FDA’s fiscal year 2015 budget request must take a 5% cut from initial projections and provide options for additional reductions, according to a White House directive.

The agency and other federal departments also need to avoid new user fees and across-the-board cuts, two common account balancing techniques, the May 29 FY 2015 budgeting memo from Office of Management and Budget Director Sylvia Burwell states.

The White House guidance appears to be another blow to FDA efforts to increase its funding levels as it continues implementing new mandates in the 2012 FDA Safety and Innovation Act and waits for a decision from Congress on creating additional authority over drug shipment tracking and pharmaceutical compounding.

OMB said in the memo that 2015 budget submissions should include a 5% cut “below the net discretionary total provided” for that year in the FY 2014 budget.

Burwell also wants options for additional cuts, asking agencies to “also include additional reductions that would bring your overall submission to a level that is 10% below the net discretionary total,” according to the memo.

President Obama’s FY 2014 budget request, released in February, did not include the 2015 budget guidance for each agency. But the net discretionary budget authority listed for FDA in FY 2014 was $2.558 billion.

The agency’s total budget request equated to $4.65 billion, with nearly 45% coming from user fee revenue. More than two-thirds of human drug spending would come from user fee revenue Also see "FDA’s Budget Proposal: It’s The User Fees’ Agency Now" - Pink Sheet, 15 April, 2013..

The White House budget likely is not going to be implemented in its original form, given that House Republicans’ want to cut more spending than Obama.

The FY 2014 appropriations and budgeting processes are ongoing on Capitol Hill. The Senate and House have conducted committee hearings on the budget requests, but have not passed legislation ([A#14130418003]).

Sequestration also is hampering FDA spending. It not only took away budget authority, but also millions in user fee revenue, forcing FDA to cut travel and training budgets ([A#14130301008]).

FDA lost $209 million in the FY 2013 budget, including $82 million in user fee revenue. Some members of Congress are interested in freeing user fee revenue from the sequester, since the money cannot be used for deficit or debt reduction ([A#14130426007]).

No New User Fees To Offset Spending

Across-the-board cuts as well as “the enactment of new user fees to offset existing spending” are not allowed in the FY 2015 budget submission, Burwell wrote in the memo.

Agencies also cannot reduce mandatory spending in appropriations bills, shift costs to other parts of the federal budget or reclassify existing discretionary spending as mandatory spending. But any of the five prohibited proposals may be included in the submission to be considered “on their merits or as alternative ways to achieve the guidance level,” according to the memo.

The prohibition of new user fees likely is intent on preventing agencies from including fees that likely have little or no chance of congressional approval.

The edict could help the proposals become more realistic and avoid the time-honored game of creating imaginary revenue; generic drug user fees, for example, were included in several previous budget requests before they were enacted in 2012 Also see "FDA Dependence on User Fees Would Increase Under FY 2012 Budget Request" - Pink Sheet, 14 February, 2011..

But the directive also could hurt FDA efforts to regulate compounding. Prohibiting new user fees likely would require agency cuts to other program areas in order to increase its regulation of large-scale compounders.

The final decision on a creating a compounding fee rests with Congress, however. FDA asked for a user fee in addition to more authority to require compounding facility inspections and adverse event reporting. A Senate committee reported out a bill recently that includes a fee, which could generate about half of the agency’s estimated cost ([A#14130522004]).

House Republicans seems to have different ideas about whether user fees – or even any additional authority – are needed. It is unclear whether they will move legislation or if it could be reconciled with the Senate bill ([A#14130523005]).

FDA likely already is planning how it could regulate compounding without any additional help from Congress, and is sending traditional drug facility inspectors into compounding facilities ([A#00130520017]).

Management Will Be Important

Agencies also should look for fragmentation, overlap and duplication reductions to increase effectiveness and “include innovative programmatic proposals that support [the] mission and further increase effectiveness,” according to the memo.

In addition, draft strategic plans, including goals and objectives, should be included with the budget submission.

“Particularly in these challenging fiscal times, more effective management strategies will be an important component of our overall approach to efficient and responsible budgeting,” Burwell said in the memo.

FDA Commissioner Margaret Hamburg has reorganized the agency hierarchy in recent years to better reflect agency priorities and keep up with changes in science and technology and globalization Also see "FDA Reorganization Adds "Directorate" Layer, But Sharpens Agency's Focus" - Pink Sheet, 18 July, 2011..

Several senior managers have left in recent months, however Also see "FDA’s Autor Moves To Mylan: Company’s Gain May Also Be Company’s Loss" - Pink Sheet, 6 May, 2013..

FDA Budget May Need To Be Trimmed 5% In FY 2015

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