The sequester alternative passed by the House last week is better for non-defense discretionary spending but the difference may be viewed as marginal. It is definitely not a solution. Under the sequester, FDA faces potential across-the-board cuts in the 8% range (about $200 million). Under the House alternative, the cut might be more in the range of $150 to $170 million and there is a chance that the Appropriations committee might choose to find savings in programs other than FDA.

These are just negotiating positions for the House relative to budget discussions that will need to be held with the Senate in the post-election session. Although there may well be a few dollars difference between sequester and the House alternative, the only thing to feel hopeful about is that mandatory program spending is finally on the table. If some type of tax reform were also part of the package, then it is possible that the burden of deficit reduction imposed on FDA and similar agencies might actually lessen when talks finally get underway.

Meantime, the FY 13, pre-sequester funding situation for FDA is starting to become clearer. Below is a chart that compares FY 12 with a “pieced together” look at the Senate position. It is based on the actions of the Appropriations Committee, the CBO score of the Senate PDUFA reauthorization bill, and indications of the likely fate in the Senate of various revenue elements requested by the President.

The chart should not be taken literally — rather it is a status check based on a couple of different Senate sources. Its assessment of the relative relationships between appropriations and user fees is also probably fairly accurate. On the other hand, the exact amount that the reauthorized PDUFA program will raise in FY 13 is a slightly different amount in three different sources. The number used here is the one in the Senate CBO score.

FY 12 vs. Senate FY 13 — Combining Senate Appropriations-passed Bill Plus CBO Scoring of S.2516, Senate PDUFA Reauthorization Legislation

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

• Senate Releases CBO Report Scoring Costs of PDUFA Legislation. Just prior to taking their user fee reauthorization bill to the Senate floor, the Senate HELP Committee released the CBO report on the costs of the legislation. The report can be found by clicking here.  The report concludes that:
  • All the user fee money collected will be spent, but because outlays (actual expenditures) lags spending authority (and collection of the funds), the bill has a positive 5 year total and marginally contributes to reducing the deficit.
  • There is about $100M per year in new non-user fee programming, rising to about $200M per year by the fifth year.
  • There may be some impact on VA, Medicare, Medicaid, etc. drug spending but the plusses and the minuses just about even out (our comment: the analysis is based on so many assumptions that it probably doesn’t have much predictive value).

• With the Senate appropriations committee having reported its FY 13 FDA funding and now with the release of the CBO estimates to correct the Senates user fee numbers, this week’s Analysis and Commentary section includes a snapshot of the Senate position on FY 13 FDA funding, including user fees.

• Drugs Approved Faster in US than Europe or Canada According to an Article in the May 16 Issue of the New England Journal of Medicine. The article concludes that:  For novel therapeutic agents approved between 2001 and 2010, the FDA reviewed applications involving novel therapeutics more quickly, on average, than did the EMA or Health Canada, and the vast majority of these new therapeutic agents were first approved for use in the United States.

The Act also calls for a sequester (across-the-board) cut in federal discretionary spending (and some mandatory spending) on January 2, 2013, split 50-50 between defense and non-defense spending. This would be in the range of 8% to 9% and would have the long-term effect of generating an additional $1.2 trillion in savings over 10 years. FDA’s share of the cuts in FY 13 would be in the range of $200 million.

The Congress still has until next January to come up with an alternative to the sequester. The House reconciliation bill that passed on Thursday was the House budget committee’s first effort to use entitlements, mandatory programs, and tax policy to pay for (offset) part of the savings (cuts) that would otherwise have come from the sequester. This is strictly House “positioning” in preparation for negotiations with the Senate after the election, although it is possible that Senate Republicans will offer it as an amendment to other legislation in the near future. The Senate did not adopt a budget resolution this year or issue “reconciliation instructions” to Senate tax and authorizing committees and, thus, has no similar bill.

We have mixed feelings about the House reconciliation effort. It is definitely good for us that the House is starting early to review deficit reduction strategies that are not focused on the appropriations process. However, given that the House’s primary motivation is protecting defense, the bottom-line result may not be any better for non-defense discretionary programs, including FDA.

As the week went on, there continued to be tweaking of the House reconciliation package. Our understanding is that the final version results in cuts in non-defense discretionary spending that are substantial, but still less than would be required under the sequester. Further, we have been told that the appropriations committee will be able to allocate the cuts according to priorities, rather than having an automatic across the board cut. Next week’s Analysis and Commentary will contain final details and further discuss the implications for FDA.

In any case, our focus needs to remain on the FDA’s central, indispensible role in keeping Americans safe and healthy … and how that role continues to grow independent of any Congressional efforts to shrink government. FDA needs to be an exception to any deficit reduction efforts (whether by appropriations, sequester or some sequester-alternative).

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

• Commissioner Hamburg Presents to Alliance Quarterly Membership Meeting. The Alliance held its quarterly member meeting on Tuesday and we were honored to have Dr. Hamburg as our guest. Alliance President Margaret Anderson interviewed her for about 40 minutes and our member’s questions filled the remainder of the hour.
  • Dr. Hamburg described the key points she makes when trying to tell FDA’s story. She emphasizing that FDA receives only about $8.25 per American per year to oversee nearly a quarter of all consumer spending and set the global standards that are important to the American economy. Not only are the responsibilities large, but she noted that FDA is not given enough credit (even by other federal agencies) for being a science-based organization that is data driven. The complexity of the agency’s job and the impact of globalization are similarly under-appreciated. Given the difficult funding environment, she is very concerned that the agency not become spread so thin that it can’t perform its tasks well.
  • With regard to budgets, Dr. Hamburg spoke optimistically about the FY 13 appropriations process, saying she felt there was support for the small increase in the President’s budget request. With regard to both the FY 14 budget request (in early stages of development) and the potential for an across-the-board cut in FY 13 appropriations (via the sequester), she talked about the FDA’s need to prioritize core functions and that FDA might need to delay other responsibilities that were important but not as great a priority.
  • Separately, she acknowledged that food would be under the greatest pressure in the case of a sequester because it receives only limited user fees to supplement its appropriation. As an example of ways that FDA will prioritize and preserve resources, she described how FDA is implementing the Food Safety Modernization Act by consciously choosing which programs will be implemented sooner and which ones will have to wait for sufficient resources.

• User Fee Reauthorization Legislation Advances. The House Energy and Commerce Committee approved its bipartisan version of the user fee reauthorization legislation on Thursday. While there are still several outstanding issues to be resolved, the House expects to bring the bill to the floor in May; conference with the Senate in June; and deliver a bill to the President before the July 4th recess. Meantime, the Senate HELP committee voted on its version of the legislation in late April and a floor vote may come as early as Monday. As with the House, the Senate staff are working out some final issues, but the bill enjoys bipartisan support.
  • The Alliance has been tracking this legislation closely because there are a number of new requirements in these bills that are likely to require resources and are not covered by user fees. This was a point also made by the Commissioner in her Q&A: that while FDA supports many of the new responsibilities, it has no assurance that the appropriations committee will supply additional funding to cover them.

• “Reconciliation in lieu of Sequester” Passes the House. Adopting this legislation is part of the House’s positioning for the post-election session, when Congress will have to simultaneously deal with FY 13 appropriations, deficit reduction via the legally-mandated sequester, and whether and to what extent to renew expiring tax cuts. The Senate is not expected to vote directly on this legislation, although it is possible that Republicans in the Senate may try to add the text as an amendment to another bill. This topic is covered erlsewhere on this web site in today’s Analysis and Commentary.

This naturally led to some questions from our members about the budget cycle and “wasn’t this a little early for the Commissioner to be talking about FY 14.” Here is a quick tour of how long things take and why the Alliance is active 12 months of the year, usually working on more than one budget year at a time.

The visible portion of the budget battle is supposed to be 9 months, running from January to October 1, as Congress digests and then acts upon the President’s request. For the Alliance, it is a minimum 12 months per year process because: (a) Congress had not been doing a good job of getting the current cycle done by October 1 and (b) in September we increase our efforts to work with FDA/HHS/OMB to urge higher levels for the next fiscal year. We work with the Administration year-round, but the August/September/October timeframe coincides with the time when the FDA’s agency’s budget request is starting to get critical attention at HHS.

By comparison, the appropriations cycle for FDA is about 18 to 20 months from start to finish. The budget is put together from the bottom up, with each office and division developing its budget request, then having to compete for resources with others within their center, then center competes with center. Eventually, FDA competes with other HHS agencies for resources. And then HHS competes with other Cabinet departments for resources, with OMB as the arbiter. In short, FDA’s budget process started in March/April of this year for the FY 14 budget. That is the budget the President releases in February 2013 and on which Congress won’t ultimately decide until the Fall of 2013.

We tend to leave the FDA internal process alone because it is not our jobs to tell FDA how to spend its money. If they ask us questions, we certainly respond. The FDA process is done by about Labor Day ± 30 days. Meantime, we have no problem talking to HHS, OMB and the Office of the President about FDA’s resource needs. We ask them to look kindly on the agency request (even without knowing the actual amount) and to consider whether even more funding might be needed. Tying the calendar together, that’s puts us at the September/October time when we get busy with HHS and OMB. Also, as noted, we talk to HHS and OMB outside this cycle, but we always follow this Fall schedule, regardless.

Which brings us back to Dr. Hamburg’s comments. FDA is in the early stages of preparing the FY 14 budget, which is an extremely lengthy process of 18 to 20 months. It would be natural for her to share some ideas and get some feedback from the Science Board that advises her … exactly because it is early in the process and the agency may get some additional perspective.

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

In sum, the Senate committee has agreed to a $24 million increase for FDA above the FY 12 level. Essentially, this is the President’s request for a $11.5 million increase, with the Senate adding another $12.5 million specifically for implementation of the Food Safety Modernization Act. Under the bill, FDA’s budget authority appropriations would go from $2.506 billion in FY 12  to $2.530 billion in FY 13. According to the Committee, the increase is accounted for as follows:

• Increases:  $47.1 million
  • $12.5 million for implementation of the Food Safety Modernization Act
  • $21.1 million for necessary expenses, mandatory rental payments, and facilities (we believe this includes funding for outfitting the new biological sciences building, but this is not confirmed)
  • $3.5 million for advancing medical countermeasures
  • $10.0 million for safety inspections in Chin
• Decreases:   $23.2 million
  • $19.7 million in FDA-proposed information technology savings
  • $3.5 million in building and facilities repair
• Net increase: $23.9 million

Our position (as expressed in the press release issued last week) is to be appreciative of the Senate’s actions … and we are. This is not an easy environment to be in favor of increasing the budgets of federal agencies. On the other hand, we have not retreated from our position that higher funding is needed, given the FDA’s vast responsibilities and importance to public health protection.  Even the Alliance’s request for an increase of $150 million is probably not enough to fund FDA’s many needs, but our request was held at this level in recognition of the difficulty in getting any increase for any federal programs this year.

What comes next? We have not been told when Senate will consider the Ag-FDA appropriations bill and whether it will be anytime soon.

Meantime, the House Ag-FDA appropriations subcommittee is likely to be marking up sometime in May. As discussed here previously, the House-passed FY 13 budget resolution decreases the amount available to the appropriations committees to spend by about $19 billion. For the Agriculture-FDA subcommittee, this means a cut below FY 12 of at least $375 million. However, the House allotment for Agriculture and FDA programs is about $1.3 billion below the amount that was available to the Senate when it voted yesterday. This suggests the possible need for a lot of cuts.

Because of the impact of certain mandatory spending, it is hard to judge exactly how deep the House will be cutting within the Agriculture-FDA jurisdiction.  Our feeling is that FDA funding is in substantial jeopardy when the House subcommittee marks up, but that there still may be room for required budget cuts to be allocated to programs other than FDA. So, we are guardedly hopeful about the House, even while the overall environment is not promising.

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

• Senate Appropriations Committee Mark-up. On Thursday last week, the Senate Appropriations Committee marked-up the FY 13 Agriculture-FDA appropriations bill.   Please click here to view the Alliance’s press release. The statement of the Alliance’s position is unchanged, although there has been some further adjustment of the numbers cited. Specifically, as we have done further analysis, we have established that the Senate’s position is $24 million above FY 12, rather than $22 million. This revision is shown in this table and  discussed elsewhere on this web site.

Senate Appropriations Committee Mark for FY 13  Budget Authority Appropriations for FDA

• The Alliance for a Stronger FDA Invites Its Membership to: A Conversation with FDA Commissioner Margaret A. Hamburg, M.D.  Tuesday, May 8 at 2:00 p.m: from 2:00 to 2:40 p.m., Alliance President Margaret Anderson will interview  Commissioner Hamburg on her priorities; from 2:40 to 3:00, audience members can ask questions of the  Commissioner. Please RSVP at acurry@akingump.com, if you plan to attend.

•  FDA Releases the “Global Engagement Report.” On Monday the FDA released a new report detailing the agency’s strategy to meet a rapidly  growing list  of complex  public health challenges related to globalization.  To view the “Global Engagement Report,” please click here.

The Alliance has issued a media release expressing appreciation for the Committee’s support of additional FY 13 funding for the U.S. Food and Drug Administration, saying it is a “step in the right direction,” but that higher funding is needed given the FDA’s vast responsibilities and importance to public health protection.