President Obama’s FY 2014 budget proposal would make FDA increasingly reliant on user fees, which are slated to make up close to two-thirds of the agency’s $1.3 billion in human drugs program spending, up from just over 50% of spending in FY 2012 – a shift driven by both the growth of user fee programs and cuts to taxpayer funding.

President Obama’s 2014 budget cuts $11.9 million in human drug budget authority with $8.4 million coming from CDER and $3.5 million coming for the Office of Regulatory Affairs. Despite the cuts to budget authority, which comes from the Treasury, the human drugs program will see an overall boost of $313.5 million, or about 32%, over FY 2012 levels.

The White House Office of Management And Budget compared its FY 2014 request to the FY 2012 budget because the FY 2013 continuing resolution numbers do not represent restoration of either the rescission or sequester of FY 2013 funds, according to the Alliance for a Stronger FDA.

“This is an austere budget, there’s no doubt about it,” FDA Commissioner Margaret Hamburg said.

The sharp increase in human drug funds is attributed largely to the new generic and biosimilar user fee programs that took effect in FY 2013. The generic user fee program is expected to bring in about $260.5 million for the human drugs program, while the biosimilar program is anticipated to garner the human drugs program $17 million. The more established prescription drug user fee program should bring in nearly $545.4 million for the human drugs program in FY 2014.

GDUFA and BsUFA help propel user fee monies to 64% of the proposed human drug spending in FY 2014, a 13% percent jump from the last pre-GDUFA and BsUFA year, FY 2012.

Even without the new user fee programs, FDA has been trending toward greater user fee reliance. User fees first surpassed taxpayer spending for the human drugs program in FY 2011, accounting for just over 50% of enacted funds (see chart).

User Fees As A Proportion Of FDA Drug Program Funding

All years are federal fiscal years. The 2014 data are FDA's requested funding levels.

Source: FDA's justification of budget estimates for appropriations committees for various years.

The increasing reliance on user fee funds has been met with some criticism in recent years, as stakeholders have called for more balance between user fee and tax payer dollars at FDA Also see "PDUFA Old School: Industry Wants User Fees To Get Back To Basics" - Pink Sheet, 16 June, 2010..

The Alliance for a Stronger FDA cautioned that “all sources of FDA revenue are not equally useful to meeting the agency’s broad responsibilities,” noting that most of the agency’s additional revenue – the user fees – are directed towards very specific functions. “The greatest threat to FDA funding is for dollars that can be applied to a broad range of activities,” the Alliance said, and the addition of user fee revenue “does not offset any cuts that might occur in [budget authority] funding,” which is available for any use.

Pharmaceutical Research and Manufacturers of America VP of Scientific and Regulatory Affairs Sascha Haverfield said that user fees provide predictable funding for drug reviews and bring innovative medicines to patients faster, but added “it is important to maintain a balance between user fees and [budget authority] appropriations to support public health.”

The brand Rx user fee program, now in its third decade, certainly seems predictable, but yearly user fee revenue from the newer programs is not always a guaranteed pot of money for FDA.

For instance, though the FDA expected to take in $20.2 million in revenue from biosimilar developers this fiscal year, it is unlikely the agency will come close to meeting that funding goal as it has only received $4.5 million in the first half of FY 2013. With the number of early FDA sponsor meetings and IND submissions slowing down since the beginning of the fiscal year and no big ticket marketing applications on the agency’s desk, its appears unlikely the agency will meet even half of the $20.2 million goal Also see "Biosimilars: Does Low BsUFA Fee Revenue Suggest Sponsor Interest Has Stalled?" - Pink Sheet, 8 April, 2013..

Despite the lackluster FY 2013, FDA is budgeting that next year’s submissions will meet its more optimistic projections as it is estimating a nearly $500,000 increase in BsUFA revenue in FY 2014 over what it hoped to bring in this year ([A#14130410007]).

Generic use fees, on the other hand, have been a high point for the agency in FY 2013, as the FDA has already collected nearly 80% of the GDUFA fees it budgeted for the year ([A#00130408010]).

The agency has been ramping up hiring to administer the new program. CDER is adding 250 new full time equivalent generic drug hires with user fee money this year and plans to add another 194 new hires with user fee money in FY 2014, but it cautions that it needs increased facilities appropriations to meet its goals (see related story,[A#00130415024]).

CDER also anticipates increasing its generic drug productivity in FY 2014 thanks to user fee money. The center expects to take about 200 more actions – including approvals, tentative approvals and “complete response” letters – on abbreviated new drug applications in FY 2014 up from 2,313 in FY 2012.

Overall FDA Budget Also Shows Growing User Fee Reliance

The agency’s FY 2014 budget also asks for a number of user fees that are still a pipedream since they are unlikely to be enacted by Congress. The agency asked for $491,000 for the Office of Regulatory Affairs for international courier user fees to help the agency examine the growing volume of imports that enter through international couriers, and $2.8 million in medical product reinspection user fees that would require facilities to pay the full cost of FDA reinspection and associated follow up work associated with failures to meet agency requirements such as good manufacturing practices. FDA has attempted to secure funding for such programs in the past and failed Also see "FDA Globalization Efforts Gain Traction Even As Budget Request Emphasizes Old Inspection Model" - Pink Sheet, 21 February, 2011..

FDA’s growing reliance on user fees can also be seen in the full agency FY 2014 budget request. User fees are expected to make up nearly 45% of the agency’s $4.7 billion budget request in FY 2014, compared to just 34% in FY 2012.

The FY 2014 budget request is $821 million or 1.2% higher than its FY 2012 budget, with user fees accounting for $770 million or 94% of this increase. Increased budget authority accounts for only $52 million.

“This is an austere budget, there’s no doubt about it,” FDA Commissioner Margaret Hamburg said at HHS’s budget release press conference.

FDA’s Budget Proposal: It’s The User Fees’ Agency Now

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