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How FDA is Funded, … and Why

September 25, 2020

Q: How many different sources of revenue does FDA have?

A: Most agencies are funded through budget authority (BA) (taxpayer-funded) appropriations (National Institutes of Health). A few agencies have programs that are a mix of mandatory spending and BA (Centers for Medicare & Medicaid Services). Very few agencies receive user fee funds for all (Patent and Trademark Office) or part (National Park Service) of their work. FDA receives funding from all these sources. BA funding comes to about $3.2 billion each year. User fee funding for medical products is about $1.9 billion. User fee funding for tobacco adds another $700 million, which pays for the entirety of FDA’s work on tobacco (no BA funding).

Apart from these sources, FDA will receive $70 million in FY 21 to fulfill medical product development goals set by the 21st Century Cures Act. Because the monies are derived from savings in mandatory programs, these funds must be appropriated, but do not count against any discretionary budget ceilings. To reflect that the funds are derived from mandatory programs, these Cures funds are in a separate section that comes after the main FDA appropriation of taxpayer and user fee funds.

Q: Who benefits from FDA receiving funds from all of these different sources?

A: FDA is a consumer protection agency, a public health agency, and a regulatory agency. Combining those missions, about 20% of all consumer spending in the United States — about $2.5 trillion — is spent on goods and services that are regulated or overseen by FDA. The primary beneficiary of a strong, well-resourced FDA is the American public. All of FDA’s stakeholders benefit, as well, when FDA has the resources it needs.

Q: How are BA appropriations different from user fees?

A: There is the obvious distinction that BA funding comes through the U.S. Treasury and represents taxpayer funding, while user fees are paid by companies. User fees supplement appropriations and pay for specific purposes, not general needs. To do its job properly — and best serve the public health needs of Americans — FDA needs funding from both sources. Also, decisions about BA appropriated funding are made each year, while user fee programming is based on a workplan (“commitment letter”) that covers the programming goals for a 5-year period. The current goals for medical product user fees extend from FY 18 to FY 22 and the negotiations process for the next cycle has just begun.

Q: Why did the current CR include an appropriation for the new OTC Monograph User Fee program?

A: All of FDA’s funding is appropriated, regardless of source, although only BA funding counts against budget and spending ceilings. The CR, by its nature, does not fund new programs (because they aren’t continuations of the prior year’s work). As a result, FDA would not have been able to initiate the OTC Monograph program without specific provisions being added to the CR to appropriate these user fee funds. (Note: None of the existing user fee programs needed this treatment; those programs all operate as continuations of the prior year.)

Editorial Note: The Analysis and Commentary section is written by Steven Grossman, Deputy Executive Director of the Alliance for a Stronger FDA.

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