FDA Only Winner as New Budget Battle Begins

Next year’s federal budget plan provides a nice increase in resources for FDA, but that’s about the only good news for the healthcare and biomedical research community. The proposal seeks to reduce resources for Medicare, Medicaid, the National Institutes of Health (NIH), and many important federal health and science programs, raising concerns about the future of medical innovation in the United States.

NIH faces a $4.5-billion cut that reduces its annual budget to $33 billion. That includes an $897-million drop for the National Cancer Institute and a $769-million cut for the National Institute of Allergy and Infectious Diseases. Such changes appear to undermine a high-profile administration plan for advancing research in pediatric cancer and for promoting innovation in vaccines and medicines to combat infectious diseases. It also would undermine the administration priority to halt the spread of HIV/AIDS in the US, which also would be compromised by reductions in funding for the Centers for Disease Control and Prevention (CDC) and for Medicaid, which provides care for many AIDS patients. In addition, the budget slashes support for the President’s Emergency Plan for AIDS Relief (PEPFAR), which has been credited with savings millions of lives in some 50 third-world nations and helping to reduce the spread of the virus to the US and globally.

The administration maps out a major overhaul of Medicaid by shifting it to block grant funding and expanding work requirements to all states, which is predicted to cut eligibility for millions. While these changes are dead-on-arrival on Capitol Hill, there could be ramifications for prescription drug coverage and reimbursement: one proposal is to launch a Medicaid pilot to evaluate the impact of five states establishing closed formularies for prescription drugs.

Cutting drug costs

In addition, the Trump Administration looks to use the budget process to implement its broader plan for lowering drug prices by $69 billion. The spending proposal lays out a host of initiatives to spur competition and limit federal payments for prescription drugs, many linked to broader reforms and budget cuts for Medicare and Medicaid.

Medicare Part D would save $74.7 billion over 10 years by excluding manufacturer discounts from beneficiary out-of-pocket payments, which would reduce the number of patients entering “catastrophic” coverage. Savings for Medicare Part B would come from limits on price increases and shifts in coverage of some drugs to Part D, where health plans and pharmacy benefit managers (PBMs) can negotiate prices. Another proposal would reduce reimbursement for newly approved drugs.

Drug prices also would be controlled by policies designed to increase competition from generics and biosimilars. Proposals aim to crack down further on pay-for-delay deals, limit price increases, eliminate cost-sharing on generics and biosimilars for low-income beneficiaries, and modify the 180-day exclusivity for a first-approved generic drug to prevent marketing delays. The tighter exclusivity provision would save more than $1 billion over 10 years for Medicare and Medicaid but is strongly opposed by generic-drug makers as likely to weaken incentives for investment in first generics and thus reduce competition. The administration also proposes limits on exclusivities awarded new chemical entities and strategies to reduce excessive use of citizen petitions to delay generic-drug marketing.

Boost for FDA

The bright spot in the administration’s budget is the increase in resources for FDA, with much of the added funds allotted to improved oversight of drugs, biologics, and medical devices. The administration requests a $643-million funding increase to $6.1 billion for fiscal year 2020 (begins Oct. 1, 2019). That total includes $3.3 billion in government outlays and $2.8 billion in user fees.

Oversight of human drugs and biologics, including field inspections, gets more than $300 million in additional funds to bring resources up to approximately $2 billion. This will continue support for initiatives to advance the development of effective medical products, to ensure the quality of compounded drugs, and to advance over-the-counter drug regulation. FDA also will support administration drug pricing initiatives by encouraging the development and marketing of generic drugs and biosimilars. And there’s an emphasis on taking further steps to combat the opioid epidemic and to reduce teen smoking. While the legislators may applaud many of these initiatives and policies, FDA funding is sure be caught up on heated wrangling over the many controversial provisions in the administration’s plan.