Life Science Compliance Update

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June 13, 2017

President Trump’s Budget Proposal: Renegotiation of FDA User Fees?

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President Donald Trump’s FY 2018 budget proposal seeks a renegotiation of user fee deals made over the last two years to make up for roughly a 30% decrease in the United States Food and Drug Administration (FDA) budget.

The budget, which calls for more than $1 billion in new user fees to replace appropriations, comes while both the House and Senate have advanced their individual versions of the user fees reauthorization legislation with the previously negotiated user fee levels agreed to between the FDA and the pharmaceutical, medical device, generic drug, and biosimilar industries.

Current user fees cover an average of 60% of FDA premarket review costs, ranging from 30% for animal drug review to 70% for prescription drugs. Under the budget plan, all of those costs would fall on industry. Scott Gottlieb, the recently confirmed FDA commissioner, echoes the calls for these cuts, as does HHS Secretary Tom Price.

For the FDA, the proposed budget would increase user fees by $1.306 billion or 68% from FY 2017, to $3.223 billion, accounting for nearly two-thirds of the agency’s total budget, up from 42.5% in FY 2016.

Prescription drug developers would face $508 million in new fees, which would rise from $755 million to $1.262 billion. Medical device user fees—a category that includes diagnostics—would more than triple, from $126 million to $429 million.

FDA’s total program-level spending would rise by $456 million or nearly 10%, to $5.116 billion, mostly due to increases in salaries and expenses; spending on programs affecting human drugs would see the largest increase of $287 million, up to $1.612 billion.

However, representatives from BIO, AdvaMed, and AAM all spoke with the Senate HELP committee in April, reiterating what FDA officials told the House Energy & Commerce Committee in March, that a failure to act on the already agreed to reauthorizations would be devastating. The Alliance for a Stronger FDA also noted that this supposed modest increase in budget for FDA is actually a large budget cut for the Agency.

Troy Zimmerman, Alliance President, said in a statement on Tuesday: "We are especially concerned because the Congress has made clear that these additional user fees will not be adopted ... Thus, the Administration has not proposed a viable pathway for the agency to avoid a 31% cut in FDA’s BA [taxpayer-funded budget authority] appropriation."

Higher user fees are likely not to come into effect this year. Senator Lamar Alexander, Chairman of the United States Senate’s Committee on Health, Education, Labor, and Pensions, told HHS Secretary Tom Price in a letter that the user fee hikes were “an interesting proposal” but “way too late to have an impact on this year's agreements, which have been negotiated over the last 2 years” with biopharma and other FDA-regulated industries.”

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