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A Large and Unequal Hit on the FDA

September 14, 2012

One of the continued obstacles for FDA funding is that the appropriations process keeps being hijacked by “one size fits all” federal spending policies. The Appropriations Committees mostly finished their individual bills this year — giving consideration to the merits of each program and agency within their jurisdictions.

Notwithstanding those efforts, it looks like the federal government will be funded from October 1, 2012 to March 31, 2013 by a continuing resolution that strictly limits all agencies — regardless of merit — to the monies that they received in FY 12.

Similarly, sequestration (to occur on January 2, 2013) is also a “one size fits all” approach to deficit reduction. All discretionary federal spending, domestic and defense, will be subject to an across-the-board cut of about 8%. Merit/growing responsibilities/importance to the American people are all rendered immaterial.

Over the last half-dozen years, especially as the momentum for deficit reduction has grown, we have been told by some Hill staff — my boss thinks “across the board” cuts are the best way to go because they are inherently fair. In this view, every program contributes equally to solving the problem of shrinking government and the deficit.

We have (gently) argued and even convinced many staffers that responsible, fiscally prudent government is founded on making tough choices about national priorities. Subtracting money from every program just weakens vital programs and prolongs the life of less important programs. Our view has been that FDA should/will come out near the top if federal resources are allocated on the basis of merit and importance.

While we can count a large number of converts to our point of view, it is hard to deny that the macro politics of the Hill have made it quite difficult for the FDA’s many advocates to obtain increased funding for the agency. This year in particular, breaking even with FY 12 is probably as good a result as possible until the Congress breaks the “fiscal cliff” logjam at year’s end. Either sequestration will occur and, possibly, the Bush tax cuts will expire … or Congress will finally have to decide upon national priorities.

Meantime, however — and unexpectedly — it seems like “treating everyone equally” is actively hurting FDA — by taking more dollars away, rather than just leaving the agency in “status quo” mode.

Earlier this week, the House of Representatives released the text of the FY 12 Continuing Resolution. Notably, it omitted language that would have allowed FDA to collect and use the higher user fee levels that were adopted in FDASIA for FY 13, instead capping them at the FY 12 level. Similarly, there is no language for FDA to receive the user fee funds under the generic and biosimilars programs. Neither existed in FY 12, so without “conforming” language, there is nothing in the FY 12 agency base to be “continued” under the CR.

The collection of the higher user fee levels and the new user fees were on OMB’s list of anomalies that needed to be corrected in the CR. In the past, such updates were considered to be within the boundaries of a politically “clean” CR. Thus, by historic standards, this latest CR is much narrower than in the past — but there is no question that there is a large and unequal hit on FDA that is occurring as part of this.

In a similar vein, when the transparency report is released by OMB (possibly today, Friday), we expect the Administration to interpret the sequestration language to include user fees. In a note that Ladd and I circulated on September 4, as well as in last week’s “Analysis and Commentary”, this was discussed at greater length. Our primary concern is the approximately $200 million sequester of the FDA’s budget authority (taxpayer-funded) appropriations of $2.5 billion.

Making user fees part of the sequestration could mean more than $100 million more removed from the agency’s budget. This is a further example of where “treating everyone equally” will wind up being even more painful for FDA than for other agencies.

As we have said before: The Alliance remains committed to advocating for FDA funding and hopes it can count on the support of each of its members in the difficult effort to retain FDA’s funding levels in the face of shrinking federal budgets and sequestration.

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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