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FDA USER FEES WOULD CONTRIBUTE $ 198 MIL. TO PROPOSED FY 1992 BUDGET OF $ 770 MIL.; DRUG AND BIOLOGIC REVIEW FEES REPRESENT LION's SHARE -- $ 143 MIL.

Executive Summary

User fees for drug and biological product reviews would be expected to generate $ 142.5 mil. out of total user fee revenues of $ 197.5 mil. included in the Bush Administration's proposed FY 1992 budget for FDA. The budget plan includes $ 106.4 mil. raised from drug review fees plus $ 36.1 mil. from biologicals. In addition, the Administration budget projects raising $ 26.6 mil. from medical device reviews, $ 17 mil. from foods, and $ 11.4 mil. from reviews of animal drugs. The Bush Administration's budget request proposes an 11.6% increase in FDA appropriations to $ 770 mil., including user fees. "Over the past 18 months, a variety of entities have reviewed and scrutinized FDA's capacity to protect the public health; almost universally, they have concluded that FDA needs a substantial infusion of resources," according to the HHS' budget document. "The FY 1992 request of $ 770 mil., a 12% increase over FY 1991 and a 43% increase over FY 1989, represents a significant down-payment toward the process of revitalizing the agency." However, FY 1991 appropriations for FDA of $ 690.4 mil. require no user fees. Minus the user fee proposal, FDA is requesting appropriations of $ 573 mil. for FY 1992. Although the Bush Administration, like the Reagan Administration before it, has never been able to attract interest from Congress for FDA user fees, the Administration's three budget requests have placed an increasing importance on user fees to make up for budget shortfalls at the agency. In FY 1991, the Bush Administration had sought for FDA a total budget allotment of $ 685 mil.: $ 528 mil. in appropriations plus $ 157 mil. in user fees. The Administration's first budget request had proposed a $ 570 mil. budget for FDA in FY 1990 based on anticipated user fee revenues of $ 100 mil. For industry, past Administration attempts to implement user fees at FDA have represented little more than an empty threat given the opposition to the concept by the key health legislators in Congress. However, the combination of federal budget constraints and FDA resource needs has persuaded several long-time opponents of FDA user fees to rethink their position. They include Sens. Kennedy (D-Mass.) and Hatch (R-Utah) and Reps. Dingell (D-Mich.) and Waxman (D-Calif.), and Dingell is expected to introduce authorizing legislation this session. The legislators have generally expressed concerns that the fees add to, rather than replace, existing funding levels. In 1989, Kennedy had floated the idea of a facility registration fee as an alternative revenue raising approach, but that drew opposition by Hatch and others, largely because the revenues would have gone to the Treasury rather than to enhancing FDA's funding. At a Feb. 8 meeting of the Association of Biotechnology Companies, Rep. Wyden (D-Ore.) said there is a "very high probability that there will be an agreement this time worked out on the user fees. As one who has been skeptical of this in the past, I know that I'm willing to take a new look at this . . . simply because there is so much to do" at FDA. At a Feb. 4 HHS press conference on the budget, Assistant Secretary for Management & Budget Kevin Moley predicted that Congress may be more receptive to user fees this year. "I would suggest [Congress is] going to have to be a lot more amenable to things that they previously have rejected, and I would add [user fees to] the 'A' category," Moley said. "By virtue of the budget summit agreement entered into by the Congress and the Administration, there are simply not additional monies to be had." Assistant Secretary for Health Mason indicated after the press conference that even with the FDA budget increase, the agency would be hard pressed to implement the 13 FDA-related bills enacted last year. Mason has strongly criticized Congress recently for such a sudden expansion in the agency's workload ("The Pink Sheet" Jan. 7, p. 18). He suggested that gaining authority to levy user fees may make it easier to match revenues to spending needs. However, he predicted that even with the $ 197.5 mil. proposed in user fees this year, FDA will not be able to move ahead with any "reasonable speed" on the measures passed by Congress last session, which range from food transport to medical device amendments ("The Pink Sheet" Nov. 26, p. 8). Asked which measures FDA will be slow in implementing, Mason replied, "all of them" with the possible exception of food labeling, which he described as an Administration initiative. Mason said HHS plans to "work with" Congress to gain some leeway in implementing FDA's expanded workload. During the press conference, Moley was asked whether the upcoming report from the Edwards Committee, which is expected to point out severe shortages in FDA personnel, physical plant and other resources, might lead HHS to increase its budget request, perhaps including supplemental funding for 1991. Moley responded that the Edwards Committee report is due out in May, which "would be in time for the '93 budget." He indicated that HHS might be swayed to ask for additional funding only if the Edwards Committee "found a situation that was so drastic that we needed to move sooner than that." Overall, the $ 79.7 mil. FDA increase proposed for 1992 includes $ 35.2 mil. to maintain the current level of activities. In addition, the budget proposal would add $ 44.5 mil. for new initiatives, including $ 29.5 mil., and 322 full-time equivalent staffing positions, to bolster enforcement activities. From the increased funding for enforcement activities, $ 15 mil. and 150 staffers would be directed at human generic drug enforcement. The $ 15 mil. for enforcement is part of a $ 52 mil. budget request for generic drugs. According to HHS, the FY 1992 budget increase will allow for "increased inspections of each generic drug manufacturing facility prior to its marketing of approved products; an increase in the number of bioequivalency tests performed by the agency; and the creation of a cadre of criminal investigators to determine fraudulent practices in the production of generic drugs and other regulated products." The budget adds $ 10.6 mil. above inflation to improve product review and evaluation, including $ 3.6 mil. for biologic and vaccine products; $ 3.1 mil. for generic human drugs, and $ 2.8 mil. for AIDS-related evaluation and review. The proposed user fee revenues just from drugs would not only exceed the total funding increase for FDA but also is more than five times the funding increase specifically alloted to the Center for Drug Evaluation and Research. CDER would be allocated $ 195.6 mil., up $ 19.3 mil., or about 11% from FY 1991 (see box, previous page). The budget proposal overall would add 473 full-time equivalent staff positions for FDA in FY 1992, an increase of 6% over FY 1991 and 14% from FY 1990. Agency-wide spending related to AIDS and HIV is estimated at $ 72 mil., a $ 9 mil. increase over fiscal 1991. Commenting on the AIDS spending increase, the HHS budget document notes that between fiscal years 1988 and 1990, "AIDS therapies in clinical trials increased 30% and applications to market new AIDS therapies increased 67%. The increase also allows FDA to continue to improve the availability of experimental AIDS therapies to patients through such mechanisms as the treatment INDs and parallel track clinical trials." Regarding FDA's infrastructure, the budget document explains that $ 5.5 mil. would be used to "replace outmoded laboratory and computer equipment, and improve [FDA's] financial management and internal controls." In addition, "FDA will use a total of $ 1.7 mil. in FY 1992 -- along with funds previously appropriated -- to continue studying ways to consolidate the agency's 23 Washington, D.C.-area locations." At the Centers for Disease Control, $ 258 mil. is requested for immunization programs, an increase of $ 40 mil. or 19%. With the added funds, CDC plans to "expand infant outreach demonstrations to better coordinate immunization services with other low-income assistance programs; establish a team of experts to assist communities in identifying and eliminating existing barriers to the delivery of immunization services; as an incentive, reward those states and communities which show they have improved immunization rates the most among the population of low-income two-year olds; increase support for preventing the perinatal transmission of hepatitis B; continue new vaccine research and continue purchasing, for the states, about 21 mil. doses of routine childhood vaccine." CDC is seeking no new monies for the vaccine stockpile, funded at $ 3 mil. in 1991. About "94% of the 26-week goal will have been accumulated through FY 1991 as an emergency reserve," the budget documents explain.
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