FDA at a Crossroads: Budgets and Leadership

With a new Commissioner of the US Food and Drug Administration pending and budget battles brewing, what may be in store for the FDA?

Funding and budget priorities are important for any federal agency, but the Food and Drug Administration (FDA) is facing a potential large shift in funding that reflects a greater reliance on user fees to fund the agency. So where do Congress and the President now stand in their budget proposals, and what may a new FDA Commissioner be facing? DCAT Value Chain Insights examines the details. 

Budget battles
A key issue now and going forward for the FDA is funding. In the short-term, the FDA received a boost from the short-term spending bill that will fund US government operations through September. Early this week, the appropriation committees of the US House of Representatives and US Senate unveiled a 1,665-page spending bill that would fund the US government for the balance of the fiscal year (FY) 2017 (ending September 30, 2017). The bill is expected to be voted on later this week.

As outlined in the summaries of the omnibus agreements of proposed appropriations bill from the House and Senate, $2.759 billion in discretionary funding is allocated to the FDA, which is $39 million above the FY 2016 enacted level. An additional $35.6 million is provided to support the implementation of the Food Safety Modernization Act,and $10.9 million is provided to supplement medical product safety and the Precision Medicine initiatives authorized in the 21st Century Cures Act. In addition, $10 million is provided for the FDA to respond to emerging health threats, including Ebola and Zika viruses. The Senate and House omnibus bill summaries have slightly different total funding for the FDA. On the Senate side, the omnibus spending bill puts total funding for the FDA, including user fees,at $4.655 billion, $103 million above FY 2016 levels, The House omnibus spending bill places total funding for the FDA, including revenue from user fees, at $4.67 billion, $23.3 million below FY 2016, attributing the decrease in total funds to changes to user fee amounts prior to the reauthorization of user fee programs.

For the FDA and other federal agencies, the important measure will come later as the budge for FY 2018 (October 1, 2017 to September 30, 2017) is decided. In March 2017, President Donald Trump released his budget blueprint for FY 2018. In it, the blueprint recalibrates medical product user fees to more than $2 billion in 2018, approximately $1 billion over the 2017 annualized continuing resolution level, and replaces the need for new budget authority to cover pre-market review costs. To complement the increase in medical product user fees, the budget includes a package of administrative actions designed to achieve regulatory efficiency and speed the development of safe and effective medical products. Reflective of a policy position to increase reliance on user fees to fund the FDA, the budget blueprint said: “In a constrained budget environment, industries that benefit from FDA’s approval can and should pay for their share.”

The Alliance for a Stronger FDA, which among its membership include not-for-profit health associations, pharmaceutical industry trade associations (including the Pharmaceutical Research and Manufacturers of American and the Biotechnology Innovation Organization), and a number of large pharmaceutical companies, voiced concern over the increased reliance on user fees to fund FDA operations. “As we interpret the President’s initial budget request, it seems like the Administration agrees with us about FDA’s importance,” said the Alliance in a April 7, 2017 statement. “At least for the moment, they are not talking about cutting back FDA’s total funding. This is quite positive for the agency. However, the devil is in the details … and, in this case, the details are not good. The President proposes to increase off-budget medical product user fees by $1 billion per year and, presumably, take a corresponding amount of money away from the on-budget BA [budget authority] appropriations. If Congress does not enact the increased user fees (and they almost certainly will not), then the President’s proposal has the effect of becoming a $1 billion/37% cut in the agency’s BA funding.”

The Alliance points out that although recent news has centered on the short-term spending bill to fund government operations through September 30, 2017 and healthcare reform, the real test for the FDA will come in May 2017 when the President releases his full budget proposal for FY 2018. “Based on the “skinny budget” that the President has already released, many on Capitol Hill have called the full budget “dead on arrival.” If this was actually true, then FDA would be in okay shape for the FY 18 cycle, working from its budget authority appropriation of $2.7 billion. Instead, based on the President “skinny budget” proposal for FDA, he is more likely to propose something closer to $1.7 billion (lower is not out of the question) and this would be a 37% cut. “

Congressional proposals for user fees are more in line with current levels. Earlier this month, the House and Senate proposed bipartisan legislation, the FDA Reauthorization Act of 2017, for reauthorizing the FDA’s user fee programs for pharmaceuticals, generic drugs, and biosimilars. The proposed legislation comes as the House and Senate consider legislation for reauthorization of the Prescription Drug User Fee Act (PDUFA VI), the Generic Drug User Fee Amendments (GDUFA II), and the Biosimilar User Fee Amendments (BsUFA II), which are set to expire on September 30, 2017 and which need reauthorization by Congress to continue. Under The FDA Reauthorization Act of 2017, the base user fee would increase from $718.7 million FY 2017 to $878.6 million in FY 2018 for prescription drugs; would rise from $299 million in FY 2017 to $493.6 million in FY2018 for generic drugs ; and would increase from $20 million in FY2017 to $45 million in FY 2018 for biosimilars.

Leadership changes
Budgetary battles, alone, however, are not the only issues at hand for the FDA. A new FDA Commissioner, who will inherit these funding issues and be charged with setting key policy priorities for the agency, is in the offing. Earlier this month, the US Senate Committee on Health, Education, Labor & Pensions voted to advance the nomination of Scott Gottlieb, MD, as the next FDA Commissioner. The nomination will now go to the full Senate for consideration.

If his nomination is approved, Dr. Gottlieb would be returning to the agency where he served as Deputy Commissioner for Medical and Scientific Affairs following his appointment in 2005. Dr. Gottlieb is a physician, a resident fellow at the American Enterprise Institute, and a venture partner at New Enterprise Associates, a Chevy Chase, Maryland-headquartered venture capital firm. If confirmed by the US Senate, Dr. Gottlieb will succeed Robert Califf, MD, the former FDA Commissioner who formally stepped down before the Trump administration took office. Stephen Ostroff, MD, is currently serving as Acting Commissioner of Food and Drugs on an interim basis.

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