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FDA USER FEES OF $1.4 BIL. OVER FIVE YEARS

Executive Summary

FDA USER FEES OF $1.4 BIL. OVER FIVE YEARS are proposed by Vice President Gore in his "reinventing government" report, formally entitled the "National Performance Review." Released Sept. 7, the report proposes to raise $1.44 bil. during fiscal 1994-1999 via "user fees on FDA's inspection and approval processes," on the premise that "food, drug and medical device manufacturing, processors and suppliers should be required to pay for FDA services." Looking to FDA for increased revenues through user fees is not a new idea. The Clinton Administration had proposed to raise $1.02 bil. over four years (FY 1994-97) in the President's spring deficit reduction plan, "A vision of Change for America" ("The Pink Sheet" Feb. 22, p. 9). Facing congressional objections to the earlier proposal, the Clinton Administration agreed not to seek expanded user fees for deficit reduction but to continue with the implementation schedule for the Prescription Drug User Fee Act. The 1992 law calls for industry user fees for prescription drug reviews and Rx-to-OTC switch applications in exchange for setting certain performance goals for FDA. The law authorizes user fees of $54 mil. in FY 1994 and a total of $300 mil. during the program's first four years. FDA's total budget for FY 1994 is $942.3 mil., including the $54 mil. in user fees. While many of the provisions can be implemented through executive order; some, including the user fee proposal, will require legislation. Administration officials said they have not yet decided how the user fees would be allocated among industries regulated by FDA or what fees might be for different types of FDA activities. They suggested the expanded program could include some sort of performance objectives for FDA, in line with the approach of the Prescription Drug User Fee Act and the Vice President's emphasis on focusing the federal government on measuring the outcomes of services. Another recommendation in the report that directly affects FDA is a plan to consolidate food safety programs into the agency and to develop a uniform national food safety inspection system. The plan would require moving a number of food safety programs from the Agriculture Department to FDA and expanding agency efforts in this area. The report also proposes to "amend the Health Care Financing Administration's contracting authority to allow for competitive contracting," for estimated savings of $985 mil. through 1999. The report states that HCFA "should be authorized to fully and openly compete Medicare processing contracts to reduce costs and eliminate inefficiencies and conflicts of interest." One recommendation calls for streamlining the rulemaking procedures of federal agencies like FDA and HCFA by omitting Office of Management & Budget overview of all but "significant" regulations. An executive order limiting OMB reviews could be issued as soon as the week of Sept. 13. Currently, OMB's Office of Information and Regulatory Affairs reviews all regulations before they are issued by federal agencies. The policy was established in 1981 by President Reagan as part of his antiregulatory program. Critics of OMB reg reviews have argued that they cede too much authority from the agencies to OMB and emasculate the agencies' regulatory power. The Gore report recommends that President Clinton "instruct OIRA to review only significant regulations, not, as under the current process, all regulation." Lengthy OMB reviews "may be appropriate for significant rules, [but] it is a waste of time for others." Limited OMB reviews "will take into account a broad range of costs and benefit, will be more useful and realistic" and "will enhance the planning process and encourage agencies to consult with the public early in the process," the report maintains. By 1999, a total of 252,000 jobs would be eliminated under the Gore plan; more than 2 mil. individuals are currently employed by the federal government. Administration officials estimated that at least 700,000 are employed to "run the red tape" of the bureaucracy, or twice as many as are needed.
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