Report: US Budget Sequestration Could Seize Portion of FDA User Fees

Posted 05 September 2012 | By Alexander Gaffney, RAC 

A planned 7.8% across-the-board budget cut for all federal agencies passed into law in 2011 could ultimately effect the US Food and Drug Administration's (FDA) user fees, reports a prominent agency advocate.

The cut, otherwise known as budget sequestration, came as the result of the Budget Control Act of 2011, which stated that if Democrats and Republicans were unable to come up with substantial, voluntary cuts to federal expenditures, an automatic trigger would be activated that would call for $1.2 trillion in budget cuts over the coming decade.

Despite the enormity of the cuts, information about how, exactly, they would come into effect has thus far been lacking. Under the terms of a recently passed law, the Sequestration Transparency Act of 2012, the Office of Management and Budget (OMB) is scheduled to release a report on the cuts by 7 September. The legislation requires the report to include the impact of cuts on each agency's projects and activity levels.

Could Cuts Also Affect User Fees?

Those cuts-and the lack of information about them-have agency advocates worried, including Steven Grossman and Ladd Wiley of The Alliance for a Stronger FDA.

In a 4 September posting, Grossman and Wiley write that their understanding of what could fall under the budget ax is changing, potentially to the detriment of industry-paid user fees.

"Recently, we have picked up an increasing number of signals that industry user fees paid to FDA are 'non-voluntary payments to government' and subject to sequestration," they write. This, they add, seems counterintuitive, as the fees are not taxpayer-funded and would not accomplish the Budget Control Act's goal of reducing the deficit. However, because they would still be collected by the Treasury Department, the funds could still be used to pay down any previous debts.

Grossman and Wiley write that, "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."

This could result in FDA losing $68 million in user fees for the prescription drug and medical device user fee acts, and a further $26 million from generic and biosimilar user fee programs during fiscal year 2013. FDA would also stand to lose more than $200 million from its congressionally appropriated funding if the cuts were to go through, they noted.

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