IBJNews

FDA drug-review deal may unravel as fiscal cliff looms

Back to TopCommentsE-mailPrintBookmark and Share

A $6.4 billion accord for U.S. drug and medical-device reviews is set to unravel just three months after taking effect as lawmakers squabble over budget cutbacks.

Drug and device reviews, which rely heavily on fees paid by companies, may slow or halt in January because the Food and Drug Administration must receive certain funding from Congress before it can spend any of the industry money, said Karen Riley, an FDA spokeswoman. That appropriations level is at risk as lawmakers bicker over whether to follow through on $1.2 trillion of government-wide budget cuts through 2021.

The stalemate “could result in the loss of whole user fee programs, programs that have become essential to public health and medical product innovation,” Riley said in an e-mail.

Drugmakers such as Indianapolis-based Eli Lilly and  Co. and Pfizer Inc.will pay almost $2 million for each new drug application to the FDA beginning Oct. 1, as well as a $527,000 establishment fee and $98,000 product charge. Also at risk are fees for medical-device and cigarette-safety reviews. The National Institutes of Health may also lose $2.4 billion and have to cancel as many as 2,400 grants, Calvin Jackson, a spokesman, said in an e-mail.

President Barack Obama’s Office of Management and Budget missed a Sept. 6 deadline to submit a plan to Congress for the first $109 billion in mandated spending reductions, known as sequestration. The FDA may lose 8 percent of the taxpayer money it’s appropriated, or a reduction of $200 million for fiscal 2013, the advocacy group Alliance for a Stronger FDA estimates.

The key element of the user fee program is known as the trigger, which sets a baseline of taxpayer funds to ensure that industry payments supplement congressional appropriations, said Alan Goldhammer, an independent drug-industry consultant.

For fiscal 2013, the Obama administration has requested about $2.5 billion in taxpayer funds for the FDA. An additional $2 billion in industry fees are supposed to be collected as well; including $720 million for brand-name drugs, $299 million for generic medicines, and $98 million from medical-device companies such as Medtronic Inc. and Boston Scientific Corp., according to a Congressional Budget Office assessment in May.

Riley of the FDA declined to discuss the actual user-fee trigger levels, which are based on formulas that take into account consumer inflation and past spending.

While the initial “$200 million will be devastating,” a cut of that size shouldn’t set off the trigger, said Steven Grossman, deputy executive director of the Silver Spring, Md.-based Alliance for a Stronger FDA. The Obama administration may still subject user fees to sequestration to meet broader spending-reduction goals, he said.

Grossman calculates that about $68 million in drug and device user fees and $40 million in tobacco-company payments would be diverted to a U.S. Treasury Department account. While the fees wouldn’t go directly toward the deficit, the FDA’s inability to use the money would “reduce government because it would reduce what they can do,” Grossman said.

“The user fee part of it adds to the problem of there not being enough money to get the job done,” he said.

As much as 90 percent of user fees go toward personnel costs so the budget cuts would likely result in layoffs at the FDA, according to Goldhammer, who was once a vice president at the Pharmaceutical Research and Manufacturers of America, the drugmakers’ main lobbying group in Washington.

The FDA maintains a surplus to allow for an orderly shutdown of the user fee program if needed, he said.

The budget predicament arose after talks failed last year on a bipartisan plan to curb the nation’s increasing debt. The nation now faces the expiration of income-tax cuts first enacted under President George W. Bush, the end of payroll-tax reductions and automatic decreases in government expenditures.

That budgetary soup has created a “fiscal cliff” that economists and the nonpartisan Congressional Budget Office have said may lead the U.S. economy back into recession.

“I personally doubt very seriously that the White House is going to let sequestration affect FDA because of the serious mission that it does,” Goldhammer said.

Based on the five-year agreement set to start next month, drug reviews would be funded 60 percent by industry fees, about $4.1 billion over the length of the deal. Medical device manufacturers will pay fees that make up about 35 percent of funding for the industry’s review program, or $609 million over five years. Generic-drug companies, which had been exempt from user fees, will pay $1.58 billion over that time.

The fees were increased and expanded from the previous five-year period to help the FDA speed product review times, especially after U.S. drug approvals rose to a seven-year high last year.

“Even without sequestration, FDA’s workload and statutory responsibilities have grown far faster than its budget,” Riley said.

ADVERTISEMENT

  • VOTE REPUBLICAN IN NOVEMBER!!
    If you think it's bad now, just vote Obama in again.

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
thisissue1-092914.jpg 092914

Subscribe to IBJ
  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. http://www2.hamiltoncounty.in.gov/publicdocs/Campaign%20Finance%20Images/defaultfiles.asp?ARG1=Campaign Finance Images&ARG2=/Brainard, Jim

ADVERTISEMENT