Budget Angles: “Not All User Fees Are Alike” and “No Base, No Clarity”

The President’s FY 25 Budget Request will be released soon, probably March 11. 

Through the lens of “How FDA is Funded,” my presentation at this week’s Alliance webinar (slides, summary) highlighted two ways in which the President’s request will be misinterpreted or confusing.  

All User Fees Are Not Alike. When the President’s budget is released, there will be a lot of attention to the big picture, the so-called “headline numbers.” One such number – prominent in most of the news coverage – will be the amount of taxpayer (BA) funding compared to the amount of user fees. 

If it follows recent years, it will show that BA is about 53% and user fees about 47% of FDA’s budget. Some news articles (and maybe even OMB) will observe that it is about 50/50. Except, the numbers are distorted by lumping tobacco user fees in with medical product user fees. 

They are not alike. FDA’s tobacco activities are a self-contained regulatory program that is permanently authorized and exclusively funded by user fees. Tobacco user fees are an imposition on industry and there is no mutuality of interests. Tobacco, in effect, is paying the cost of its own regulation.

Medical product user fees are collaborative—industry and FDA negotiate 5-year agreements. User fees provide more resources for programs and initiatives that FDA wants to undertake. There is no imposition. 

We call both user fees, but they are different in almost every aspect. Yet, tobacco’s $712 million fee program is a significant part of the headline number for user fees. If you exclude tobacco user fees, the FDA is about 60% BA funding and about 40% user fees. 

When the President’s budget request is released, don’t be fooled by the headline number for user fees!

No Base, No Clarity. This challenge will be with us all year and will lead to endless confusion. 

The President’s FY 25 budget request was formulated before FY 24 numbers were finalized. So, all the budget tables will use the first or second FY 24 CR numbers and extrapolate them to a full year. In many cases that will yield a number that is similar to the final FY 24 funding bills, once enacted. However, there can also be wide variance. 

Here is an example. FDA’s BA funding in FY 23 was $3.50 billion (rounding down). Working from the FY 23 base, and by formula, the FY 24 CR should be close to that number. But that says nothing about what number will emerge next week as part of the FY 24 Ag/FDA appropriations. 

Let’s say the President appreciates FDA’s hard work and recommends a $500 million increase for FY 25, bringing the agency to $4 billion in FY 25. If the FY 24 bill provides $3.6 billion, then the President's request is actually $400 million, not $500 million.  If FDA were to only get $3.3 billion in FY 24, then the President’s request is effectively a recommendation for $700 million. 

My appropriations colleagues assure me that the right number is the requested amount, not the amount of the increase. Under this example, advocates would ask for $4 billion, whether that ends up being a $300 million, $500 million, or $700 million increase over the FY 24 final. 

You will see this come into play quickly. Once we have the FY 24 final and the FY 25 request, there will be an almost unlimited number of examples to point to.

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