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Regulatory Focus™ > News Articles > Legislators to OMB: Sequestration of FDA User Fees Wrong, Should be Reversed

Legislators to OMB: Sequestration of FDA User Fees Wrong, Should be Reversed

Posted 02 December 2013 | By Alexander Gaffney, RAC

Legislators in the House of Representatives seem to have a consistent message for the White House's Office of Management and Budget (OMB), the office which effectively sets and enforces policy within the executive branch: Stop holding the US Food and Drug Administration's (FDA) user fees hostage.


FDA's funding comes from a variety of different streams. While it receives a substantial amount of funding from the congressional appropriations process, it also receives so-called "user fee" funding from manufacturers of pharmaceuticals, medical devices, veterinary products, generic drugs, biosimilars, tobacco products and more.

Many of the programs were initially set up as a sort of quid pro quo: Industry agreed to pay higher fees to FDA, which in turn was expected to put those resources into reviewing product applications more expeditiously.

In 2013, legislators failed to take actions necessary to blunt the effects of the Budget Control Act of 2011, which required massive spending cuts across the government. To ensure those changes were made, the law contained a trigger mechanism that would automatically "sequester" approximately 5% from all federal agencies if the cuts were not made.

Legislators failed to act, and FDA was among the agencies that lost money.

But in a twist not foreseen by some, not only FDA's congressionally-appropriated monies were sequestered. Its user fee funding was also subject to sequestration, the amount of which has already exceeded $80 million. That money currently sits in an account at the Treasury Department, unable to be released but also unable to be spent.

OMB 'Incorrect' to Sequester User Fees

The user fee's perpetual state of monetary limbo has prompted dozens of legislators to write to OMB pressing the office to release the funding.

In a 2 December 2013 letter to OMB, Rep. Kevin Yoder (R-KS) said that OMB had "incorrectly interpreted sequestration to apply to both appropriations and user fees," resulting in tens of millions being sequestered from FDA's budget. By Yoder's accounting, the tally includes $36.6 million in prescription drug user fees, $15.2 million in generic drug user fees and $2.8 million in medical device user fees.

"Congress reauthorized collection of these fees as part of the PDUFA bill of 2012, and under this legislation, these user fees cannot lawfully be used for any purpose other than to support the FDA's human drug or medical device review programs," Yoder explained. OMB and the Treasury appear to agree in part with that statement, as they have confirmed that they are unable to spend the money.

But if they cannot spend it to pay down the national debt, why keep it, asked Yoder?

Yoder also took issue with OMB's decision to sequester the fees in the first place, calling the move antithetical to the intent of the Budget Control Act, the law which enacted the sequester.

"User fees are paid as part of an agreement negotiated between medical product applicants and the FDA, and ratified by Congress to supplement scarce government resources," he wrote. "Sequestering them not only compromises the good faith of industries that chose to enter into such an agreement, but also has the potential to cripple an essential public health agency that relies on outside resources for well over 60 percent of its drug review budget."

The letter was co-signed by 73 other members of the House.

The letter also follows one sent in November 2013 by Rep. Mike Honda (D-CA), who called on House and Senate appropriations officials to release the fees from their current state of limbo. Honda's letter was co-signed by 21 legislators.

Rep. Yoder Letter to OMB

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