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Through the Crystal Ball Darkly

July 20, 2012

My crystal ball has never been cloudier about Congress and FY 13 funding, especially for FDA.

All the big decisions are — more or less — put off until after the election on November 6. With the presidency and control of the Senate at stake and every member of the House up for re-election … policy has been reduced to sound bites and no one wants to make any hard decisions until afterward. Unfortunately though, the accumulation of undecided items has now reached gargantuan proportions. As recounted last week:

After the election, the Congress will have its plate full dealing with a series of interlocking budgetary decisions. In addition to resolving FY 13 appropriations, they will have to decide what to do about the sequester (across-the-board cut) planned for January 2, 2013 and whether to extend all or part of the Bush tax cuts, the temporary payroll tax cut, and expanded unemployment insurance provisions. In addition, sometime soon into the new calendar year (estimates vary), we will again run into the need to extend the federal debt ceiling.

Congress has only one decision to make before the election: what level to set the Continuing Resolution (CR) to cover the first 8 to 10 weeks  of the new fiscal year (starts on October 1, 2012). Over the last few year, the CRs have been set at the previous year’s level. That is, the first FY 13 CR would initially fund FDA at the FY 12 level. That would be a good outcome for the agency because it could maintain current activity levels in the short-term. However, FDA would still (as would all federal agencies) need to be careful not to make too many commitments in the first quarter of the fiscal year, in case the final appropriations bill is lower or the sequester goes into effect.

While we are used to CRs set at the prior year’s funding level, there is nothing automatic about this. It is just the formula that is most often chosen. In years past, the Congress has used different formulas, most often “the lower of the House or Senate appropriations marks.” The idea was that the agency could not then spend at a faster rate than the minimum amount it might receive in the appropriations process. The pendency of 7% to 10% cuts via sequester might even lead the CR to be set at a lower level (e.g., 90% of the FY 12 spending level). None of these formulas are as good for FDA as the CR level being set at the FY 12 level.

Some final thoughts (for this week) about the potential for sequestration and FDA. We don’t know if the sequestration will occur, but in all likelihood, it will be hanging over us as a possibility until late November or December.  We hope it can be avoided, not least because of the devastating impact of reducing FDA’s appropriation by somewhere between $175 million and $250 million in FY 13. Also, it would not be a one-time cut, but rather FDA’s base for FY 14 discussions would be the post-sequestration number.

Ladd and I have been studying this issue very hard and talking with others — because the impact on FDA is not straightforward. We have been pressed to provide the same stark quantified factoids as other governmental agencies (e.g., the National Institutes of Health would issue about 700 fewer grants to medical researchers and up to 1,500 grants would be cut from the National Science Foundation).  However, it is much harder to specify the consequences for FDA because of the many different types of programs and responsibilities of the agency.

It is clear that sequestration would mean FDA cannot do nearly as much in FY 13 as it did in FY 12, probably a lot less.  Most functions of the agency will have less money to work with — suggesting food will be less safe, drugs and devices will get slower reviews, and fewer people will be available to beef up the urgent gap in import safety. Further, there is the unknown interplay of priorities and user fees. The user fee programs are not subject to sequestration, but must be used for specific purposes that may not be the most pressing and immediate needs of the agency. Among other things, this will mean more pressure on the food safety programs.

One possible consequence, discussed in this column before, is that increases in user fee income backfills some of the BA cuts (e.g., in areas where activities are jointly funded, such as drug and device review and safety). This puts the agency in an un-winnable bind: FDA will be obligated to undertake the activities and meet the performance measures in the new user fee law as if the new user fee money was paying for additional staff. Instead, it seems logical that the money will be needed to preserve the jobs of existing staff whose efforts were already being counted upon to perform the activities and help meet the performance measures.

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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