Hamburg, Like Industry, Wants Predictability – But In FDA Funding

Commissioner says the agency cannot operate effectively without predictable budgets and that sequestered user fees are needed now.

FDA Commissioner Margaret Hamburg seems to have a similar problem with agency predictability as many in the industries she regulates.

Hamburg said the mandatory budget cuts known as sequestration have left her unsure of the funding that will be available for FDA, which is necessary for effective operations.

It is a similar argument to one made by industry that consistent FDA policy and actions are necessary for successful drug development.

“When I talk to industry I often hear one of the things we really care about is predictability: We don’t have to like the answer that you give us, but we have to have predictability and there has to be consistency and there has to be transparency,” Hamburg said Nov. 5 during the Bloomberg Government Health Care Summit in Washington, D.C.

“I have to say that really is resonating with me now as I’ve tried to cope with our budget situation. You can’t run an agency as important as the FDA if you don’t have predictability, you don’t know what your budget is going to be in a given year, and if you don’t know whether you’re going to be able to draw on certain resources or not.”

The agency lost $85 million in user fees when sequester went into effect, part of an overall $209 million cut to its fiscal year 2013 budget.

Hamburg’s comment illustrates the frustration that FDA and its stakeholders feel with the continuing sequestration. It also likely will serve strategic aims to increase the pressure on Congress to find a way to restore the funding.

It remains to be seen whether Hamburg’s sympathy with industry regarding the need for predictability will result in any regulatory changes.

Investors and sponsors have pleaded with FDA to make its approval standards more predictable to better encourage drug development. Rare disease advocates recently reiterated the point, as new draft guidance on expedited approval programs did not provide the clarity that they wanted (Also see "FDA Accelerated Approval For Rare Diseases Again Under Congressional Pressure" - Pink Sheet, 30 Jul, 2013.).

Much of the anger about sequestration is directed at the loss of FY 2013 user fee revenue. Because the money is designated for a specific purpose, it cannot be used to pay government debt or decrease its deficit.

Hamburg indicated the lost fee money continues to affect agency operations in the fiscal year after they were paid.

“It’s one of those unfortunate effects that nobody anticipated, but that is having a real impact on our ability to do our work near-term and certainly if it extends over time,” she said. “Presumably [the sequestered fee revenue] will come back at some point, but we don’t really know. We actually need it now.”

A number of Congressional efforts are underway to restore the sequestered user fee funding, but so far have been unsuccessful.

Congressional officials have said that they were concerned user fees are not lost in FY 2014 budgets, if they are eventually approved. They said FY 2013 fees may not be easy to recover (Also see "FDA’s Sequestered User Fees From FY 2013 Likely Gone, But FY 2014 Fees Could Be Exempted" - Pink Sheet, 5 Jun, 2013.).

Fees Remain In Account And Unavailable, OMB Says

Now that new budget negotiations are beginning following the government shutdown, members once again are looking to remove user fees from sequestration.

Rep. Anna Eshoo, D-Calif., who has co-sponsored a bill that would exempt user fees from sequestration, recently released a letter from the Office of Management and Budget explaining why FDA user fees were subject to the sequester.

The letter, dated Oct. 22, but released by Eshoo on Nov. 4, stated that sequestered fee revenue remains in FDA’s Salaries and Expenses account, but will not be available unless appropriated by Congress through subsequent legislation.

Adding to the difficultly of eventually allowing FDA use of the revenue is that appropriating the revenue would “score as new budget authority that counts against the discretionary cap in the year in which the funds are made available,” according to the letter.

With House Republicans looking to reduce spending across all federal agencies in recent years, it would appear difficult to simply spend the user fee revenue already in hand because it may require a reduction somewhere else.

OMB also said the sequestered user fee funding does not earn interest, since there is no authority to invest the balance.

When OMB determined the potential cuts sequestration would require, it said most user fees were subject to sequestration because there was no exemption for them in the law (Also see "FDA’s 8.2% Solution: Sequestration Would Cut $319 Million" - Pink Sheet, 14 Sep, 2012.).

Campaign May Prove Fruitful

FDA may have a good chance to see its sequestered user fees returned if budget negotiations are successful. A new deal could include provisions ending sequester for all agencies, or if not possible, include provisions exempting FDA user fees.

Negotiations started again following the 16-day government shutdown, which forced FDA to furlough 45% of its staff and hindered many operations. The agency still was able to meet most user fee goals, mainly because personnel supported by fee revenue were allowed to continue working (Also see "Shutdown Week Two: Could Sponsors Find A More Focused FDA?" - Pink Sheet, 14 Oct, 2013.).

Pressure to include the user fee exemption in a budget deal or pass a stand-alone bill also should continue to mount. The issue already appears to have bipartisan and bicameral support.

Democrats have introduced bills have been introduced in both chambers and the GOP chairman of the House appropriations subcommittee responsible for FDA also committed to work on the issue (Also see "FDA’s Hopes For User Fee Un-Sequestration Likely Hinge On Senate Appropriations Panel" - Pink Sheet, 13 Jun, 2013.).