Regulatory Focus™ > News Articles > UPDATED: President's Budget Proposal Calls for Small Increases at FDA, but Big Changes for Industry

UPDATED: President's Budget Proposal Calls for Small Increases at FDA, but Big Changes for Industry

Posted 11 April 2013 | By Alexander Gaffney, RAC

The US Food and Drug Administration (FDA) would get a sizeable increase in its funding under a new budget proposal released by the Obama Administration on 10 April 2013, but much of that funding comes in the form of user fees, reflecting some of the realities of an austere budget environment.

Background

The budget proposal is one of several released by US political entities, but differs from those released by House and Senate legislators in its considerable level of detail. While most other plans are frameworks that address budgetary needs in general, the presidential budget in many ways is an argument put forth by the federal government calling for additional resources.

At present, FDA and other agencies are operating at the FY2012 level, which has remained in law due to a series of continuing resolutions intended to keep the government from shutting down. Many political analysts see the FY2014 budget as the first real opportunity to set a new baseline for the budget.

The Plan: More Appropriated Funds for FDA

Under the plan, FDA would see its food and medical product activities given $821 million in additional funding above the FY2012 baseline. That would bring total FDA funding up to $4.7 billion, of which $2.6 billion would be congressionally appropriated.

That funding will go to a variety of new programs, including a $10 million initiative meant to improve oversight of medical imports into the US by establishing a more robust presence in foreign countries such as China, where an increasing number of US consumer goods now originate.

Additional funding will also be given to fund regulatory science initiatives, long the hallmark cause of FDA Commissioner Margaret Hamburg, who has often touted it as one way the regulatory agency can promote safe and effective products while expediting their regulatory approval.

What's clear, though, is that FDA's appropriated funding won't be changing much. Though the budget would give it an additional $821,453,000 in total funding, just $51,884,000 would be from Congress (and thus US taxpayers). The vast majority--$769,569,000-would come from new user fees established in late 2012 under the FDA Safety and Innovation Act (FDASIA). That program established enhanced fees for several programs, including pharmaceuticals and medical devices, and established entirely new programs for biosimilar and generic pharmaceutical products.

"The user fee increases are $269,434,000 for proposed new user fees, $175,510,000 for current law user fees, and $324,625,000 for indefinite user fees," FDA explained.

FDA would, however, see its number of full time employees grow substantially, from 14,416 at present to 15,424 during 2014. More than half (607) of those employees would come from the food safety area, which is currently grappling to implement the Food Safety and Modernization Act. Nineteen additional staff members would be added to FDA's China offices to boost inspections there, FDA added.

Other Measures

Not all measures slated to affect the industry are ones affecting FDA. Other programs under the Department of Health and Human Services' umbrella, including the National Institutes of Health (NIH) and the Biomedical Advanced Research and Development Authority (BARDA) will see new funding.

The budget includes $415 million to "enhance the advanced development of next generation medical counter-measures against chemical, biological, radiological, and nuclear threats," including pandemic influenza.

Some of that funding will go toward the establishment of a novel mechanism known as the Strategic Investor-"An independent venture capital entity in the Office of the Assistant Secretary for Preparedness and Response" charged with funding promising therapies intended to treat biological threats. Similar funding will also be given to the NIH's Concept Acceleration Program, which aims to help develop promising countermeasures, and FDA's Medical Countermeasures Regulatory Science Initiatives. The exact funding for those two programs was not immediately clear.

A further $250 million will be appropriated to replenish the Project BioShield Special Reserve Fund, which is used to purchase stockpiles of medical countermeasures in the case of a national emergency.

The CDC will also be given new funding for an "Advanced Molecular Detection" (AMD) initiative intended to allow the agency to respond quickly to emerging disease threats, the likes of which it is now dealing with in the form of the Chinese H7N9 flu strain. The same technology should, in principle, be able to determine whether those diseases are resistant to antibiotics as well-a key benefit to determining the best method of response.

The Medicare Part D drug plan would also see changes under the budget, accelerating the closing of the so-called "Donut Hole" by 2015 instead of 2020 for brand-name drugs. That funding would come from the pharmaceutical industry, which, according to a summary of the plan, would be required to increase the discounts offered on those products.

In addition, the budget also calls for the end for so-called "pay-for-delay" agreements between innovative and generic pharmaceutical companies in which the former compensates the latter in return for a delay in the introduction of the generic competitor to the market. Similarly, the budget calls for a seven-year window for biologic market exclusivity, down from the current 12. That measure would save $3 billion per year by the White House's accounting.

Reactions Mixed

The budget received a wide range of reactions from industry groups, including PhRMA, AdvaMed, GPhA and the Alliance for a Stronger FDA.

"The president's total budget request for all discretionary spending is substantially more than will be allowed under the Budget Control Act of 2011," observed Steven Grossman of the Alliance in a statement. "If a larger budget deal is adopted (and the president is proposing one) that sets up a scenario where discretionary spending cuts are replaced (in whole or part) with tax changes and entitlement reforms, that would be supportive of the FDA funding level proposed by the president."

Grossman also took note of the limitations proposed for FDA even as it stands to see its overall funding increase.

"Most of the additional revenue (real and proposed) is for very specific functions," he explained. "In contrast, the greatest threat to FDA funding is for dollars that can be applied to a broad range of activities. As an example, bottom-line appearances to the contrary, the addition of $300 million in generic user fee revenue does not offset any cuts that might occur in Budgetary Appropriations (BA) funding (available for any priority) or, even within CDER/CBER, the PDUFA user fee funding."

Other industry groups were more critical of the budget proposal.

PhRMA, for example, called the budget "bad for patients, bad for innovation, and bad for the economy," adding that the policy proposals were "misguided."

Much of their ire, however, was focused on Medicare Part D proposals that would see pharmaceutical companies forced to offer much deeper discounts on their products and five years sooner than expected. PhRMA called the Part D program, which offers prescription drug coverage to seniors, a "model of success," and urged legislators to reject the reform provisions.

PhRMA also said that changes to pay-for-delay provisions interfere with complex legal settlements, serving only to create "an uncertain business environment and can lead to higher costs for consumers."

Those sentiments were echoed by GPhA, which said that while the budget "affirms the cost-saving role that generic alternatives can play," it "strongly opposes" the ban on pay-for-delay settlements.

"GPhA believes that more recent and accurate data will conclusively show that a patent settlement ban will chill generic competition and result in an increased cost, not a savings," it said.

Medical device industry group AdvaMed, meanwhile, said that it remains "deeply concerned that some of the policy proposals in the budget such as reductions in payments for clinical lab services and for durable medical equipment in Medicaid and, if adopted, unprecedented prior authorization for advanced imaging, will chill continued medical innovation affecting current and future Medicare beneficiaries as well as significantly harm access to life-saving, life-enhancing medical technology."

"We look forward to discussing these issues with the Congress and the Administration to find constructive solutions as consideration of the budget moves forward," it added.

The Bio Industry Association (BIO) did not have a comment on the budget available.



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