Budget Policies Jeopardize FDA Funding, User Fees

Even though Congress authorized both existing and new user fees for the Food and Drug Administration several months ago through the FDA Safety & Innovation Act (FDASIA), efforts to cut the federal deficit raises questions about how those fees will be collected and used in the coming year. FDA, along with the rest of the federal government, is operating under a Continuing Appropriations Resolution (CR) through the end of March 2013. That keeps funding at 2012 levels and puts many new initiatives on hold until Congress fully approves 2013 appropriations bills.

In addition, Congress has mandated “sequestration” (or removal) of $109 billion in federal government outlays beginning Jan. 1, 2013 if certain deficit reduction goals are not met before then. An analysis by the Office of Management and Budget (OMB) indicates that FDA would lose more than $300 million, or about 8%, of its 2013 budget.

Almost half of that amount would come from user fees, according to the Alliance for a Stronger FDA, although just how that would occur – and where the fee money would go – is unclear. If user fee payments are sequestered, “they may be lost forever,” commented John Castellani, president of the Pharmaceutical Research and Manufacturers of America, in discussing challenges to industry and to FDA at the National Press Club last week. There is discussion about whether FDA user fees are sufficiently “unique” to be exempt from sequestration, and whether that policy would impose added impediments to new user fee programs for generic drugs and for biosimilars.

The picture was even murkier last week, when Congressional adoption of the CR appeared likely to stymie FDA collection of new fees authorized by the Generic Drug User Fee Amendments (GDUFA). That problem was remedied in late, “hotlined” action led by House Energy & Commerce Committee chairman Fred Upton (R-Mich) and ranking minority member Henry Waxman (D-Ca); their “technical corrections” bill (HR 6433) was adopted just before the legislators left Washington until after the November elections. FDA thus may collect fees for generic drug applications and from facilities, unless sequestration further complicates the picture.

Despite budget uncertainties, FDA officials say they plan to implement the new and revised fee programs, which involve hiring new staffers, developing training programs, issuing new guidances and a host of activities authorized by FDASIA. The agency is calculating the new fees for posting in the Federal Register, which sets the stage for fee collection 30 days later. A loss of fee revenues due to budget complications doesn’t mean that new FDASIA-authorized programs won’t start, FDA leaders insist, but they acknowledge that things may move more slowly.

Federal budget reductions also may cut into pharma revenues by spurring expansion of Medicare drug rebates as a way to cut spending, noted Castellani of PhRMA. He predicts more savings through extension of elements of the Medicare Part D drug program to Medicare Part B services, as well as a spectrum of policies that would stimulate the discovery of more new medicines. Castellani’s short list of pro-innovation polices include retention of 12-year exclusivity for biotech products, increased regulatory certainty under a “modern” FDA, firm support for research by the National Institutes of Health, and a pro-business environment that fosters investment.