review of the PMA or notice of completion of the
PDP. FDA intends to review any PMA for the device within 180 days, and
any notice of completion of a PDP for the device within 90 days of the
date of filing. FDA cautions that under section 515(d)(1)(B)(i) of the
FD&C Act, the Agency may not enter into an agreement to extend the
review period for a PMA beyond 180 days unless the Agency finds that
``the continued availability of the device is necessary for the public
health.''
    FDA intends that under Sec.  812.2(d), the preamble to any final
rule based on this proposal will state that, as of the date on which
the filing of a PMA or a notice of completion of a PDP is required to
be filed, the exemptions from the requirements of the IDE regulations
for preamendments class III devices in Sec.  812.2(c)(1) and (c)(2)
will cease to apply to any device that is: (1) Not legally on the
market on or before that date or (2) legally on the market on or before
that date but for which a PMA or notice of completion of a PDP is not
filed by that date, or for which PMA approval has been denied or
withdrawn.
    If a PMA or notice of completion of a PDP for the cranial
electrotherapy stimulator is not filed with FDA within 90 days after
the date of issuance of any final rule requiring premarket approval for
the device, commercial distribution of the device must cease. The
device may be distributed for investigational use only if the
requirements of the IDE regulations are met. The requirements for
significant risk devices include submitting an IDE application to FDA
for its review and approval. An approved IDE is required to be in
effect before an investigation of the device may be initiated or
continued under Sec.  812.30. FDA, therefore, cautions that IDE
applications should be submitted to FDA at least 30 days before the end
of the 90-day period after the issuance of the final rule to avoid
interrupting investigations.

III. Proposed Findings With Respect to Risks and Benefits

    As required by section 515(b) of the FD&C Act, FDA is publishing
its proposed findings regarding: (1) The degree of risk of illness or
injury designed to be eliminated or reduced by requiring that the
cranial electrotherapy stimulator have an approved PMA or a declared
completed PDP and (2) the benefits to the public from the use of the
cranial electrotherapy stimulator.
    These findings are based on the reports and recommendations of the
advisory committee (panel) for the classification of this device along
with information submitted in response to the 515(i) Order, (74 FR
16214, April 9, 2009), and any additional information that FDA has
encountered. Additional information regarding the risks as well as
classification associated with this device type can be found in the
following documents published in the Federal Register on these dates:
November 28, 1974 (43 FR 55716), September 4, 1979 (44 FR 51770),
January 6, 1989 (54 FR 550), August 31, 1993 (58 FR 45865), August 24,
1995 (60 FR 43967), November 22, 1996 (61 FR 59448), January 28, 1997
(62 FR 4023), and June 4, 1997 (62 FR 30456 and 62 FR 30600).

IV. Devices Subject to This Proposal

    Cranial electrotherapy stimulator (21 CFR 882.5800)

A. Identification

    A cranial electrotheraphy stimulator is a device that applies
electrical current to a patient's head to treat insomnia, depression,
or anxiety.

B. Summary of Data

    The Neurological Devices Panel that discussed original
classification for the cranial electrotherapy stimulator (CES) device
in 1977 and 1978 ultimately recommended that the device be classified
into class III because satisfactory device effectiveness had not been
demonstrated. The panel considered information from the National
Research Council, which reviewed 88 published studies on CES and
concluded that the device has not been shown to be effective in
treating any of the conditions for which it was prescribed. In
addition, the panel indicated that it was not possible to establish an
adequate performance standard for CES because the characteristics of
the electrical current necessary for potential effectiveness were not
known. The panel believed that general controls would not provide
sufficient control over these characteristics, and that the device
presented a potential unreasonable risk of illness or injury to the
patient if the practitioner relied on the device, and it was
ineffective in treating the patient's illness. Therefore, the panel
recommended that premarket approval was necessary to assure the safety
and effectiveness of CES devices.
    In support of a subsequent proposed rule in 1993 for classification
of CES into class III, FDA performed a literature review and identified
additional studies that had been performed for CES. After a review of
the scientific literature, FDA concluded that the effectiveness of CES
had still not been established by adequate scientific evidence.
    FDA has performed a literature search for studies of CES published
after the 1993 proposed rule (January 1, 1993, to present). Many
studies were excluded from further review because they were conducted
on very specific populations (e.g., alcoholics or other types of
substance abuse), and therefore were not representative of the general
population suffering from insomnia, anxiety, or depression. Six studies
were identified for further review (Refs. 1 through 6). FDA also
identified two relevant meta-analyses (Refs. 7 and 8).
    The Bystritsky et al. study (Ref. 1) was conducted open-label, and
on only 12

subjects. The study involved observational baseline versus post-
treatment without a control and therefore provided insufficient
evidence of safety and effectiveness. The Heffernan study (Ref. 2)
concludes that a single CES treatment may have physiologic effects;
however, no outcomes of anxiety, depression or insomnia were measured
and the study was conducted on only 20 subjects. The Overcash study
(Ref. 3) was a retrospective study design and used an anxiety rating
scale that was not validated. The Voris study (Ref. 4) analyzed only a
subgroup of ``psychiatric subjects'' which included many types of
anxiety disorders as well as non-anxiety psychiatric disorders. The
subgroup represents a diagnostically heterogeneous group. The subgroup
analysis was not pre-specified and the number of subjects per subgroup
was not specified. The Hyun study (Ref. 5) was a randomized controlled
trial of 60 subjects. However, the indication under investigation was
preoperative anxiety, which may not be indicative of an Axis I anxiety
disorder. Moreover, the outcome measure, a 5-point Likert scale rating
of anxiety, was not a standardized validated rating instrument. The
Winick study (Ref. 6), which was a randomized controlled trial of 33
subjects with anxiety prior to dental procedures and utilized a 7-point
Likert scale, suffers from the same limitations as the Hyun study.
    The O'Conner meta-analysis (Ref. 7) examined the effect of CES on
reduction of primary and secondary withdrawal symptoms among various
chemically dependent populations. The results of this analysis do not
relate to the question of safety and effectiveness since the labeled
indications for CES currently include insomnia, depression, or anxiety,
and not withdrawal symptoms of chemical dependence. The Klawansky meta-
analysis (Ref. 8) was based on an examination of literature on CES
versus sham treatment. Although the analysis showed CES to be more
effective than sham for anxiety, the study populations showed great
heterogeneity of diagnostic categories (e.g., in many cases anxiety was
not the primary diagnosis, but rather one of a number of symptomatic
outcome measures collected during a trial). Therefore, it is unclear
whether the finding can be generalized to support the effectiveness of
CES in homogeneous populations of individuals suffering from anxiety,
depression, or insomnia. Also, many of the studies evaluated in the
Klawansky meta-analysis involved insufficient blinding.
    FDA has concluded from a review of the scientific literature and
the information provided in the 515(i) call for information (74 FR
16214) that the effectiveness of CES has not been established by
adequate scientific evidence and the Agency continues to agree with the
panel's recommendation.

C. Risks to Health

     Worsening of the condition being treated--If the device is
not effective and the patient is not treated in a conventional manner,
the patient's psychological condition may worsen.
     Skin irritation--The electrodes or the conductive cream
used with the electrodes may cause skin irritation.
     Headaches--Reported cases of adverse effects of CES
devices include headaches following treatment with electrical
stimulation.
     Potential risk of seizure--electrical stimulation of the
brain may result in seizures, particularly in patients with a history
of seizure.
     Blurred vision--placement of electrodes over the eyes may
cause blurred vision.
     Potential adverse effects from electrical stimulation of
the brain--The physiological effects associated with electrical
stimulation of the brain by these devices have not been studied
systematically; therefore, adverse effects which may be caused by these
electrical stimuli remain unknown.

V. PMA Requirements

    A PMA for the cranial electrotherapy simulator must include the
information required by section 515(c)(1) of the FD&C Act. Such a PMA
should also include a detailed discussion of the risks identified
previously, as well as a discussion of the effectiveness of the device
for which premarket approval is sought. In addition, a PMA must include
all data and information on: (1) Any risks known, or that should be
reasonably known, to the applicant that have not been identified in
this document; (2) the effectiveness of the device that is the subject
of the application; and (3) full reports of all preclinical and
clinical information from investigations on the safety and
effectiveness of the device for which premarket approval is sought.
    A PMA must include valid scientific evidence to demonstrate
reasonable assurance of the safety and effectiveness of the device for
its intended use (see Sec.  860.7(c)(2)). Valid scientific evidence is
``evidence from well-controlled investigations, partially controlled
studies, studies and objective trials without matched controls, well-
documented case histories conducted by qualified experts, and reports
of significant human experience with a marketed device, from which it
can fairly and responsibly be concluded by qualified experts that there
is reasonable assurance of the safety and effectiveness of a device
under its conditions of use. * * * Isolated case reports, random
experience, reports lacking sufficient details to permit scientific
evaluation, and unsubstantiated opinions are not regarded as valid
scientific evidence to show safety or effectiveness. * * *'' (21 CFR
860.7(c)(2)).

VI. PDP Requirements

    A PDP for the cranial electrotherapy stimulator may be submitted in
lieu of a PMA, and must follow the procedures outlined in section
515(f) of the FD&C Act. A PDP must provide: (1) A description of the
device, (2) preclinical trial information (if any), (3) clinical trial
information (if any), (4) a description of the manufacturing and
processing of the device, (5) the labeling of the device, and (6) all
other relevant information about the device. In addition, the PDP must
include progress reports and records of the trials conducted under the
protocol on the safety and effectiveness of the device.

VII. Opportunity To Request a Change in Classification

    Before requiring the filing of a PMA or notice of completion of a
PDP for a device, FDA is required by section 515(b)(2)(A)(i) through
(b)(2)(A)(iv) of the FD&C Act and Sec.  860.132 to provide an
opportunity for interested persons to request a change in the
classification of the device based on new information relevant to the
classification. Any proceeding to reclassify the device will be under
the authority of section 513(e) of the FD&C Act.
    A request for a change in the classification of these devices is to
be in the form of a reclassification petition containing the
information required by Sec.  860.123, including new information
relevant to the classification of the device.
    The Agency advises that to ensure timely filing of any such
petition, any request should be submitted to the Division of Dockets
Management (see ADDRESSES) and not to the address provided in Sec.
860.123(b)(1). If a timely request for a change in the classification
of these devices is submitted, the Agency will, within 60 days after
receipt of the petition, and after consultation with the appropriate
FDA resources, publish an order in the Federal Register that either
denies the

request or gives notice of its intent to initiate a change in the
classification of the device in accordance with section 513(e) of the
FD&C Act and 21 CFR 860.130 of the regulations.

VIII. Environmental Impact

    The Agency has determined under 21 CFR 25.30(h) that this action is
of a type that does not individually or cumulatively have a significant
effect on the human environment. Therefore, neither an environmental
assessment nor an environmental impact statement is required.

IX. Analysis of Impacts

    FDA has examined the impacts of the proposed 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 Agencies 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). The Agency believes that this proposed rule is not a
significant action under Executive Order 12866.
    The Regulatory Flexibility Act requires Agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. The Agency proposes to certify that the rule would
not have a significant economic impact on a substantial number of small
entities.
    Section 202(a) of the Unfunded Mandates Reform Act of 1995 requires
that Agencies prepare a written statement, which includes an assessment
of anticipated costs and benefits, before proposing ``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 inflation is $136 million, using the most current (2010) Implicit
Price Deflator for the Gross Domestic Product. FDA does not expect this
proposed rule to result in any one-year expenditure that would meet or
exceed this amount.

A. Benefits of the Proposed Rule

    The proposed requirement for PMAs or PDPs for CES would generate
social benefits equal to the value of the information generated by the
safety and effectiveness tests that CES producers would be required to
conduct under the proposed call for PMAs or PDPs. Provided first to
FDA, this information would eventually assist physicians, patients and
insurance providers in making more informed decisions about CES.
    There is reason to believe that current decisions about CES use are
based on incomplete information. In their 1995 meta-analysis of CES
research, Klawansky et al. (Ref. 8) find that most CES studies in the
literature are beset with weaknesses, such as small sample size,
incomplete statistical reporting, and potential bias from authors who
have commercial interests in CES products. Klawansky and coauthors also
express concern that only three of the 18 studies they examined were
truly double-blinded, and patient blinding may have been insufficient
in some cases due to the difficulty of mimicking in sham treatment the
sensation produced by CES. More recent literature indicates that there
is still much uncertainty about the safety and effectiveness of CES.
    If consumers, up until now, have been overestimating the safety and
effectiveness of CES devices, then demand for these products would
decrease as a result of the call for PMAs or PDPs, and consumers would
purchase fewer CES devices and services than under the previous process
whereby CES devices were cleared under the 510(k) process. For all the
units purchased under the 510(k) clearance process that would not be
purchased under the PMA or PDP approval process, society is currently
incurring a cost equal to the difference between the producer's cost of
producing that unit and the dollar value of the health benefit
experienced by the consumer. The avoidance of this cost represents the
per-unit benefit to society of the proposed requirement for PMAs or
PDPs; summing over all currently-marketed units yields society's total
benefit. This sum is bounded above by current consumer expenditure on
CES devices (further discussion of this point appears in the Technical
Appendix in section IX.D of this document).
    Consumer expenditure on CES can be approximated by finding total
producer revenue (this is only an approximation because any applicable
taxes drive a wedge between expenditure and revenue). FDA estimates
that there are approximately 11 producers currently marketing CES
devices. Six of these producers appear in FDA's Data universal
numbering system database, with sales revenue for the six ranging from
$100,000 to $1.2 million per year. Manta.com (Ref. 9) reports sales
revenue of less than $0.5 million for one of the producers not
appearing in Data universal numbering system. (It appears that few CES
producers market non-CES goods or services, so most of the firms'
revenue can be attributed to CES sales.) The average annual sales
revenue of the 7 producers for whom we have data is $515,000. Assuming
that this average equals the CES industry's overall average yields an
estimate of annual CES producer revenue of 11 x $515,000=$5.67 million.
As mentioned previously, in the case where additional safety and
effectiveness information decreases demand, this revenue total provides
an upper bound on the estimated benefit to society of requiring PMAs or
PDPs for CES devices.
    If the additional testing associated with class III PMA or PDP were
to reveal that CES devices are safer and more effective than consumers
currently believe, then demand for these products would increase. In
this case, consumers currently purchase too few rather than too many
CES devices as a result of incomplete information, and the benefit of
the requirement for PMAs or PDPs would come from the increased use and
associated health benefits of the devices. As discussed in the
Technical Appendix in section IX.D of this document, FDA cannot in this
case estimate a bound on the total social benefit of requiring PMAs or
PDPs. FDA requests comment on this issue and on all methods and results
of our benefits estimation.

B. Costs of the Proposed Rule

    Under the proposed rule, FDA would require producers in this
industry to obtain PMA or establish a PDP before marketing new
products. Currently, a CES producer receives clearance to market by
submitting a 510(k). Therefore, the rule-induced cost per new product
would be the difference between the cost of preparing and submitting a
PMA application (which we assume to be approximately the same with PDP
as with traditional PMA) and the cost of preparing and submitting a
510(k) application. Blozan and Tucker (Ref. 10) estimate the cost of an
average 510(k) at $500; since the mean number of pages for the 510(k)
submissions in their sample is 24, the estimated cost per page is $21,
or $36 after adjusting for inflation (Ref. 11). FDA records indicate
that, recently, the one or two cranial electrotherapy stimulator 510(k)
submissions received per year have consisted of several hundred pages
each. Assuming an average of 300 pages per submission and a cost per
page of $36 yields an average cost of preparing and submitting a 510(k)
of $11,000. FDA

has estimated an upper bound on the cost of PMA at approximately
$1,000,000 (see, for example, 73 FR 7498 at 7501, February 8, 2008);
this yields a difference of $989,000 between the costs of PMA and
510(k) preparation. Multiplying this cost difference by the recent
average of 1.5 new CES submissions per year yields an annual rule-
induced cost equal to $1.48 million. Additionally, producers of CES
products that are already on the market would need to submit PMA
applications, costing approximately $1 million each. FDA believes that
there are approximately 13 such products, so there would be a rule-
induced upfront cost of $13 million.
    These cost estimates are only correct if no producers would be
dissuaded from introducing new products or seeking approval for
currently-marketed products by the cost of submitting a PMA application
or by changes in the possibility that FDA grants approval. In cases
where producers are dissuaded from entering or attempting to stay in
the market, the cost to industry of the proposed rule would be the
foregone expected profit on the withdrawn or withheld CES devices,
which is necessarily less than the cost of PMA submission (otherwise,
the producers in question would not be dissuaded from seeking PMA); the
$13 million upfront and $1.48 million annual estimates mentioned
previously thus provide upper bounds on the submission-related cost
that would be borne by industry. Excluded from these totals is the
welfare loss that would be borne by consumers who would, in the absence
of the proposed rule, use the CES devices that would be withdrawn or
withheld from the market as a result of the call for PMAs or PDPs. Due
to the lack of sufficient market data, we cannot quantify these
consumers' welfare loss. FDA requests comment on this issue and on all
methods and results of our cost estimation.
    In addition to the cost to industry of preparing and submitting
PMAs or PDPs, the proposed rule would impose review costs on FDA.
Geiger (Ref. 12) estimated that, for devices reviewed by FDA's Center
for Devices and Radiological Health in 2003 and 2004, review costs were
$563,000 per PMA and $13,400 per 510(k). Updated for inflation (with
Ref. 11) to 2010 dollars, these review costs become $653,000 per PMA
and $15,500 per 510(k). Thus, the proposed rule's review-related costs
are expected to equal $8.49 million (= 13 x $653,000) upfront and
$956,000 (= 1.5 x [$653,000 -$15,500]) per subsequent year. A portion
of this total will be paid by industry in the form of user fees, with
the remainder coming from general revenues. The CES manufacturers
currently registered with FDA have annual revenues well under $100
million, so they would likely be eligible for small business user fees,
which are currently set at $59,705 for a premarket application (PMA or
PDP) and $2,174 for a 510(k) submission (75 FR 45641 at 45643). Thus,
user fees would likely cover $776,000 (= 13 x $59,705) of upfront and
$86,000 (= 1.5 x [$59,705 -$2,174]) of subsequent annual rule-induced
review costs. Because annual revenues for CES manufacturers are also
below $30 million, CES manufacturers submitting first premarket
applications may qualify for user fee waivers; such cases would
increase the portion of FDA review costs coming from general revenues
above the current estimates of $7.71 million upfront and $870,000 per
subsequent year and decrease the anticipated rule-induced change in
user fee collections.
    Table 1 of this document displays all quantified benefits and costs
of the proposed rule. We reiterate that most of our estimates represent
extreme upper bounds. For both benefits and costs, the likely effects
of the rule would be much smaller than the estimates appearing in table
1.

                              Table 1--Estimated Upper Bounds of Benefits and Costs
                                                  [$ thousands]
----------------------------------------------------------------------------------------------------------------
                                                         3% Discount rate                7% Discount rate
                                                 ---------------------------------------------------------------
                                                      Annual       Present value      Annual       Present value
----------------------------------------------------------------------------------------------------------------
Ongoing Benefit:
    Better-Informed Consumer Decisions..........           5,665          48,324           5,665          39,789
    Benefits: Ten-Year Total....................  ..............          48,324  ..............          39,789
Upfront Costs:
    Industry PMA or PDP Preparation.............          13,000          13,000          13,000          13,000
    User Fees...................................             776             776             776             776
    FDA Review, Net of User Fees................           7,710           7,710           7,710           7,710
Ongoing Costs:
    Industry PMA or PDP Preparation.............           1,484          12,656           1,484          10,421
    User Fees...................................              86             736              86             606
    FDA Review, Net of User Fees................             870           4,945             870           4,072
Costs: Ten-Year Total \1\.......................  ..............          39,823  ..............          36,584
----------------------------------------------------------------------------------------------------------------
\1\ Costs borne by consumers (in the form of welfare loss) are not estimated.

C. Impact on Small Entities

    The Regulatory Flexibility Act requires Agencies to prepare an
initial regulatory flexibility analysis if a proposed rule would have a
significant effect on a substantial number of small businesses, non-
profit organizations, local jurisdictions or other entities. Even
though the producers of CES devices do tend to be small, only a very
few entities participate in this market. FDA estimates that there are
approximately 11 producers currently marketing CES devices; there may
also be a handful of affiliated businesses that would be affected by
the requirement for PMAs or PDPs. Therefore, FDA tentatively concludes
that this proposed rule would not have a significant economic impact on
a substantial number of small entities. We request comment on this
issue.

D. Technical Appendix

    The supply-demand diagrams of figure 1 of this document illustrate
the changes in the market for CES devices and services that would occur
if the additional testing associated with class III pre-market approval
were to reveal that CES devices are less safe and effective than
consumers currently believe. In Panel A, the benefit of proposed
requirement for PMAs or PDPs is represented by the shaded area below

the current market supply curve, above the better-informed, post-call
for PMA demand curve (Demand1) and between the old and new quantities
purchased (determined by the intersections of the pre- and post-call
for PMAs or PDPs demand curves with the current supply curve or the
vertical axis). A similar shaded benefit area appears in Panel B, but
in that case, there is an offsetting loss (shown as the shaded triangle
between the pre- and post-call for PMAs or PDPs supply curves) caused
by CES producers passing on some costs related to PMAs and PDPs to
consumers and consumers therefore purchasing even fewer CES devices or
services than new information indicates they should. The overall
benefit of the rule in Panel B is the difference between the areas of
the Benefit and Loss triangles. In both panels of Figure 1, total CES
spending by consumers, equal to the revenue collected by CES producers
and shown as the rectangle LMNO, provides an upper bound on the amount
of the shaded rule-induced social benefit. While total spending/revenue
always provides an overestimate of the social benefit, the amount of
the over-estimation may range from moderate, as in Panel A (the case in
which CES products disappear from the market), to extreme, as in Panel
B (the case in which there is continued use of at least some CES
products).
[GRAPHIC] [TIFF OMITTED] TP08AU11.171

    If the additional testing associated with class III marketing
approval increases consumers' confidence in the safety and
effectiveness of CES devices, then demand for these products would
increase, as depicted in figure 2 of this document. In this case,
consumers currently purchase too few rather than too many CES devices
and services as a result of incomplete information. The benefit to
society of providing information can, as in Panel A of figure 1, be
depicted graphically as the area between the pre-call for PMA or PDP
supply curve and the post-call for PMA or PDP demand curve, and between
the old and new quantities consumed (determined by the intersections of
the pre- and post-call for PMA or PDP demand curves with the pre- and
post-call for PMA or PDP supply curves), but because the revenue
rectangle LMNO does not contain the shaded benefit area, FDA cannot in
this case estimate a bound on the total social benefit.

[GRAPHIC] [TIFF OMITTED] TP08AU11.172

X. Federalism

    FDA has analyzed this proposed rule in accordance with the
principles set forth in Executive Order 13132. FDA has determined that
the proposed rule, if finalized, would not contain policies that would
have substantial direct effects on the States, on the relationship
between the National Government and the States, or on the distribution
of power and responsibilities among the various levels of government.
Accordingly, the Agency tentatively concludes that the proposed rule
does not contain policies that have federalism implications as defined
in the Executive order and, consequently, a federalism summary impact
statement is not required.

XI. Paperwork Reduction Act of 1995

    This proposed rule refers to currently approved collections of
information found in FDA regulations. These collections of information
are subject to review by the Office of Management and Budget (OMB)
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). The
collections of information in 21 CFR part 812 have been approved under
OMB control number 0910-0078; the collections of information in 21 CFR
part 814, subpart B, have been approved under OMB control number 0910-
0231; and the collections of information under 21 CFR part 801 have
been approved under OMB control number 0910-0485.

XII. Proposed Effective Date

    FDA is proposing that any final rule based on this proposal become
effective on the date of its publication in the Federal Register or at
a later date if stated in the final rule.

XIII. Comments

    Interested persons may submit to the Division of Dockets Management
(see ADDRESSES), either electronic or written comments regarding this
document. It is only necessary to send one set of comments. It is no
longer necessary to send two copies of mailed comments. Identify
comments with the docket number found in brackets in the heading of
this document. Received comments may be seen in the Division of Dockets
Management between 9 a.m. and 4 p.m., Monday through Friday.

XIV. References

    The following references have been placed on display in the
Division of Dockets Management (see ADDRESSES), and may be seen by
interested persons between 9 a.m. and 4 p.m., Monday through Friday.
(FDA has verified the Web site addresses, but we are not responsible
for any subsequent changes to the Web sites after this document
publishes in the Federal Register.)

1. Bystritsky A, L. Kerwin, J. Feusner, ``A Pilot Study of Cranial
Electrotherapy Stimulation for Generalized Anxiety Disorder,''
Journal of Clinical Psychiatry, 69(3): 412-417, 2008.
2. Heffernan, Michael, ``The Effect of a Single Cranial
Electrotherapy Stimulation on Multiple Stress Measures,'' The
Townsend Letter for Doctors and Patients, 147: 60-64, 1995.
3. Overcash, Stephen J., ``Cranial Electrotherapy Stimulation in
Patients Suffering From Acute Anxiety Disorders,'' American Journal
of Electromedicine, 16(1): 49-51, 1999.
4. Voris, Marshall D, ``An Investigation of the Effectiveness of
Cranial Electrotherapy Stimulation in the Treatment of Anxiety
Disorders Among Outpatient Psychiatric Patients, Impulse Control
Parolees and Pedophiles,'' Manuscript submitted for publication.
Delos Mind/Body Institute, Dallas and Corpus Christi, TX: 1-19,
1995.
5. Hyun J.K., Y.K. Woon, S.L. Yoon, et al., ``The Effect of Cranial
Electrotherapy Stimulation on Preoperative Anxiety and Hemodynamic
Responses.'' Korean Journal of Anesthesiology, 55: 657-61, 2008.
6. Winick, R.L., ``Cranial Electrotherapy Stimulation (CES): A Safe
and Effective Low Cost Means of Anxiety Control in a Dental
Practice,'' General Dentistry, 47(1): 50-55, 1999.
7. O'Connor M.E., F. Bianco, R. Nicholson, ``Meta-analysis of
Cranial Electrostimulation (CES) in Relation to the Primary and
Secondary Symptoms of Substance Withdrawal,'' Presented at the 12th
annual meeting of the Bioelectromagnetics Society, June 14, 1991.
8. Klawansky S., A. Yeung, C. Berkey, et al., ``Meta-analysis of
Randomized Controlled Trials of Cranial Electrostimulation,'' The
Journal of Nervous and Mental Disease, 183(7): 478-485, 1995.

9. Manta: Vital Info on Small Businesses, http://www.manta.com,
accessed June 11, 2010.
10. Blozan, Carl F. and Steven A. Tucker, ``Premarket Notifications:
The First 24,000,'' Medical Device & Diagnostic Industry: 59-69,
January 1986.
11. U.S. Department of Commerce, Bureau of Economic Analysis, 2010,
National Income and Product Accounts Table 1.1.9., http://www.bea.gov/national/nipaweb/SelectTable.asp, accessed March 25,
2011.
12. Geiger, Dale R. FY 2003 and 2004 Unit Costs for the Process of
Medical Device Review, http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/Overview/MedicalDeviceUserFeeandModernizationActMDUFMA/ucm109216.pdf,
accessed September 2005.

List of Subjects in 21 CFR Part 882

    Medical devices, Neurological devices.

    Therefore, under the Federal Food, Drug, and Cosmetic Act and under
authority delegated to the Commissioner of Food and Drugs, it is
proposed that 21 CFR part 882 be amended as follows:

PART 882--NEUROLOGICAL DEVICES

    1. The authority citation for 21 CFR part 882 continues to read as
follows:

    Authority: 21 U.S.C. 351, 360, 360c, 360e, 360j, 371.

    2. Section 882.5800 is amended by revising paragraph (c) to read as
follows:

Sec.  882.5800  Cranial electrotherapy stimulator.

* * * * *
    (c) Date PMA or notice of completion of PDP is required. A PMA or
notice of completion of a PDP is required to be filed with the Food and
Drug Administration on or before [A DATE WILL BE ADDED 90 DAYS AFTER
DATE OF PUBLICATION OF A FUTURE FINAL RULE IN THE FEDERAL REGISTER],
for any cranial electrotherapy stimulator device that was in commercial
distribution before May 28, 1976, or that has, on or before [A DATE
WILL BE ADDED 90 DAYS AFTER DATE OF PUBLICATION OF A FUTURE FINAL RULE
IN THE FEDERAL REGISTER], been found to be substantially equivalent to
any cranial electrotherapy stimulator device that was in commercial
distribution before May 28, 1976. Any other cranial electrotherapy
stimulator device shall have an approved PMA or declared completed PDP
in effect before being placed in commercial distribution.

    Dated: August 2, 2011.
Nancy K. Stade,
Deputy Director for Policy, Center for Devices and Radiological Health.
[FR Doc. 2011-19957 Filed 8-5-11; 8:45 am]
BILLING CODE 4160-01-P