Funding Cutbacks at FDA: A Sequester Primer

At a time when FDA’s responsibilities continue to grow rapidly, the agency has been caught in an across-the-board reduction (sequester) in federal discretionary spending, effective March 2, 2013. Although Congress may yet reverse course and restore money to affected federal agencies, this is not considered a high probability.

Altogether, FDA will lose about $209 million between now and September 30, 2013. This will reduce inspections, slow drug and device approvals, and restrict implementation of the Food Safety Modernization Act and other recent legislation. Because of the many questions about the process and outcome, this is FDA Matters’ primer on the sequester of FDA funds.

How much of FDA’s FY 13 (current year) money is involved and which funds are cut?

Sequestration FY 13 CR (to 3/27/13) Less sequester Net amount
Budget appropriations $2.521 billion $126 million $2.395 billion
User fees (inc. tobacco & generics UF) $1.647 billion $82  million $1.565 billion
Totals $4.168 billion $209 million(rounded) $3.960 billion (rounded)

Will all programs within FDA be cut by precisely the same amount?  Generally, yes.  Unless Congress or OMB change the sequester rules (and they might), each Center and the Commissioner’s office will be cut by about 5.0% to achieve the $209 million reduction. However, fixed items (rent, utilities, etc.) will still cost the agency the same amount, creating an internal deficit. This will require additional cuts (above the 5.0%) from the agency’s program activities.

Beyond the specific dollars, why will the impact be greater on FDA than on most federal agencies?  FDA is a staff-intensive organization. More than 80% of its funding is spent on personnel-related costs. Much of the remainder is fixed costs, rather than grants or contracts that could be cancelled or cut back. Many federal agencies are hoping to meet their sequester obligations without personnel cutbacks. FDA will do its best to follow this model.

FDA has said that no employees will be furloughed as a result of the sequester. How is that consistent with the agency’s staff-intensive nature and the depth of the cuts? To absorb the $209 million without furloughs, most of the savings will have to come from unfilled and/or delayed filling of vacancies—a process that probably started months ago. Many offices are probably already short-staffed and most will become so as we get deeper into the sequester. Hence, the predicted impact of the sequester is slowdowns in food (and other) inspections, drug and device reviews, and implementation of new FDA legislation and its global responsibilities.

In offices where staff reductions are needed as part of the sequester but no vacancies exist, some appropriately qualified employees may be saved through internal transfers into slots that can be paid for by the Generic Drug User Fee program (FDA’s one big growth area this year and for which it will definitely need to be hiring).

How would you characterize FDA’s “story” about the impact of the sequestration?  While $209M is a large cut with severe consequences, it may well be achieved by a thousand little bits and pieces, a vacancy here, a training contract there, a bunch of cancelled plane flights, some underspending early in the year, etc. It doesn’t make for a very dramatic story, which may account for why FDA has been relatively quiet while other departments and agencies have been talking about the severe impact of the sequester cuts.

Conclusion

If food is less safe…if drug and devices reviews go more slowly….if problems with imports increase….and if regulatory science and agency modernization stall….then there is a huge loss to the American people.

This loss is made larger by the knowledge that the agency’s mission is not static.  Congress has passed 6 new laws since 2009 giving FDA substantially more responsibility. Globalization and complex science makes the agency’s job larger and more difficult each year.

FDA staff wasn’t large enough to get the whole job done last year. Problems will  multiply quickly over the coming months as existing employees represent an every smaller proportion of the numbers needed to carry out this year’s and next year’s responsibilities.

republished and adapted with permission from FDA Matters

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