The second column, on January 20, described the standard scenario for an election year appropriations process, then examined some of the possible variations: the SOTU as the opening of the President’s re-election campaign, the possibility of a Continuing Resolution if the regular appropriations process is not completed (common in an election year), and the year-long overhang of possible sequestration, which could cost FDA $150-250 million from its appropriation.

The third column, on January 27, examined the discretionary spending ceilings for FY 13 and how they limit the funds that will be available to the Agriculture/FDA appropriations subcommittees for them to spend. The net result is that every federal program will be squeezed during appropriations, even before the possibility of the sequester being imposed at the beginning of next year.

Today’s column will try to pull all those discussions together into a short summary of what FDA faces this year.

First, there will be little or no money available to increase the resources available for FDA. This is not a reflection of the strength of the agency’s case, but rather the breadth of the spending controls being imposed to reduce the deficit. FDA’s mission is expanding, so the agency should rightfully receive an increase in funding … but we need to be sensitive to how such requests look to a Congress and President that will be reviled over the fact that FY 13 will be the fourth straight year where the federal budget exceeds revenue by more than a trillion dollars.

Second, the agency still has good arguments for why it deserves increased funding despite the larger set of spending constraints. And the agency still has friends on Capitol Hill who will make the case for increases. But it may turn out that the reward for being needy is that we get cut less than others, rather than receive an increase. Absolute dollars matter (how much the agency is appropriated), but we need to be conscious that we are also seen in relative terms (“we gave them more/cut them less than other important programs”).

Third, the overall political environment — and the major political themes of the economy, jobs, defense, security — are likely to dominate the political debate. The Presidential election is likely to further divide Republicans and Democrats in the Congress, who have already had a hard time finding common ground.

Fourth, unlike almost any other federal agency, it is certain that Congress will pass authorizing legislation this year that affects the FDA. At a minimum, that legislation will include reauthorization of drug and device user fees that pay for about one-fourth of the agency’s budget. For that reason, we will need to be even clearer this year about the importance of public funding of FDA and the needed but supplementary nature of funding that comes through user fees.

We can also expect that the reauthorization legislation will become the vehicle for a number of additional changes to the laws and programs of FDA. Regardless of the merit of any specific proposals, they are likely to be unfunded mandates — in that the agency will have to do the work but will not receive any additional appropriation monies to cover the cost.

Finally, and slightly off-point, I encourage you to come the Alliance’s quarterly membership meeting next Wednesday, February 8 at 2 p.m. If you can’t come in person, please phone in. Our speaker is Deborah Autor, FDA’s Deputy Commissioner for Global Regulatory Operations and Policy. Among other things she leads the agency’s efforts to manage the burden of imports and oversees the Office of Regulatory Affairs, which conducts inspections and, legitimately, consumes a large part of the agency’s appropriated budget. Hope to see you there.

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

The details released by OMB on February 13 are important, but the plot and major themes are already developing quickly.

In the next couple of columns, while awaiting release of the President’s Budget Request, we are going to look at the various hurdles that FDA’s budget must pass over before it becomes law. The first is the limitation on aggregate discretionary spending for FY 13, as imposed by the House and Senate budget resolutions.

Instead of the usual process by which the ceilings are set each year — and which became a major cause of delay last year in moving the appropriations process forward — the Congress passed the Budget Control Act of 2011 (BCA). This law sets ceilings for FY 12 through FY 21, although there are some special facets of how the ceilings are allocated during the first two years. Note that while the aggregate amounts are set by the BCA, the budget committees are still likely to act to allocate those monies among the various functions of government. For example, all public health programs are under function 550.

For FY 12, the budget ceiling set by the BCA was divided between security and non-security programs, whereas for FY 13, the budget ceiling will be divided between defense and non-defense programs. While the overall amount (ceiling) available for non-defense is higher in FY 13, it needs to cover parts of homeland security, military construction, and state foreign operations that were paired with DOD in FY 12. Said another way, the Agriculture Appropriations Subcommittee (where FDA resides) is bidding for its share of funds from a slightly larger pot in FY 13, but with significantly more competition than in FY 12. (In FY 14 and thereafter, there is only one ceiling with no distinction between defense and non-defense.)

After various adjustments are made, we are told it is possible that the Agriculture subcommittee will have about the same amount to spend in FY 13 as FY 12. If so, the specific programs and agencies funded through the Agriculture appropriations bill would be funded in FY 13, on average, at about the same or slightly less than they were in FY 12, without any upward adjustment for new responsibilities, larger demands on existing responsibilities and inflation.  

Our goal for FDA, of course, will be to gain an above average increase as a base number and have additional dollars allocated for new responsibilities and the larger demands being placed on FDA.

For FDA to do better than average, it means the subcommittee will need to eliminate or sharply reduce other programs in their jurisdiction … or, at a minimum, provide almost all other programs with below-average increases. This will be a tough fight … and will rely in large part on our ability to make the case that: FDA’s importance and growing responsibilities makes it a necessary exception to budget-cutting.

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

The new board members of the Alliancer are:

• Deborah White, Kraft Foods
• Jeff Allen, Friends of Cancer Research
• Ben Firschein, United States Pharmacopeia

Members of the Executive Committee for 2012 are:

• Margaret Anderson, FasterCures (President)
• Diane Dorman, National Organization for Rare Disorders (Vice President)
• Rich Buckley, AstraZeneca (Secretary)
• Caroline Smith DeWaal, Center for Science in the Public Interest (Treasurer)
• Andrew Emmett, Biotechnology Industry Organization
• Nancy Bradish Myers, Catalyst Healthcare Consulting Inc.-Member of Executive Committee; Kasey Thompson, American Society of Health-System Pharmacists –Member of Executive Committee.

• Administration’s FY 2013 Federal Budget Proposal Expected on February 13. The Administration is scheduled to send Congress its FY 13 budget proposal on February 13. The Alliance will be monitoring these developments and providing analysis on how the Administration’s proposal impacts FDA funding.

• Alliance Quarterly Membership Meeting: The next Quarterly Alliance Membership meeting is still scheduled to take place on Wednesday, February 8 at 2:00 p.m. The Special Guest Speaker will be Deb Autor, FDA’s Deputy Commissioner for Global Regulatory Operations and Policy.
  Please note the change in date: The Membership meeting is occurring on February 8th, which is a change from the originally scheduled membership meeting on February 7th.

• The details of the entire budget request will be posted online by mid-morning,
• HHS Secretary Sebelius will do a public briefing in the early afternoon, and
• FDA Commissioner Hamburg will do a similar briefing in the mid-afternoon.

The goal for the FY 13 appropriations process is to hold hearings, mark-ups and floor action, finishing the FY 13 bills by the end of fiscal year 2012 (September 30, 2012). As happened this past Fall for FY12 , it is also possible that some appropriations bills will be viewed as “easier” and passed in a timely fashion, while others may be viewed as “harder” and dealt with later.

If the appropriations process is not complete by the end of the current fiscal year, a continuing resolution would cover FY 13 funding for whichever government agencies have not been included in final appropriations bills. Whatever remains to be done, would likely be addressed in a “post-election” session of Congress.

What I’ve described above is what might be considered the standard scenario for an election year appropriations process. However, there are some important wrinkles this year that will impact what actually occurs.

First, the SOTU will be President Obama’s opening salvo of his re-election campaign. So it will cover the current state of the union, his goals and program for 2012, and the major themes of his re-election (although they will not be identified as such). We expect a heavy emphasis on jobs, the economy, and deficit reduction.

Government efficiency will be high on his list as a way to soften the impact of budget cuts. Among other things, he is expected to propose to re-organize parts of the government — with Congress getting only an up/down vote on each specific proposal. The “poster child” for this will be consolidation of a cluster of agencies and programs that promote US trade.

There have been rumors that he will also ask for a food safety consolidation, proposing to move the Department of Agriculture’s Food Safety and Inspections Service (primarily responsible for meat products) into FDA. So far, this is just a rumor and probably would never become law even if true … but re-organization and consolidation of functions is often a significant distraction in the appropriations process.

Second, on-time completion of appropriations bills has become a rarity and is even less likely to occur in an election year. This means that FDA might be funded on a continuing resolution for at least the first few months of the new fiscal year. Recent continuing resolutions have tended to be funded at the prior year’s level and occasionally at 2% or 3% below the prior year’s level.

However, there is nothing fixed about that formula. At one time, it was common for the CR to be set at “the lower of the House and Senate proposed appropriations numbers.” Had this been the case for FY 12, it would have been very difficult for FDA — the House called for an overall cut of 11% and that would have been the spending level until the conference committee finally agreed on the Senate level (a 2% increase).

Third, there is some uncertainty as to whether the President’s budget request numbers will include the sequestration (across-the-board) cuts that are scheduled to occur on January 2, 2013. The distinction is between the President providing one “request” number that includes the cuts … or providing two numbers — the President’s actual request and the net impact after sequestration. I think the latter (two numbers) is what will occur or, possibly, there will be just request numbers with general discussion of sequestration.

If there are two numbers, it is hard to tell whether the media plays up the request number or the “with sequestration” number. In any case, while sequestration represents “current law,” it is still possible for Congress to pass a package that reduces the federal deficit by all or some of the required $1.2 trillion over the next 10 years. This would offset the impact of sequestration, in whole or part.

In any of these scenarios, the risk for FDA (as for all federal agencies) is the possibility of being hit twice. Thus, for example, if FDA was flat-funded in the appropriations process (at the FY 12 level), sequestration could leave it with between 6% and 10% ($150 and $250 million) less to spend in FY 13.

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

Here is a likely calendar for 2012:

President Obama delivers the State of the Union Address (SOTU) to Congress (most likely date is Tuesday, January 24, 2012). This will include the President’s assessment of the country’s accomplishments and issues … and sets forth his priorities for 2012 and for the FY 13 budget. Typically, the address covers very broad themes — war and peace, the economy and jobs, major program initiatives, etc. We would not expect an FDA or a food and drug reference in the speech, but it is always a possibility.

About one to two weeks after the SOTU (usually early February), the Office of Management and Budget (OMB) releases the President’s Budget Request for FY 13. This will be the first opportunity to view the President’s full request for FDA — both the aggregate amount requested, the break-out by centers and any new initiatives.

Appropriations committees will hold hearings between March and May. Following the patterns of the last few years, there may only be one hearing in the House and one in the Senate … and FDA is likely to be the only witness. The Alliance will submit testimony to each. The main force of the Alliance’s effort will be meetings with Members of Congress and their staff, staff briefings and grassroots meetings.

Given that it is a Presidential election year, the appropriations committees will <em.plan to mark-up bills in committee by May/June, get floor action in June/July and have bills sent to the President by late July. A few bills might need to be finished off in September. Because the Budget Control Act of 2011 (BCA) sets aggregate spending ceilings for domestic programs for FY 13, one of the big delays in 2011 will not recur this year. On the other hand, the FY 13 ceilings set by BCA are very low.

However, despite the efforts of the appropriations committees, appropriations bills are rarely enacted early in Presidential election years. While we proceed on the assumption of the fast schedule, it would not be surprising if some or all of the government is funded on a continuing resolution on October 1, 2012, with final decisions deferred to a post-election session.

Finally, on January 2, 2013, deficit reduction cuts are mandated in the amount of $1.2 trillion in 10-year program savings. These will be accomplished by across-the-board cuts (“sequestration”) and will mostly hit discretionary domestic and defense spending … unless Congress passes legislation that would raise these monies by entitlement cuts or additional tax revenue or otherwise changes the law. The impact on FDA is likely to be a cut of between $150 and $250 million. Any sequestration cuts would be on the FY 13 appropriated or CR level for the agency.

In sum, 2012 will be a busy year for the Alliance, with a large number of challenges to FDA’s appropriation.

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

• “Top 10 medical research trends to watch in 2012” is an article by Margaret Anderson of Faster Cures that appeared in The Huffington Post on January 5.

• “Federal budget good news for nano?” is a report by Gwyneth Shaw in The New Haven Independent, dated January 11.