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A Delay Until July … And What May Happen

June 28, 2012

The House will take up the Agriculture-FDA appropriations bill in July. They are about halfway through floor action on the 12 appropriations bills and expect to complete all of them before September. That said, passage of Labor-HHS and maybe one or two others (not Ag-FDA) are always very difficult … so “all” might actually mean “almost all.”

Meantime, the Senate Appropriations Committee has completed action on 9 of the 12 appropriations bills, including Agriculture-FDA. No floor-time has been scheduled for any of them.

We have expected the appropriations process to stall at some point and be taken up again after the election, so we have assumed that the lack of Senate floor action would be the “stop point.” However, at least one of the political daily newspapers has suggested that the Senate intends to start taking up these bills on the floor in July. We still think the probability of this happening is not high, but recognize that the existence of the news story means Senate action is possible. If so, we would not expect Ag-FDA to be first, but rather toward the middle of the pack.

Most of the short-term action on appropriations has related to the potential for a sequester (an 8% to 10% across-the-board cut) in discretionary and some mandatory spending. It is scheduled to occur in early January 2013 unless Congress acts to prevent it: either by coming up with alternative savings or finding some way to delay its implementation. Senate Majority Leader Reid has said he will not allow a “delay” bill to be considered by the Senate and President Obama has said he would veto any delay bill. So, there is a brewing stalemate and it is unclear whether any combination of election results will make resolution any easier.

Meantime, in an effort to goad Members of Congress into a full appreciation of the devastating impact of sequester and why it would be best to find alternatives … Senators McCain and Murray are asking OMB to do a full analysis of the impact — program by program — if the required sequester were to occur. We are sure that it will find the impact on FDA to be quite damaging. What makes FDA’s situation particularly hard to judge is that BA funding will be subject to the sequestration but user fees will not (because cutting back on user fees does nothing to reduce the federal budget).

We did a Q&A on FDA and sequester in the Friday Update two weeks ago (June 15) that some members may find useful to review. I have received several comments on one of my answers — concerning how user fee funds might wind up substituting for lost BA monies … rather than being available to hire new personnel and increase the agency’s capacity to do its job. For those who missed it, here is an expanded version of the question and answer (with the key point bolded):

Q: Since a sequester won’t occur before January 2013 (and we may not know until the last minute whether it will happen), how will the threat of the sequester affect FDA activities and how does the BA/user fee split affect the agency if a sequester occurs?

A: From August to December of this year, FDA will need to speed up hiring that is highly specialized to new user fee requirements or which fall into categories for which the agencies post-sequester needs cannot be met by existing personnel (e.g. for certain job requirement purposes, epidemiologists are all the same; however, the agency may not have enough individuals who are qualified to handle overseas inspections, even with additional training).

Simultaneously, FDA will need to be pulling back on other spending and hiring that would come from BA dollars (e.g., filling vacancies) unless the individuals involved could also do work that would be paid for by user fees. The objective is clear-cut: FDA will be trying to avoid post-sequester lay-offs.

To ensure this result, we assume that there will also be contingency plans to shift individuals from positions and offices paid for by BA and into ones paid for by user fees.  This need not be as hard as it seems. For example, if the sequester occurs, a $20 million CDER unit (or CBER or CDRH) that is now funded one-third PDUFA (or MDUFA) to two-thirds BA might suddenly become mostly PDUFA or MDUFA-funded (i.e.,  product review offices and reviewers are not segregated nor have different purposes based on their funding source).

Note the potential consequence — increases in user fee income backfills the BA cuts rather than contributes to real agency growth. Despite that, FDA will be obligated to undertake the activities and meet the performance measures as if the new user fee money was paying for additional staff.

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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