• House releases its 302(b) allocations for FY 14 appropriations.  The 302(b) allocation specifies how many dollars each appropriations committee may spend. The allocation is the appropriations committee’s way of assuring that the sum of all appropriations bills stays within the total allowed under the Budget Control Act of 2011 (BCA/2011) and the budget resolutions passed by the House and Senate. Under the just-released House allocation, the Agriculture/FDA subcommittee is being given about $19.5 billion to spend for FY 14, which is close to its post-sequester level in FY 13. We are told that the Senate 302(b) allocations should be released next week. In general, those should be higher because the Senate budget resolution permits a higher spending level than the House budget resolution.

Q: FDA seems to be weathering the sequestration better than they or the Administration first forecast. Why is that and what are the long-term consequences?

A: In general, it now appears that the Administration overstated the immediate consequences of sequestration, with FDA being merely a specific example of how this has created a credibility gap with Congress. This isn’t a surprise because we have written a number of times that sequestration would be mostly “death by a thousand cuts,” rather than dramatic, attention grabbing program failures.

Assuring a diffused impact was why the sequester law specified that the cuts were to be taken evenly from all programs. This was to make it harder for an agency to concentrate cuts in a specific area to force public attention. There is even a widely-held suspicion that the two sequester exceptions thus far — meat inspectors and air traffic controllers — were achieved by the Agriculture and Transportation departments allocating larger cuts to those workforces.

FDA has said that it has been able to marginalize the impact of the FY 13 sequester through cuts to travel and contracts, as if such cuts do not have real programmatic impact. Further, some portion of the “savings” is being achieved by not filling all vacancies, which started earlier in the fiscal year. Nonetheless, the agency has fed an impression on Capitol Hill that FDA had 5% worth of waste ($209 million) that it could trim without consequences.

We do not believe there are extra dollars in the agency budget and wonder how that could be true in the face of massive expansion of agency responsibilities over the last 5 years, plus the costs of dealing with globalization and increased scientific complexity. For example, we certainly hope that there are no major food safety incidents, but think it is obvious that the risk of such incidents is higher post-sequester than pre-sequester. For another example, we have written that the number of new drug and device approvals this year will likely stay high—that the impact of sequester is more likely to be felt in pipeline developments where meetings, response letters and other feedback will be slowed by a lack of manpower.

Q: The House has just released is 302(b) allocations for FY 14 appropriations. What are the implications for FDA funding?

A: Relative to the BCA/2011 and the FY 14 House budget resolution, we have previously written that FDA’s proportional share for FY 14 is about the same as its post-sequester funding level. By dint of the agriculture/FDA subcommittee getting approximately the post-sequester funding level to spend, the probability of either a major increase (e.g., the President’s request level) or a further substantial decrease for FDA funding in FY 14 have been reduced. We might have benefited if the House 302(b) allocation for agriculture/FDA were larger, but we also avoided a situation (faced by several other House subcommittees) of being given less to spend than the FY 13 post-sequester amount.

The Senate numbers (to be released next week) are likely to be much better, but this foreshadows the eventual difficulties in reconciling FY 14 appropriations bills from the House and Senate that will have dramatically different bottom-line totals. FDA’s best hope is still that the Congress and the President agree on a major deficit reduction package that reduces the pressures for further cuts in domestic discretionary spending.

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

Q: There are reports that with tax revenues up and federal spending down, the debt ceiling might not be breached until the Fall. How will that effect FY 14 appropriations?

A: Currently, the House and Senate Budget Resolutions are about $90 billion apart for discretionary spending (about 9%). Not only dollars separate the two bodies, but also deficit reduction strategies and political philosophies.

Currently, the Senate is pressing for a conference to try to resolve the differences, while the House has not wanted to engage, considering the exercise futile. It was widely believed the House would come to the table in the summer, believing that the need to raise the debt ceiling would provide them with leverage.

If the debt ceiling doesn’t need to be raised until the Fall, that makes a budget deal even less likely before the new fiscal year begins on October 1. As a result, the House will likely allocate and mark-up appropriations bills that fit within its own lower ceiling and the Senate will do likewise with its higher level.

While a couple of appropriations bills may become law because both houses will agree on a bottom line for them (e.g., military construction), the bulk of bills will be too far apart, mirroring the gap between the budget bills. While any number of additional factors could come into play, that suggests that FY 14 is almost certain to start with most of the government being funded under a continuing resolution.

Q: Thank you for the explanation (last week’s Advocacy at a Glance) of how and when sequestration becomes a factor in FY 14 appropriations. What would happen if there was a continuing resolution at the beginning of the fiscal year instead?

A: As noted above, CR funding on October 1 is an increasing likelihood. The fate of FDA can be defined, but not specified. For example, a CR could be set at either the FY 13 pre-sequestration or post-sequestration levels. The gap between the two (including user fees if there is no provision to the contrary in the CR) is $209 million or slightly more than $17 million per month.

Even if FDA were to have the higher level to spend, it would most likely do what it did during the initial FY 13 CR: hold back on hiring and contracts to blunt the impact of potential cuts later in the fiscal year, which might come from either appropriations cuts or a new sequester. This would not be an issue if the CR were set at the lower FY 13 post-sequester level, because that approximates (on a proportional basis) the likely FDA funding level if the House budget levels prevail.

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

• Latest on Congressional Timing.  We have been told informally that the House Agriculture/FDA appropriations bill is targeted for sub-committee mark-up during the first week of June.  However, appropriations committee schedules are always fluid. For example, the Homeland Security appropriations bill and possibly Defense are likely to go ahead of Ag/FDA. The timing of our bill will depend on whether those get bogged down. This is a real possibility because the House leadership plans to use an “open rule” process for appropriations bills.

• Alliance on YouTube.  The Alliance thanks the Association of Clinical Research Organizations (ACRO) for an opportunity to be interviewed on ACRO’s dedicated YouTube channel. You can view an interview by ACRO’s John Lewis of Alliance Executive Director Ladd Wiley by clicking here.

•  Alliance Request for $2.6 billion for FDA in FY 14. We have a new one-page version (plus chart) of the Alliance’s FY 14 request for budget authority appropriations. We are using it in our meetings and discussions with Hill staff and wanted to be sure that our members and media have it also.

If the appropriations committees can keep their spending within the cap, no across-the-board cuts will be required. If not, there will be new across-the-board cuts for FY 14 that might be larger or smaller than in FY 13. The percentage cut will be dictated by the amount of money needed to bring the total spending under the cap.

FDA’s budget authority (BA) base funding is about $2.53 billion. Because of sequestration, it only has about $2.39 billion to actually spend in FY 13. Unless there is an overall budget deal which repeals the BCA, the FDA’s proportional share of discretionary spending in FY 14 is likely about the same amount as its post-sequester total in FY 13.

Congress will have three choices:

• Cut a major budget deal to allow enough discretionary spending to reach pre-sequester (base) levels and appropriations committees can pick winners and losers;
• Only pass appropriations bills that in the aggregate do not exceeds the BCA level; or
• Don’t cut a deal, pass bills that exceed the allowable total and allow across-the-board cuts to bring the total back to the BCA level.

The impact of sequester remains very real.  It has basically reset the agency’s base budget in FY 13, and through the budget spending caps, discretionary programs have limited opportunity to gain additional resources through the next decade. In these tight fiscal times, the mission of the Alliance for a Stronger FDA is even more important than in the past.  Competition for scarce dollars is strong, and we will be fighting to make sure the FDA has the resources it needs to fulfill its critical public health mission.

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

• Quarterly Alliance Member Meeting. We were fortunate to have as our guest speakers Walter Harris, Chief Operating Officer of the FDA, and Jay Tyler, Chief Financial Officer of the FDA. They reviewed both administrative initiatives and the FY 13/14 budget situation at FDA. Click here to see a copy of their presentation.

• Freshman and Sophomore Hill Meetings.  For 2 days this week, 40 Alliance members visited 45 offices of Members of Congress who were first elected in 2010 or 2012. We were pleased with the interest in the FDA shown by junior House members. Most knew of the FDA and had positive views … although a large number wanted to know more about the agency. There was widespread support for appropriations built on funding national priorities first, rather than having across-the-board sequestration cuts.

• Meetings with FDA leaders.  In the next weeks we will begin our effort to meet with FDA policy leaders.  Our hope is to meet with Center Directors and other senior managers – if you have an interest in meeting with a particular individuals, let us know, and we would be please to prioritize the request and include Alliance members with interest in the meetings.

• Why was the FAA relieved of the sequester and FDA wasn’t?  Short answer – FAA wasn’t relieved of the sequester.  Before Congress left town last Friday, it passed legislation “to restore funding for air traffic controllers” and end the FAA furloughs that were creating logjams at a number of major airline hubs.  However, contrary to common understanding, no funds were added to the FAA’s FY 13 budget. Instead, the final legislation took money available to FAA for infrastructure improvements (airport improvement programs, etc.) and moved it to pay for current operational needs.

• Will the sequester remain in effect at FDA in FY14?  Read this week’s Analysis and Commentary, in which we discuss the impact of the Budget Control Act on the FDA in FY14.

In most cases, what the reporters were really looking for was whether sequester at FDA would hurt the American people and, if so, how. Their hope was for some dramatic example that would put the damage at FDA on par (in a graphic media sense) with furloughs of USDA meat inspectors and the emerging “crisis” created by furloughs of air traffic controllers.

I patiently explained that the $209 million sequestration loss at FDA was, indeed, devastating. As a result:

• Food will be less safe and consumers may be hurt,
• Drug and device approvals will be slower, conflicting with promises made to consumers and companies,
• Problems with imports and globalization will become more numerous (e.g., 2,100 fewer food inspections)

However — and this frustrated the reporters and me — I couldn’t honestly tell them that there was a single dramatic example that would help them make headlines and (in their dreams) win them Pulitzers. The result of sequestration at FDA is best described as “death by a thousand cuts.” There will be delays in a broad range of responsibilities and a massive increase in the threat of things that might go wrong … but nothing that could be defined in advance as dramatic changes that will be visible to the general population.

And no, I urged them, the diffused nature of the cuts didn’t make the damage any more palatable or less impactful. FDA’s legislatively mandated responsibilities have been growing steadily (four major new laws since 2009), while globalization is galloping forward and the science behind FDA-regulated products is growing more complex and time-consuming each year. Further, Congress seems certain to add additional responsibilities this year; for example, in the area of regulation of compounders.

And so the reporters were told the truth as we know it: we don’t know where the money will come from to pay for the work FDA must do … and we cannot predict the consequence if money isn’t found and problems emerge in FDA-regulated product (nearly 25% of all consumer spending).

Finally, I pointed out to the reporters that that is why the Alliance exists: we are, quite literally, all of FDA’s stakeholders, working together for a strong, well-funded FDA. We know that a strong FDA benefits all Americans, regardless of the nation’s budget woes.

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