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The Color of Money … and Shades of Green

June 5, 2015

Some people say: all money is green. By that they mean: the value, even the power, of money is based on accumulation of it. The source doesn’t matter. Other people say: not all money is green (or, at least, not equally green). By which they mean: some types and sources of money are different than others and can limit what you can or should do.

What brings this to mind is the FDA’s situation. Presently, the agency receives a budget authority (BA) appropriation that comes from the U.S. Treasury, as well as funds from user fees that are collected from industry. As proposed by H.R. 6, the 21st Century Cures legislation, FDA would have a third funding stream: mandated spending.

The proposed mandated funds are derived from the U.S. Treasury, but (at least on their face) will not require action by the appropriations committee. Further, they are, presumably, not subject to funding caps. But even these basic aspects of the mandated funding are not clear. We do know that the availability of mandated funds for FDA will not be automatic as it is in Medicare. Nor can the monies be truly independent of the appropriations committee because there is a maintenance of effort clause. FDA only receives the extra, mandated monies, if the appropriations committees provide FDA with at least as much money as they did in the year before. Note that a lot of details are vague at the moment and may also change as the realities of a hybrid funding source becomes clearer. For example, the funds might be available only if appropriated (i.e. discretionary to the appropriations committees), which is the case for user fees.

With two very different funding sources and a possible third that is unlike the first two, FDA’s budget is sure to become more complex. Each funding stream is different and serves different purposes. Funding from each source is not necessarily interchangeable.

Budget authority appropriations are meant to be the backbone of the agency: covering all of its broad public health responsibilities, as well as much of its regulatory functions. User fees are meant to support (not supplant!) budget authority appropriations. They are intended to pay for very specific (and relatively narrow) set of activities in which FDA and industry have a mutual interest in better process and fairer outcomes (e.g., paying for more drug and device reviewers).* The new mandated funds are meant to pay for six specific functions† that are either created or greatly enhanced by the 21st Century Cures legislation.

What I hope is clear: no matter how large either user fees or mandated funding grows, they are not a substitute for a budget authority appropriations that increases as FDA’s mission and responsibilities grow. When it comes to FDA, “not all money is (equally) green.”

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* A possible exception is the tobacco control function within FDA. It is 100% user-fee funded and the only user-fee program that was not created with industry’s full support.
† The specified responsibilities that would be paid for by the Cures (FDA) Innovation Fund include development of data on natural history of diseases; support for the Council for 21st Century Cures; development and use of patient experience data to enhance structured risk benefit assessment framework; qualification of drug development tools; utilizing evidence from clinical experience; and grants for studying the process of continuous drug manufacturing.

Note: This week’s Analysis and Commentary was written by Steven Grossman, the deputy executive director of the Alliance for a Stronger FDA

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