Forthcoming FY 23 President’s Budget Release and how to interpret the OMB “headline numbers” Part 1

Looking Ahead to the President’s FY 23 Budget Request

We have learned that the President's FY23 budget request will be released on March 28, 2022. So, this is a suitable time to start preparing Alliance members, the media, and the entirety of the stakeholder community for the Budget Release and its likely distortion of what is being proposed for FDA funding.

To be clear, the distortion is not intentional, partisan, or ideological. It is a byproduct of FDA’s multiple funding sources--several of which are complex--and the desire of OMB and the media to simplify a complicated budget request. This problem occurs every year, regardless of which party holds the Presidency.

When the FY 23 President’s Budget Request is released, the OMB “headline number” for FDA will be widely circulated in the media, yet not provide an accurate and meaningful picture of the proposal being made by the President. The important numbers will be in the budget tables, not in the OMB summaries.

FDA has five main sources of revenue, of which three will be mixed in the OMB “headline number”: budget authority (BA) appropriations; medical product user fees; and tobacco product user fees.

BA funding comes from the US Treasury (i.e., taxpayer funding that supports the agency). The amount is set anew each year as part of the annual appropriations cycle. BA funding is the primary focus of the Alliance’s advocacy, and our position can be summed up as: “FDA’s growing responsibilities require a budget that grows.”

Medical product user fee monies are collected from industry in specific amounts for very specific purposes set out in five-year agreements. Despite being in the annual Ag/FDA appropriations bill, the amounts FDA will receive in each of the five years is set, subject to volume and inflation (and other) adjusters.

Medical products user fees are extremely valuable to the agency. However, unlike BA funding, they cannot be used to pay for a wide variety of programs or fund new priorities and evolving needs outside the scope of the agreement.

Tobacco product user fees are often categorized with medical product user fees, but they are quite different. Tobacco fees are not negotiated with industry. Instead, they are collected based on permanent law and not subject to five-year renewal cycles.

Tobacco programs are 100% industry-funded (no BA funding), while medical products programs are funded by a mix of BA and user fees. Tobacco user fees are an involuntary imposition on an industry to pay for the cost of FDA regulation imposed upon them, while medical product user fees reflect voluntary agreements with industry.

When the FY23 President’s Budget Request is released on March 28, the “headline number” will mix all these funding sources together. We will be told that $6.xxx billion is being requested for FDA and that it is $xxx million (xx%) more than the year before.

Because FY 23 will be the first year of a renewed medical products user fee cycle, the "headline number" increase could be quite large, both expressed in aggregate dollars and percentage growth. This could be misleading. For example, if the Alliance were to be advocating for a 10% growth in BA funding, the "headline number" might suggest that the President is already proposing that FDA's BA funding grow at that rate or even higher. However, the increase might be driven largely from new base funding levels in the user fee agreements, not BA funding.

To correct this misleading perspective when the President’s budget request is released, we will distribute our analysis as soon as we have enough information to provide accurate analysis.

Editorial Note: The week’s Analysis and Commentary section was written by the Alliance’s Executive Director, Steven Grossman.