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Of 6-Month CRs and the Perils of Sequestration

September 8, 2012

Congress returns next week, which leaves them somewhere between 6 and 10 working days to write and approve an FY 13 Continuing Resolution before FY 12 appropriations run out on October 1. Assuming that the details can be worked out and sufficient votes gathered, the CR will run for 6 months and fund most programs (including FDA) at their FY 12 levels.

For FDA, this would mean a budget authority appropriation of $2.5 billion plus revenue from user fees. As has been widely reported in the trade press this week, special language will be needed in the CR for FDA to collect monies under the two new user fee programs — the one for generic drugs and the other for biosimilars — since they technically do not have a FY 12 existence to be “continued.”

Congress will probably recess in late September/early October for campaigning and the election and come back for a post-election session around November 28. Congress would then have about 4 weeks to address remaining issues for the year. The Alliance’s foremost concern will be to avoid the budget sequestration (across-the-board appropriations cuts of about 8%) that is scheduled for January 2, 2013.

FDA is at risk of losing more than $200 million from its current appropriation — a devastating cut in the agency’s operations. If sequestration occurs: food will be less safe, drug and device approvals will be slower, problems with imports and globalization will become more numerous, and FDA modernization will be severely slowed (the opposite of what everyone, critics included, want).

The precise impact is hard to quantify because FDA will try to prioritize its remaining manpower and perhaps no immediate disasters will occur and no life-saving therapies will languish. But it is hard to imagine that anyone — including Congress and the President — thinks that the optimum FDA strategy is for the American people to rely on good luck when it comes to products under the agency’s jurisdiction.

Further, as the history of FDA so dramatically illustrates: a slower, less vigilant FDA is a boon for marginal companies, hucksters, and those attempting to cut corners … and, in contrast, creates a competitive disadvantage for companies that want to produce and market quality products. I was told yesterday that there are still companies being caught trying to import melamine-tainted milk into the United States. It is a public health risk that some bad shipments might not be caught, but it also undercuts products that meet U.S. and FDA standards and contribute to the well-being of the American people.

While no one admits to being in support of sequestration, we do hear some people argue that there is 10% waste in everything … so life for FDA (and many other federal agencies) will be okay after an 8% sequestration. The problem with this — especially as applied to FDA — is that FDA’s program costs are probably increasing by 15% to 20% each year because:

  • The agency’s existing responsibilities are growing because of globalization and scientific complexity and a larger industry to regulate
  • The agency has two new laws to implement — FSMA and FDASIA

Meantime, FDA has been funding these additional costs by moving monies out of lower priority programs and by creating additional efficiencies. This is not a squeeze that you can do indefinitely — even at level funding. In the context of growing responsibilities and an 8% across the board cut, it is impossible to avoid having to off-load programs and functions that are core activities and not even (with stretched imagination) peripheral.

These are just a few of the ways in which sequester budget cuts are bad for FDA and for the American people. In subsequent weeks, I will write more about this. We are hoping, as well, to gain some additional support from OMB’s report (requested by Congress, probably due out next week) that is supposed to detail the impacts of sequestration cuts on every part of the government.

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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