September Sequester Surprise: FDA User Fees on the Chopping Block

BY ELIZABETH M. WROE & PHILIP S. BONFORTE

The threat of a delayed or deterred (re-)authorization of key Food and Drug Administration (FDA) user fee programs (hereinafter referred to as the ‘‘FDA user fees’’) caused significant angst among biomedical product stakeholders over the course of the last year and a half.

While enactment of the Food and Drug Administration Safety and Innovation Act of 2012 (FDASIA) alleviated these concerns, a new threat to the availability of FDA user fees in Fiscal Year (FY) 2013 has emerged: sequestration.

The Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings) first established sequester as a tool to force automatic reductions in government spending.  Now, the Budget Control Act of 2011 (BCA) has revived sequestration as a budget enforcement mechanism that is set to occur over the course of the next decade.

The Sequestration Transparency Act of 2012 was enacted over the summer, requiring the President to provide Congress with a report on how sequestration will impact specific federal programs and agency funding in FY 2013.5 This report—released by the White House Office of Management and Budget (OMB) on September 14, 2012—provides the Administration’s preliminary views on ‘‘exempt and non-exempt budget accounts, an estimate of the funding reductions that would be required across non-exempt accounts, an explanation of the calculations in the report, and additional information on the potential implementation [of the sequester].. . .’’

In what came as a ‘‘September sequester surprise’’ to many in FDA-regulated industries, the OMB report classifies all budgetary resources available to FDA, including user fees, as subject to sequestration. Given the important role these fees play in FDA funding, stakeholders are seeking clarity on the practical implications of this development.

In an attempt to assist stakeholders as they navigate through the sequester process, the following article is designed to analyze how sequestration and the user fees work, overlap and present challenges for FDA funding in FY 2013.

Read the full report