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The President’s FY 11 Budget Request: Detailed Analysis and Commentary

February 4, 2010

The Alliance for a Stronger FDA has already issued a press release and provided a multi-year budget comparison chart. Here are the key points:

  • The Alliance is grateful that the President has proposed an inflationary increase of about 6% for FDA in a year in which most domestic discretionary programs will be frozen or cut.
  • This is not sufficient given the continuing imbalance between FDA’s funding and its expanding portfolio of public health responsibilities.
  • Three good appropriations cycles have not fully undone a decade of budgetary neglect.
  • Strengthening FDA is vital to our nation’s public health, economy and national security.
  • The Alliance will be working with the Congress and the Administration to increase FDA’s budget for FY 2011 beyond a simple inflation increase.

In looking at the President’s request, there are two themes worth immediate exploration.

A 6% increase looks much bigger than it is. Of the $147 million increase for the agency’s appropriated budget, CFSAN will get $60 million, about an 8% increase. This is a little more than an inflationary increase and foods will be able to grow marginally in FY 11. Of the 276 new positions to be paid from appropriations, the food function would get 128.  This is progress, though not nearly what is needed in the face of continued challenge of keeping foods safe and the increasing complexity and international scope of the food supply chain.

On the drug side, far less was provided. CDER and CBER get a combined $28 million increase in funding (about 4%) and 66 new positions. For devices, there is an $11 million increase (less than 4%) and 28 new positions. This is less than the cost of pay increases. Other items that will increase this year (rent, IT, training, travel) will need to come from existing program dollars.

It’s going to be a tough year and the federal budget needs to be trimmed. It may seem a tad ungrateful to be disappointed in a budget that roughly maintains the FDA core functions. Few domestic agencies are doing even this well.

But there are differences. FDA’s budget is almost entirely people costs. Salaries take up more than 60% of the agency’s budget. When you add in benefits, rent, IT services, travel, training, etc., it becomes about 80% of the budget devoted to people and the support they need to do their jobs.

If the FDA’s appropriated budget does not grow by at least inflation each year, then staff levels decrease. This is what was happening for most years between 1994 and 2007.

For example, after 9/11 the agency got significant new monies to hire new inspectors to decrease the risks of agro- and bio-terror. Within 5 years, this increase in the FDA field force had disappeared and the number of inspectors was about where it had been before the new monies. There is nothing hypothetical about the consequences of underfunding a government agency that is almost entirely people costs.

Undoubtedly, FDA will find ways to be more efficient in FY 11 and this will relieve a little of the pressure of doing more without new money. The amount to be gained in this manner is not that large.

In comparison, FDA is operating with a 20th Century IT system, without databases that would provide sophisticated support for decision-making and resource allocations. Training the FDA workforce is an increasing priority — both new personnel and to improve everyone’s skill and knowledge in the face of increasing complexity, globalization and scientific advances. FDA is still very much in the catch-up mode.

The massive increase in existing and proposed user fees obscures the FDA’s real needs. The squeeze on domestic discretionary spending is likely to be intense this year … and maybe for years to come. In FDA’s circumstances, as described above, the nation is put at risk without larger increases for FDA’s mission. The obvious risk is to the public health, but there are also consequences for the American economy and our national security.

Our ability to make this argument is far more difficult because of the Administration’s claim that FDA will grow by up to 23% in FY 11. It is one thing for us to argue that the 6% increase in appropriated funds is not enough. It is near impossible to argue that an increase four times that size is not enough.

There are two ways to respond to this. First, there is a difference between appropriated funds that serve the broad public good and user fees that are designed to pay for specific aspects of FDA’s responsibilities. Tobacco user fees go to fund the tobacco center.  Drug user fees mainly go to the drug approval and safety monitoring process.  It is the appropriated funds that support the core functions of the agency and which need to be increased the most.

Besides obscuring the need for significant increases in the FDA’s appropriation, the user fee increases don’t provide the growth that is being attributed to them. The increased user fee funds are a mix of inflation-based increases, highly targeted funding and new fees that are unlikely to be adopted.

The President’s request projects an increase of $601 million in user fee revenue in FY 2011 (this compares with the $146 million targeted for appropriated increases). Of the user fee increases, about $97 million is inflation-adjusted increases in existing user fee programs. This is the 6% annual increase pursuant to the user fee laws. It represents OMB’s approved number for how FDA costs increase each year without new responsibilities.

There is $215 million in user fees to pay for the new Tobacco Center. This does not represent any net growth for the agency’s mission. FDA got a brand new responsibility and was provided user fees to exactly cover the cost. It is a wash — it doesn’t undercut the agency’s budget nor does it contribute in any way to strengthening the agency.

Then there is $290 million allocated to new user fees that don’t now exist. This is nearly half of the total growth attributed to user fee increases. Of this, $220 million is for food inspection and related activities as provided in legislation currently pending in Congress. The House version does envision user fees to cover the costs of a dramatic increase in FDA responsibilities. The Senate bill does not have user fees and the intent is that activities to protect the public should be paid for by the taxpayers rather than through user fees.

When the increases in FDA user fees are examined in this manner, I think it is clear that these funds — however worthwhile they may be — are not going to be used to support the long-neglected core mission of the FDA.

Every day, in many ways, every American is impacted by the quality, safety and effectiveness of FDA-regulated products.  Our job as an Alliance is to be sure that the agency is strengthened through appropriated funding, so that it can carry out its broad, public mission.

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

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