FDA Budget Faces $319 Million Cut Under Sequestration
This article was originally published in The Tan Sheet
Executive Summary
The estimated reduction, included in the White House OMB’s report to Congress, is equal to the cost of 900 to 1,200 agency employees, an agency advocate says. The across-the-board cuts loom with the failure of the congressional Super Committee to find $1.2 trillion in cuts over 10 years.
More than $300 million would be cut from FDA’s budget if federal funding sequestration is enacted in January, a reduction of about 8%.
A long-anticipated report from the White House Office of Management and Budget, released Sept. 14, detailed the potential cuts to more than 1,200 federal accounts, including two at FDA.
The agency would lose $318 million from its “Salaries and Expenses” discretionary spending account out of $3.94 billion in total gross budget authority.
Another $1 million would be sequestered from a “Revolving Fund for Certification and Other Services” mandatory spending account with $8 million in total gross budget authority.
Together, the two accounts would have $319 million sequestered out of $3.881 billion in FDA budget authority eligible for sequestration, which equates to an 8.2% cut.
Total gross budget authority across both accounts: $3.950 billion, which includes exempt funds, would be reduced about 8.1%.
Sequestration By FDA Account
Salaries and Expenses
- $318 million sequestered out of $3.873 billion in non-exempt budget authority
Revolving Fund for Certification and Other Services
- $1 million sequestered out of $8 million in non-exempt budget authority
Steven Grossman, deputy executive director of the Alliance for a Stronger FDA, said the cuts were not surprising, but would devastate the agency. His group will continue to work to avert them.
Grossman said that while FDA would try to avoid layoffs in a worst-case scenario, the amount to be sequestered equates to between 900 and 1,200 employees.
He based the figure on an average per employee cost of $250,000 to $335,000.
FDA referred all requests for comment to OMB.
The across-the-board cuts are looming as a result of the failure of the congressional Super Committee to find $1.2 trillion in cuts over 10 years by a November 2011 deadline. Congressional leaders agreed to the threat of sequestration to force a deal on deficit reduction. Absent an agreement, the cuts go into effect Jan. 2 (Also see "Sequestration Could Drive An FDA Resources Review" - Pink Sheet, 10 Sep, 2012.).
OMB’s figures are roughly similar to those projected by advocates. The alliance estimated the agency could lose $294 million, not including tobacco programs, if user fees were not exempt. It based its calculations on a 7.8% cut.
When the assumption was that all user fees would be exempt, the group estimated FDA would see a $200 million cut. Research!America estimated in May that FDA could lose $191.1 million.
A former FDA official thought the agency would have to lay off personnel if the sequester was implemented. While it could be managed for a short period of time, it likely would not lead to service reductions long term, the official said.
No Exemption For User Fees
In FDA’s salaries account, $67 million was considered exempt discretionary spending and another $2 million was exempt mandatory spending. The report did not give any detail about the funds.
No funds were exempt in the revolving fund account.
While not stated specifically, it appears user fee revenue would be lost in sequestration, although some fees were exempted.
Sources said Sept. 4 that OMB had determined many user fees were not exempt. It was expected that fees for priority review vouchers and importation would not be sequestered, but likely neither would generate a large amount of revenue (Also see "FDA User Fees On Sequester Chopping Block: A Deeper Wound That Might Heal Quicker" - Pink Sheet, 5 Sep, 2012.).
An administration official said Sept. 14 that since there is no exemption for user fees in the law, most of them are considered eligible for sequestration.
Senior administration officials said during a same-day conference call with reporters that the White House had almost no discretion as to which programs could be exempted from the cuts. Determinations were based on requirements in the law, they said.
The president was allowed to exempt military personnel, which already has occurred.
With OMB estimates based on fiscal 2012 appropriations, if sequestration actually occurred in January the cuts would differ as they would be based on fiscal 2013 numbers, the administration officials said. The officials said the continuing resolution to fund the government through late March, which passed the House Sept. 13, was not considered in the calculations.
The continuing resolution could create additional problems for FDA, because it does not allow it to spend some new user fees for generic drugs and biosimilars (Also see "FDA Generic, Biosimilar User Fees Could Be Locked Up Under Short-Term Funding Bill" - Pink Sheet, 11 Sep, 2012.).