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 must avoid new user fees and across-the-board cuts, two common account balancing techniques, according to the fiscal 2015 budgeting memo from Office of Management and Budget Director Sylvia Burwell, dated May 29, 2013.

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

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

Burwell also wants options for additional cuts, asking agencies to “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 fiscal 2014 budget request, released in February 2013, did not include the 2015 budget guidance for each agency. But the net discretionary budget authority listed for FDA in fiscal 2014 is $2.56 billion.

The agency’s total budget request comes to $4.65 billion, with nearly 45% derived from user fee revenue. More than two-thirds of human drug spending would come from user fee revenue ([A#05130422003]).

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

The fiscal 2014 appropriations and budgeting processes are ongoing on Capitol Hill, where the Senate and House held committee hearings on the budget requests but have not passed legislation.

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. FDA saw a $209 million reduction in the fiscal 2013 budget, including $82 million in lost 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#05130513005]).

No New 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 fiscal 2015 budget submission, OMB’s Burwell says 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. 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 aims to prevent budgets featuring fees with little or no chance of congressional approval.

The edict could help the proposals become more realistic and discourage agencies from conjuring up imaginary revenue; generic drug user fees, for example, were included in several previous FDA budget requests before congressional approval in 2012 Also see "House FDA Budget Bill Boosts User Fees, Trims Direct Appropriations" - Pink Sheet, 30 May, 2011..

But the directive also could hurt FDA efforts to regulate compounding pharmacies. 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 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 recently reported out a bill that includes a fee, which could generate about half of the agency’s estimated cost.

House Republicans seem to have different ideas about whether user fees – or even any additional authority – are needed. House members are developing legislation to clarify issues related to compounding oversight, but their bill likely would be difficult to reconcile with the Senate bill ([A#14130523005]).

FDA likely already is formulating procedures to regulate compounding without additional help from Congress, and is sending traditional drug facility inspectors into compounding facilities.

Management Will Be Important

According to the OMB memo, 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.”

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

“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 says in the memo.

FDA Commissioner Margaret Hamburg 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 Becomes An Agency Of “Directorates” Under Hamburg’s Reorganization" - Pink Sheet, 18 July, 2011..

Several senior managers have left the agency in recent months, however Also see "House Investigates Tenure Of FDA Medical Products Office Acting Head" - Pink Sheet, 20 May, 2013..

FDA Budget Could Face 5% Cut In Fiscal 2015

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