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User Fees No Replacement for Public Funding

June 17, 2011

The House has now passed its version of the FY 12 House agriculture/FDA appropriations bill. It includes a $285 million cut for FDA. While there were concerns about FDA’s performance expressed within the Appropriations committee and on the House floor, the cuts were primarily a reflection of the lack of monies available for the subcommittee to spend.

Our advocacy efforts have turned to the Senate, where we believe there is a deeper appreciation of why FDA needs to be funded at its current level or higher. Senate action can come at any time. However, it seems more likely that the Senate will wait until a deal is cut on lifting the debt ceiling, probably later in July.

During House consideration of the agriculture/FDA bill this week, we received several inquiries about why we focused on cutbacks at FDA, “when the agency would actually receive more funds under the House bill then it did in FY 11.” This is technically true, since the FDA’s user fee income would increase by $288 million, while the agency’s appropriated funding would decrease by “only” $285 million.

However, user fees and budget authority (BA) appropriations are collected differently and serve quite different purposes. BA appropriations come from the general treasury (taxes) and are intended to support the entirety of FDA’s public health and regulatory missions.   User fees are collected from industry and are intended to pay for very specific activities that FDA might otherwise not have the funds to carry out.

Comparing funds available through the two mechanisms violates the intent of user fees, which is that they be additive to (not a substitute for) public funding of FDA. Further, the tobacco institute is 100% user fee funded — increases in those fees (now nearly a half billion dollars) do nothing to help the food, drug and device activities of the agency.

Even the substitution of user fees for public funds is “highly inefficient.” For example, $164 million additional is being collected from industry in PDUFA fees in FY 12 in order to pay for specific activities at CDER and CBER. Because of the proposed cuts in BA appropriated funds, those two centers actually see their budgets increase by $74 million. Make no mistake, CDER and CBER (and other centers) will lose enormous capacity should the House appropriations bill become law. User fees will not make up the difference in any meaningful way.

The Alliance for a Stronger FDA has focused on BA appropriations for a number of reasons, outlined here and in the attached document.

Here is a chart that further explains the PDUFA example:

Explanatory note: User fee numbers reflect the amounts that CDER and CBER actually receive, not the total of PDUFA funds collected. PDUFA monies also go to the Office of the Commissioner, FDA consolidation at White Oak, and two different rent accounts.

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

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