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Tick … Tick … Tick … Tick … Tick …

December 14, 2012

There is barely more than two weeks before the U.S. hits “the fiscal cliff.” For FDA, the chief component is the 8.2% cut in the agency’s budget that will occur as part of across-the-board (ATB) cuts that will occur on January 2, 2013 (“sequestration”). 

This would be a devastating blow to the agency — the immediate withdrawal of between $320 million and $350 million in FY 13 agency funding (including both appropriated and user fee revenues). There is no fixed list of activities that the FDA will drop without this money, but significant programmatic and manpower reductions would be impossible to avoid. Mission failure may not be an option for FDA, but it will be very hard to avoid.

Here are the top three questions we are being asked:

What is the status of negotiations?  It is hard to say where the stagecraft ends and the actual dealmaking begins. Based on public statements and leaks, President Obama and Speaker Boehner continue to talk and exchange ideas and proposals. It would appear they are far apart, but there is the possibility that a real deal is cooking behind the scenes. Primary issues: how much deficit reduction will come from revenue (marginal tax rates? a cap on deductions?) and how much will come from entitlement changes (the big three are Medicare, Social Security, and Medicaid)?

What is the role of sequestration in the larger picture? Based on the Alliance’s meetings on Capitol Hill, there is widespread agreement that last year’s agreement on spending caps (creating a trillion dollar, 10-year saving) are substantial and sufficient … and sequestration would go too far by enforcing further cuts. However, the risk of sequestration is still quite real because President Obama and Speaker Boehner may not reach a deal.

Even if a fiscal cliff deal is cut, substantial discretionary spending cuts ($300 billion or more) could be part of the package in lieu of sequestration. The total cuts might be less, but FDA could still be hurt. As a result, the Alliance opposes ATB cuts of any kind or amount. We also recognize that the larger the total discretionary cuts (even if not ATB), the more likely that FDA will be cut by some amount and the less likely there will be monies to provide the agency with the increases it needs.

What happens if there is no deal and the nation (and FDA) goes over the fiscal cliff?  Some thought leaders say that “going over the cliff” is neither immediate nor irreversible. Legal changes take effect, but the real world impact will take days for some changes, weeks for others. There would be time for a deal to still be worked out in January. I don’t know if it would/could work this way, but it seems worth mentioning because the clock is ticking and there is very little time left.

Note: This analysis and commentary is written by Steven Grossman, the Deputy Executive Director of the Alliance for a Stronger FDA.

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