User Fees Bolster FDA’s Budget—Analysis

The Bush administration’s spending plan for 2008 treats the US Food and Drug Administration (Rockville, MD, www.fda.gov) fairly well, considering the cuts directed at Medicare, Medicaid, and children’s health programs and flat funding for the National Institutes of Health (NIH).

The White House has proposed a record $2 billion budget for FDA for the year that starts September 30, 2007. That amount consists of $1.6 billion in appropriated funds, plus some $450 million in user fees for drugs, biologics, medical devices, and other products. Even though it’s fairly murky just where the money would come from and just how big the increase really is, the $2 billion total sets a marker for Congress to achieve through some combination of government funding and industry payments.

One problem is that about $45 million in proposed user fees have never been approved by Congress, and may not be this year. The administration wants generic drug makers to pay $16 million in fees to speed up approvals, but that industry quickly nixed the idea; they want any fee deal to link to policies halting obstructionist tactics by brands, such as authorized generics.

At the same time, pharma companies are likely to pay much more than the $340 million in user fees in the budget plan for next year. Under the recent proposal for reauthorizing the Prescription Drug User Fee Act (PDUFA), FDA and industry have proposed boosting fees for drugs and biologics to $400 million a year to support increased oversight of drug safety issues. Congressional leaders plan to address the proposal by summer.

An unusual complication in budget analysis this year is that Congress failed to approve most 2007 spending bills before it adjourned last year, forcing most federal agencies to continue operating at 2006 funding levels. The legislators were still negotiating revised 2007 budget numbers when Bush unveiled the 2008 spending plan, making it difficult to calculate year-to-year increases. Under a Continuing Resolution approved by Congress last month, FDA and NIH were big winners. NIH gained a $600 million budget increase, while FDA was provided $90 million over 2006, for a $1.95 billion total budget for this year. The increase was critical for the agency to continue collecting and increasing user fees and to avoid layoffs of some 650 staffers.

The biggest gainer is the generic drug program. Of almost $50 million in added funds for the Center for Drug Evaluation and Research (CDER) under the Continuing Resolution for 2007, $35 million goes to the Office of Generic Drugs (OGD) to support faster application approvals. The Bush administration proposes to provide another $5 million next year for OGD, plus the added user fees.

Bigger cuts

Despite its growth, the FDA budget is barely a blip in the administration’s $2.9 trillion federal spending plan, or in the $700 billion budget for the US Department of Health and Human Services, most of that mandated spending for Medicare and Medicaid. Thus, in order to curb the “unsustainable growth of federal entitlement programs,” the Bush administration seeks more than $100 billion in Medicare savings over five years, largely by freezing payments to hospitals, nursing homes, and physicians.

Healthcare providers immediately made plans to kill the fee cuts, while Congressional Democrats fumed that the budget was dead on arrival. Administration supporters described the administration’s proposal as the “opening bid” in the battle to reduce the budget deficit, a task made more difficult by huge increases in spending for the war in Iraq.

A controversial proposal is to have wealthier seniors pay higher premiums for Medicare benefits, including premiums for Medicare prescription drug plans. Additional cuts would hit Medicaid and the Children’s Health Insurance Program (CHIP), which has to be reauthorized by Congress this year. With pressure high on the legislators to find more money for Medicare, CHIP and other health programs, added funding for FDA is far from a done deal.