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And the Mailbox is Still Filling Up …

May 24, 2013

Unfortunately, sequestration and its consequences … means that I always have more questions than I can answer in any one column. Here are two more:

Q: Is FDA still prohibited from spending user fee income?

A: The March 2, 2013 sequester of $209 million included approximately $83 million in user fees. Those are not available to the agency to spend, i.e., less a prohibition and more a “You can’t spend money that isn’t in your account.” The total is approximately $36 million from PDUFA, $15 million from GDUFA, $3 million from MDUFMA, $25 million from tobacco, and a few dribs and drabs from other user fees, such as the animal drug ones. This doesn’t quite add up to the total, but gives roughly the proportional shares and sources.

The FY 13 sequestered user fees (which is about 5% of the total) never become available to FDA unless Congress re-appropriates them, which would almost certainly require offsetting cuts elsewhere. So, the absence of the money is permanent (without new legislation or new interpretation by OMB) but the impact is defined as March, 2 to September 30, 2013. At that point, the topic becomes FY 14 user fees, which are also “at risk.”

Q: Will there be a sequester in FY 14 and how would that affect appropriations and user fees?

A: Under the Budget Control Act (BCA), if Congress spends more than the budget cap in any particular year, another series of across-the-board cuts will go into place to get the spending level underneath the overall discretionary spending caps.

For FY 14: if the appropriations committees can keep their spending within the cap, no across-the-board cuts will be required. If not, there will be new across-the-board cuts for FY 14 that might be larger or smaller than in FY 13. The percentage cut will be dictated by the amount of money needed to bring the total spending under the cap.

Under current law and OMB interpretation, user fees would be included within a sequester, the same as in FY 13. However, the possibility remains (because the process is just getting started) that FDA could be excluded from any new sequestration, either in whole or just the user fee portion.

As we have noted in previous commentaries, Congress has three choices for FY 14:

  • Cut a major budget deal to allow enough discretionary spending to reach pre-sequester (base) levels and appropriations committees can pick winners and losers;
  • Only pass appropriations bills that in the aggregate do not exceeds the BCA level; or
  • Don’t cut a deal, pass bills that exceed the allowable total and allow across-the-board cuts to bring the total back to the BCA level.

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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