FDA SOS: New Bill Would Exempt FDA User Fees From the Ravages of Sequestration

July 18, 2013

By Kurt R. Karst –      

“… — …” – That’s the international Morse code distress signal commonly shown as SOS.  SOS is also in the title of the acronymized “FDA SOS Act,” or the “FDA Safety Over Sequestration Act,” which a bipartisan group of members of the House of Representatives consisting of Reps. Anna G. Eshoo (D-CA), Leonard Lance (R-NJ), Doris Matsui (D-CA), and Mike Rogers (R-MI) introduced on July 18th in an effort to spare FDA from having the funding the Agency gets through industry-paid user fees from being further sequestered.  “Sequestration” is a term we have become all too familiar with in the U.S.  It refers to automatic spending cuts to the U.S. federal budget that went into effect earlier this year as a result of the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012.

Even before sequestration went into effect, there was concern about how user fees paid to FDA would be handled (see here).  Once it became apparent that at least some of the user fee funding would not be exempt from sequestration (about $85 million in Fiscal Year 2013), there was an immediate push by many stakeholders, FDA, and some Members of Congress to remedy the situation by excluding user fees.  But, as with so many things in Washington, D.C., user fees got caught up in a larger political battle.  (The Alliance for a Stronger FDA has been closely tracking the situation for many months now.) 

In recent weeks, however, the effort to exempt FDA user fee funding from sequestration has picked up steam.  For example, reports accompanying both the House (H.R. 2410) and Senate (S. 1244) FDA Appropriation Bills were highly critical of sequestering user fees.  The House Report (page 56) includes a passage stating:

The Committee is concerned about subjecting FDA user fees to sequestration as these fees are not normal tax revenue.  It is important to maintain the integrity and industry support for user fee programs.  The Committee encourages FDA to reevaluate its calculations of sequestration in regard to user fees.

Similarly, the Senate Report (page 84) states:

The Committee is aware that FDA user fee programs have been subjected to sequester, and is concerned because these user fees are not normal tax revenue.  The Committee believes that it is important to maintain industry support for user fee programs, and for FDA to continue to meet negotiated performance standards.  Therefore, the Committee encourages the Administration to reconsider the inclusion of FDA user fees when calculating sequester.

But these are only statements of concern.  They have no real effect.  What was needed was a stand-alone bill specifically addressing FDA user fees and sequestration.  And that’s what the FDA SOS Act does in just a few passages.  A fact sheet released along with the text of the bill in a press release nicely outlines the issue and solution as follows:

The Problem:

Industry-financed user fees to FDA are being sequestered alongside traditional appropriated monies to the Agency.  Fees are negotiated periodically between industry and FDA and are intended for a specific purpose, such as the review and approval of a new medical therapy.  These are private monies and should not be subject to the sequester.

Why This is Important:

FDA relies on user fees to supplement congressional appropriations when approving new drugs and devices. User fees began in 1992 after industry, consumer groups, and FDA agreed it was taking far too long from time of submission to approval. The agreement negotiated between industry and FDA was required to meet two goals: faster approval times and the promise that fees would supplement, rather than replace funding that Congress appropriated to the FDA.

The Solution:

The FDA SOS Act would exempt FDA user fees from sequestration.

Of course, now the real heavy lifting has to happen.  Both the House and the Senate have to pass the bill for the President to sign into law.  If that happens, then FDA (and industry) will almost certainly say to Congress: “- …. .- -. -.- / -.– — ..-”  That’s Morse code for “thank you.”