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The Supercommittee “Failure” and Impact on FDA

November 22, 2011

The Alliance for a Stronger FDA issued the following statement to its membership earlier today:

As you may have heard by now, the Congressional Supercommittee has announced that it has failed in its work. There will not be a proposal for Congressional approval that would generate $1.2 trillion over 10 years (FY 13 to FY 22).

IF NOTHING ELSE HAPPENS, the consequences for FDA are substantial and serious. On January 1, 2013, federal spending would be cut “across the board” under a formula contained in the Budget Control Act (BCA) passed this summer. This process, known as sequestration, will cut deeply into all spending, but discretionary programs will be, by far, the most heavily affected.

According to the analyses we have seen, FDA (along with most domestic discretionary programs) would probably be cut about 7.8% in FY 13. However, this percentage is not definitive, but rather based on a host of assumptions about implementation of a very complex process. Until we have better numbers, we are assuming that FDA would incur an automatic cut of $150 to $250 million (6% to 10%).

SOMETHING ELSE COULD HAPPEN, if only because the sequestration cuts are draconian and abdicates Congressional responsibility for setting national priorities. There has been talk of rolling back the sequestration levels for defense programs only. It is unlikely that this would pass Congress and it would be vetoed by the President, regardless. The same failure to achieve consensus through the Supercommittee process is likely to stymie any attempt to undo all or part of the mandated sequestration.

The only exception would be if Congress were to adopt a very large, alternative deficit reduction plan that could pass both Houses and be signed into law by the President. With the Supercommittee failure just having occurred, some commentators speculate it would be very unlikely that Congress would pass such a bill next year. However, there are a number of Members of Congress who will be continuing to work toward a bipartisan deficit reduction deal that would be make sequestration unnecessary. Further, the outcome might be affected by fiscal and political forces that operate outside of the immediate Congressional deadlock (e.g., the expiration of the Bush tax cuts and extension of unemployment benefits and the payroll tax holiday; the US economy; the current European fiscal/bank crisis, and the status of the Iraqi and Afghan wars).

THE ALLIANCE UNDERSTANDS that the threat of sequestration will hang over the FDA appropriations process, which is already likely to be quite difficult in FY 13. As we better understand the impact on FDA, we will keep you informed and will be adjusting our strategies accordingly.

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