FDA would be able to fund up to six months of operations beyond Sept. 30 if the Prescription Drug User Fee Act has not been reauthorized, Deputy Commissioner for External Affairs Sharon Smith Holston indicated in a July 25 letter to House Commerce/Oversight Subcommittee Chairman Barton (R-Tex.).

"FDA, at the request of and with the concurrence of the Office of Management and Budget, has planned its Prescription Drug User Fee Act operations so that there will be sufficient carry-over funds to operate for three-to-six months into the next year even if new collections are not authorized," the letter states. Holston estimated that the carry-over amount for fiscal year 1997 will be approximately $24 mil. "The unobligated balance at the end of FY '96 was $29.5 mil. which consisted of a carry-over of $27.5 mil. and accounts receivable of $2 mil." Holston said.

The availability of carry-over funds to retain the agency's 700 full time equivalent employees paid for by user fees could become vital if Congress fails to complete work on the FDA reform/PDUFA bill during September.

The House has yet to begin mark-up of the legislation, and the Senate has postponed floor consideration of its bill (S 830) until after August recess. An Aug. 1 deadline had been discussed earlier in the year as the point at which FDA would have to begin issuing layoff notices. The public acknowledgment that FDA could operate into early 1998 without reauthorization reduces the urgency of completing work on the bill.

Holston was responding to a June 26 letter from Barton questioning FDA's management of PDUFA funds and the existence of "rainy-day funds" which could serve to "soften the blow of delayed PDUFA funding." Holston said that the term "rainy-day funds" is "not an accurate characterization of what appears to be a reference to the unobligated balance of user fee receipts carried forward from one fiscal year to the next."

"The carry-over of funds into a succeeding fiscal year results from the multi-year nature of the process for the review of human drugs, as well as the need for prudent management of PDUFA resources," Holston explained. "The agency must ensure that funds are available to meet financial obligations incurred under PDUFA, in the event of delayed appropriations or program termination."

"In the event PDUFA was terminated, a period of time would be required to meet costs associated with ending the program, such as payments for severance pay and lease and other contract terminations," Holston continued. "Even without program termination, funds must be available from one fiscal year to the next for continuity of the drug process."

"FDA's general ledger system, which is used for overall fund management in the agency, is the source of all financial data including PDUFA receipts," Holston said. However, "funds collected under PDUFA are maintained and tracked separately," with "obligation of PDUFA funds" made "only on the basis of allocations." FDA's PDUFA accounts financial statements were independently audited by the accounting firm Gardiner, Kamiya & Associates, who issued an "unqualified opinion in July 1995 specifically on PDUFA for the fiscal year ending Sept. 30, 1994," Holston reported. Barton has claimed to have evidence that FDA has misused user fee funds.

Barton asked FDA what procedures it would follow if layoffs were necessary because PDUFA reauthorization did not pass Congress. Holston indicated that if PDUFA reauthorization was delayed but appeared to be imminent, FDA "would make every effort to use alternative methods of downsizing, including short-term furloughs rather than layoffs." However, "if layoffs were necessary...we would follow the prescribed federal reduction-in-force regulations." Employee assignment rights "are determined by type of appointment, veteran preference, length of service and performance ratings," Holston said.

FDA USER FEE CARRY-OVERS COULD FUND 3-6 MONTHS OF OPERATIONS AFTER USER FEE ACT EXPIRES, AGENCY TELLS REP. BARTON; $24 MIL. CARRY-OVER EXPECTED IN FY '97

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