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A Time of Speculation and Uncertainty

October 30, 2010

During the Alliance’s quarterly membership meeting this past week, Alliance staff were asked about the possible impact on FDA if Congress fails to fund the health reform legislation enacted earlier this year.

To the best of our knowledge, no FDA programs will be effected. The new approval pathway for biosimilars was contained in that legislation, but was not given a separate authorization of appropriations. Further, it does not appear to be a target of the “de-funding” effort.  

ANALYSIS AND COMMENTARY

By this time next week, Election 2010 will be over. The votes will have been tallied and the winners determined. We will know which party will be in charge in the House and Senate.

Soon thereafter, the old Congress will return for the “lame duck” session and focus on legislation to fund the government for FY 11. Toward the end of November, a high-level, bipartisan commission, including elected officials, will report its findings on how to significantly reduce the federal deficit.

Campaign rhetoric in previous election cycles has largely failed to bring about budget discipline. There have been a number of bipartisan budget commissions whose recommendations never advanced. Congress has never been able to break “the iron triangle of deficit reduction.” Republicans don’t want new taxes, making it hard to generate more revenue.  Democrats don’t want to change entitlement programs, making it hard to significantly decrease expenditures. Everyone’s favorite punching bag, discretionary spending, isn’t large enough or growing fast enough to produce meaningful deficit reduction.

Despite these past failures, most pundits believe this time is different and Congress and the President will act to reduce the federal budget deficit.   

The best case for FDA (and not the most likely) is that Congress quickly accepts that both taxes and entitlements must be adjusted. Perhaps the bipartisan commission will give them a blueprint that makes it easier. As a result, pressure on discretionary spending eases a little bit. Agencies with the strongest cases, such as FDA, can then continue to grow to fulfill their missions and serve the American people.

The first sign of progress in this direction would be for the lame-duck Congress to adopt an omnibus appropriations bill that covers the remainder of FY 11 (through September 30, 2010). It is our understanding that House and Senate appropriations staff have negotiated such a bill … and  that the aggregate cost would be $20 billion less than the President requested. In this scenario, FDA might receive the $155 million increase in the President’s request and possibly the additional monies that were in the House subcommittee bill.

The worst case for FDA is that Congress finds no political will or consensus on taxes and entitlements. To show they understood the message from voters, Congress might then feel the need to adopt  “across the board cuts” of 10% or more.  Some have proposed rolling back the federal budget to FY 08 levels. This would constitute a 25% cut for FDA, taking it from a $2.4 billion agency to a $1.8 billion agency.

There will continue to be a lot of rhetoric about serious cuts in discretionary program. The first sign that Congress it actually taking this approach will be the funding decisions in the next Continuing Resolution, which must be passed by December 3. Even under this worst case, it is possible that FDA’s needs will be recognized and the agency will be an exception to the budget cutting.

What will really happen? Nobody knows, including the President and House and Senate leadership. Most likely, it will be somewhere in-between these two extreme cases.

In all scenarios, our strong advocacy will be needed to make the case  for FDA, its mission and the value of its efforts to protect and advance the public health. The Alliance will be there—with your support.

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

MEDIA

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