Over the past months, there has been a lot of speculation (see recent blogs here , here, and here) whether the White House’s proposed budget would cause a sequester situation for FDA, resulting in potential layoffs or program cuts, in an era of new user fees for generic drugs and biosimilar biological products. While initial reports and temporary budget fixes (called continuing resolutions) appeared to keep FDA’s user fees intact and available for use, FDA’s Commissioner, Margaret A. Hamburg, M.D., recently reported to members of a biotechnology trade association, the Massachusetts Biotechnology Council (“MassBio”), that it was not clear what would happen with user fees in the new federal budget.
Released on April 10, the White House’s proposed fiscal year 2014 budget is a mixed bag that has been called a “political document rather than a serious piece of legislation” with a “series of bargaining positions” that “would bleed pharma.” On the one hand, the plan would appear to confirm that FDA’s user fees would not be sequestered, given that it supported the $4.7 billion in total program budget requested by FDA, which included user fees that would help fund over 90 percent of the requested increases. On the other hand, the budget includes a myriad of proposals that would change the way the government pays for medical care and products. For example, Medicare (senior citizens’ drug coverage) Part D manufacturer discounts for branded drugs would be increased from 50% to 75% in 2015 (rather than 2020) and low-income individuals would be pushed more to generic drugs by increasing certain copayments for branded drugs and lowering certain copayments for generic drugs.
Many of the more controversial proposals were nestled in a document called “Reducing the Deficit in a Smart and Balanced Way”. Here, the White House proposes, among other things, several items to purportedly lower drug costs, including: 1) authorizing the Federal Trade Commission to stop companies from entering into certain “pay-for-delay” agreements (see below) and 2) beginning in 2014, to reduce biologic product exclusivity from 12 years to 7 years and prohibit additional periods of exclusivity for minor changes to product formulations. These two items could open up some unanticipated debate regarding the White House’s budget.