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Sequester Update and House Extension of CR

March 9, 2013

This week’s Analysis and Commentary offers some thoughts on the effects of the sequester and of the House’s extension of the CR through September 30, 2013.

The Sequester: As shown in this week’s Advocacy at a Glance, the sequester reduced FDA spending in FY 13 by about 5% or $209 million. This was done to achieve reduction in the federal deficit for FY 13. A rumor circulated about a week ago that the White House supported eliminating the user fee portion of the sequester, which would have returned $82 million to the agency to spend this year. The Alliance was never able to confirm this rumor and nothing has emerged that suggests it is true or likely to occur.

To absorb the $209 million without furloughs, most of the savings will have to come from unfilled and/or delayed filling of vacancies — a process that probably started months ago. Many offices are already short-staffed and, by the end of the fiscal year, most FDA offices will not have enough staff. Nothing will go completely undone, but nothing will be finished in the timeframe or with the thoroughness that would have occurred if the agency was adequately staffed.

The degree of harm to FDA’s mission — in effect, a death by a thousand cuts — will be hard to explain because the surface appearances (i.e., optics) may not look very different. For example, I would expect the agency to prioritize medical product applications that are closest to approval. As a result, total approvals this year might be impressive, despite the sequester. However, the offsetting cost to the new drug/device pipeline will be significant. Companies that might reasonably expect to have a “pre-IND meeting” or an “end of phase 2 meeting” in 6 to 8 weeks may wind up waiting 5 or 6 months. Tomorrow’s product successes may be sacrificed to maintaining today’s approvals. That cost will be real enough, just not very visible.

The House Continuing Resolution: FDA’s issues in the CR are about anomalies between FY 12 and FY 13 funding caused by passage of FDASIA. The CR does not impact any aspect of the sequestration, which is already in effect and is based on the agency’s funding level on March 2, 2013.

The House-passed CR extension (through September 30, 2013) does not address two issues. First, it does not authorize the higher user fee spending level (+$18 million over FY 12) that was contained in FDASIA. There is a technical disagreement about whether specific language is needed in the CR or whether the language in the FY 12 appropriations bill already permits the higher spending level.

Second, the House CR does not provide for collection and expenditure of the biosimilars user fees created by FDASIA. One source has told us this was an oversight on the House’s part, while another has said that there is a technical disagreement over whether CR language is needed. Either way, we fully expect House and Senate staff to resolve this in favor of assuring the biosimilars program is implemented. Nonetheless, there have been rumors that the biosimilars program will be halted. However, this would only be the case if the House intentionally and for policy reasons wants to do this and that the Senate acquiesces. This seems a completely unlikely result to us.

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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