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US Congress Will Address Sequestration Spending Cuts to FDA Following Presidential Election

Published: 9/25/2012
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Unless Congress is able to pass a budget deal by the end of the year, mandatory spending reductions would cut the FDA's budget by USD318 million, including about USD112 million in user fees



IHS Global Insight Perspective

 

Significance

The United States Congress passed a six-month spending bill to fund the government through March 2013, but delayed discussion on sequestration spending reductions which could deprive the FDA of millions of dollars in user fee funding.

Implications

Sequestration automatic budget cuts would go into effect in January unless Congress is able to reach a compromise to reduce the deficit. The White House estimates that the FDA's contribution to the sequester would be USD318 million.

Outlook

The outcome of the presidential election will drive the direction of budget negotiations during a "lame-duck" session of Congress. If a budget deal cannot be reached, there will likely be strong pressure on Congress to ensure the FDA's ability to collect and spend all of its user fees.

The United States Congress will debate deficit reduction after the 6 November presidential election to prevent mandatory defence and domestic spending cuts. The federal budget sequester is scheduled to go into effect 2 January 2013, unless Congress is able to agree on a budget deal to reduce the deficit by USD1.2 trillion as required by the Budget Control Act passed by Congress in 2011. Congress passed a six-month spending bill on 22 September to continue funding the government when the fiscal year (FY) ends 30 September at approximately the same level as FY2012, but it did not attempt to resolve broader fiscal issues.

FDA Budget

Sequestration budget cuts could delay the FDA's ability to conduct drug and medical device reviews (see United States: 10 September 2012: Spending Cuts Threaten FDA Functions). The White House Office of Management and Budget (OMB) sequestration report outlines that USD3.873 billion of the FDA's budget (USD67 million of the agency's budget is exempt) is subject to an 8.2%, or USD318-million, reduction in FY2013. The OMB report is available here.

Taking this level of funding out of the agency's budget would equate to significant lay-offs, according to an advocacy group. "If all the savings were achieved through lay-offs, it would mean more than 1,000 fewer people would be standing on the front line to protect the public health," the Alliance for a Stronger FDA said. Their statement is available here.

User Fees

The USD318-million budget sequestration for the FDA includes about USD112 million in user fees, according to BioCentury. The sequestration amount is based on FY2012 budget spending which is prior to the enactment of generic and biosimilar user fee programmes and it is unclear whether these new fees could be collected. The expanded user fee programme is scheduled to go into effect on 1 October, however, the recently-passed spending bill does not specifically authorise the FDA to collect user fees for generic and biosimilar products (see United States: 27 June 2012: Passage of PDUFA V Overshadowed by Impending D-Day for Healthcare Reform in US).

Outlook and Implications

Congress passed a six-month spending bill to fund the government through March 2013, but delayed discussion on sequestration spending reductions which would cut USD318 million from the FDA's budget in FY2013. When Congress returns after the national election it will have only a few weeks to reach a deal to cut the deficit before automatic budget cuts take effect in January. The outcome of the election will determine how the sequester will be avoided and from where alternative budget cuts will come from.

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