What The Fiscal Cliff Could Mean For The FDA

By Matthew Herper

A lot of the discussion over the last-minute effort to come to a deal over the fiscal cliff have focused on whether congress and President

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Obama can stave off the expiration of the Bush-era tax cuts. Such a deal appears to be near. But another question is whether they can avert what’s known as sequestration: $110 billion in automatic spending cuts that will go into effect on Jan. 2 if legislators can’t agree on a budget, or at least agree to agree.

What would these spending cuts mean in practice? One thing worth considering is what could happen to the Food and Drug Administration, which regulates a quarter of the U.S. economy in the form of medicines, medical devices, and food. In September, the Office of Management and Budget said that if Congress failed to reach a budget, it could cut $318 million from the FDA’s $4.5 billion budget. According to the Alliance For A Stronger FDA, an advocacy group, that poses a particular problem for the FDA because most of its money goes to paying scientists, inspectors, and other employees. The only way to save money would be to furlough or lay off employees, slowing down drug approvals and safety inspections. Many of those employees might find jobs elsewhere if they are sent home without pay.

Writes Steven Grossman, deputy executive director of The Alliance For A Stronger FDA:

Eighty-plus percent of the FDA’s budget is “people-costs” (salary, benefits, travel, training, rent, IT, etc.), which reflects the fact that the agency is completely service-oriented organization and does comparatively little grant-making or ancillary contracting. So, the Alliance is understandably concerned that the agency faces manpower cutbacks—though potential hiring freezes, furloughs and/or lay-offs.

We know that if the entire sequester came out of FDA manpower, it would require a reduction in force of between 1000 and 1400 people (probably a combination of not filling vacancies, which is a really bad way to decide priorities, and lay-offs). This is so contrary to the public good (as well as contrary to administration and Congressional directives to avoid lay-offs in federal agencies) that it won’t happen that way.

Exactly what would happen in the event of sequestration is an open question; the government is not speaking publicly about its plans. But if it does happen, some of the effects could be permanent, even if Congress does reach a deal.

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