FDA Budget Could Hike User Fees, Overseas Inspections

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Budget-conscious firms that do business in China and elsewhere outside the US may not like what they find in the FDA budget request in the President’s FY 2013 budget.

While it is one of the few agency’s that could see its overall budget increase a bit this year, much of that increase will be borne by industry. Broadly speaking, FDA is requesting a budget of $4.5 billion as part of the President’s fiscal year (FY) 2013 budget – a 17 percent increase over the FDA enacted budget for FY 2012. Industry user fees would fund 98 percent of the proposed budget increase. The FY 2013 request covers the period from Oct. 1, 2012 through Sept 30, 2013.

“These are austere budget times, and the FDA budget request reflects this reality,” said Margaret A. Hamburg, M.D., Commissioner of FDA. “Our budget increases are targeted to strategic areas that will help speed the availability of new medical products, address the challenges of increased globalization and allow FDA to fulfill its public health duties more efficiently. With FDA-regulated products accounting for about a quarter of each dollar that Americans spend, these budget priorities will benefit patients and consumers and strengthen our economy.”

Highlights of the FDA FY 2013 budget include:

Protecting Patients Initiative (+$364 million) recommends new user fees to support FDA generic drug activities and to support development and review of biosimilar biological products. Biosimilar biological products are highly similar to biological products that are already approved for marketing in the U.S. FDA’s budget request for these user fees is consistent with the agreement reached with industry.

Transforming Food Safety Initiative (+$253 million) will bolster FDA’s efforts to build a strong, reliable food safety system – as envisioned in the landmark Food Safety Modernization Act (FSMA). With the support of new user fees, FDA says it will foster a prevention-focused domestic and import food safety system to protect the health of American consumers. Under this initiative, FDA is also proposing new user fees to support its cosmetic and food contact substance programs.

Food and Drug Inspections in China: The Transforming Food Safety and Protecting Patients Initiatives include $10 million in new resources for FDA to enhance collaboration with our Chinese counterparts and increase the agency’s presence in and expertise on China. This investment will strengthen the safety of the food and drugs produced in China for export to the United States.

Medical Countermeasures (MCM) Initiative (+$3.5 million) will help meet America’s national security and public health requirements for MCM readiness, the FDA says. Congress provided new resources in FY 2012 to support FDA’s role in protecting the United States from chemical, biological, radiological and nuclear threats, and from emerging infectious diseases such as pandemic influenza. The additional resources in FY 2013 will support science and partnerships to improve MCM development timelines and the success rates for MCMs. FDA will also expand technical assistance to developers, focusing on the highest priority MCMs.

But the increases aren’t across the board.

For example, CDER funding would fall by $11 million to $855 million while CBER’s funding would remain virtually the same with $210 million slated for 2013.

Jim Neale , a partner with McGuireWoods, works on a wide range of food safety and product recall matters. In 2010, he and another partner at the firm worked with Law Journal Press to publish the book, Food Safety Law.

Neale observes:

The Food Safety Modernization Act was signed into law on 1/4/11. It requires a significant increase in the number and frequency of inspections of FDA regulated facilities. It also requires the FDA to certify laboratories and private auditors. Each of these tasks will require significant funds.

Part of that cost will be borne by the food industry, which will be required to pay an expected $220 million annually in fees to register facilities, to have facilities reinspected, and to import foods.

In addition to industry funds, however, the FDA is likely to seek additional appropriations from taxpayers to fund the significant new mandates under the FSMA.

While the FDA is one of very few agencies to enjoy discretionary budget increases of late, it continues to maintain that Congress must provide significantly more revenues to fund the mandates of the FSMA.

Meanwhile, those in Congress who opposed the FSMA , seem to recognize that the funding battle provides the opportunity to open a “second front” on which to fight the same battle they lost when the FSMA was enacted.

Neale’s bottom line: “this issue is only going to get more attention, and isn’t going away.”

Melissa Gilmore, senior counsel with McGuireWoods and the head of the firm’s FDA practice, primarily works with clients in the medical device and pharmaceutical industry.

Gilmore notes:

Margaret Hamburg took the helm as FDA Commissioner in 2009 with a #1 agenda item of ramping up enforcement. She made good on her word: from 2009 – 2011, the number of injunctions increased 45%, recalls 24%, seizures 150%, and warning letters 263%.

Industry and academic insiders predict continued upward trending, particularly in light of (i) FDA’s budget request for FY 2012 and (ii) the proliferation of new technologies and widespread communications facilitated by mobile, global access.

Gilmore also reminds us that the FDA is now estimated to regulate over 25% of the U.S. gross domestic product – or, one in four of every consumer product in this country.

Sounds like we’d better get used to the agency sticking around.

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