Regulatory Focus™ > News Articles > FDA: Budget Sequestration Could Lead to 'Loss of Whole User Fee Programs'

FDA: Budget Sequestration Could Lead to 'Loss of Whole User Fee Programs'

Posted 10 September 2012 | By Alexander Gaffney, RAC 

The current congressional budget environment is leading to a situation in which the US Food and Drug Administration (FDA) could face the loss of "whole user fee programs" and hundreds of millions of dollars, FDA recently told Bloomberg Businessweek.

The agency remarks were in response to recent reports indicating that industry-paid user fees set to flow to the agency under the recently passed FDA Safety and Innovation Act (FDASIA) legislation are at risk of being seized under the terms of the Budget Control Act (BCA).

Under the terms of the BCA, federal agencies are set to lose approximately 7.8% of their funding effective 1 January 2013, and every year thereafter for the subsequent decade, if legislators are unable to come up with $1.2 trillion in budget savings. The entire process is known as budget sequestration.

A recent report out of the FDA-advocacy group Alliance for a Stronger FDA indicated the agency's user fees-non-appropriated funding paid for by industry-could similarly be sequestered under the terms of the BCA.

"Within the past few days, trusted sources in the government have indicated to us that it is highly likely that the Administration will determine user fees will be subject to sequestration," wrote Steven Grossman and Ladd Wiley of the alliance.

FDA: Agency Facing Loss of 'Whole User Fee Programs'

The agency is not taking the threats against its funding lightly, said FDA spokeswoman Karen Riley in remarks to Bloomberg Businessweek on 10 September. The user fees are intended to provide the agency with additional resources to conduct reviews and inspections, but are structured in a way as to prevent legislators from simply shifting resources away from the agency and operating FDA on user fees alone. Thus, if certain funding levels aren't met, said Riley, the funding for the user fee programs will not materialize.

The threat of sequestration, paired with the possibility of a government shutdown, "Could result in the loss of whole user fee programs, programs that have become essential to public health and medical product innovation," said Riley.

Even if funding does come through, FDA still faces a loss of approximately $200 million relative to its $2.5 billion in congressionally-appropriated funding. If the sequestration hits the agency's $2 billion in user fee appropriations, medical device and pharmaceutical review staff could lose as much as $70 million, said Grossman.

The amount, though, remains uncertain. Under a recently passed piece of legislation known as the Sequestration Transparency Act, the White House's Office of Management and Budget (OMB) was required to release a report by 7 September regarding how the sequestration would affect federal agencies. OMB has since missed that deadline, leaving the exact impact of the cuts-and what they stand to affect-unclear.

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