Government Shutdown: Why the Pipeline Matters

by Suzanne M. Rivera, Ph.D.

Much attention has been paid to the government shutdown that started last week.  Many of us heard heart-tugging stories on public radio about the NIH closing down new subject enrollment at its “House of Hope,” the clinical trial hospital on the NIH main campus.  These stories gave many people the impression that clinical research halted around the country when the federal government failed to approve a Continuing Resolution.

The reality is both less dramatic in the short term and more concerning for the long term.  For the most part, federally-funded projects at university campuses and hospitals are continuing as usual (or, the new “usual,” as reduced by sequestration), because the grants already awarded are like I.O.U.s from the government.  By and large, university researchers will keep spending on their funded grants, with the knowledge that reimbursement will come once the government re-opens for business. The universities and hospitals are, in a sense, acting like banks that loan the government money while waiting for these expenses to be reimbursed.

Also, many clinical trials are funded by the pharmaceutical industry.  So it is not the case that hospitals are closing their doors to research en masse.  But the long-term effects of a shutdown will have lasting and compounding effects on our science pipeline.  The U.S. federal government is the single largest funder of scientific research at American universities.  Each month, thousands of grant proposals are sent to the various federal funding agencies for consideration.  These in turn are filtered and assigned to peer review committees.  The whole process of review, scoring, and funding approval typically takes months, sometimes more than a year.

Under the terms of the shutdown, the staff who normally receive and triage these grant proposals are considered non-essential.  All but one of the federal grant on-line submission portals have been taken off-line.  So thousands of researchers who had been working for months to write grant proposals for funds needed to conduct the next generation of studies are now left wondering when it will be possible to submit for agency review.  Those studies hold the keys to future discoveries that could bring needed cures to the bedside, important products to the marketplace, and new jobs into the economy. Continue reading

Impact of the Sequester on Health Care: By the Numbers

By: Katie Booth 

The looming sequester will have a significant impact on health care, including cuts to Medicare, FDA, CDC, NIH, and Affordable Care Act programs. Budget cuts could slow down the drug approval process, impede the tracking of infectious diseases, and lead to layoffs for hundreds of thousands of workers in the health care sector. Read on for sequestration by the numbers…

Medicare:

  • Medicare cut by 2% ($11 billion) (not set to begin until April 1st, 2013, unlike other sequestration cuts, which are set to begin on March 1, 2013)
  • Physicians’ payments cut by 2%
  • Hospital Medicare reimbursement cut by $5.8 billion
  • Hospitals could end up with especially large cuts under the sequester because other parts of healthcare system run on longer term contracts
  • Loss of almost 500,000 health care sector jobs in the first year of the sequester according to an American Medical Association and American Hospital Association study, including job losses for 40,000 practitioners such as physicians and dentists

FDA:

  • FDA cut by 8% ($318 million)
  • FDA public funding cut by $206 million
  • FDA industry user fees cut by $112 million (for an interesting discussion of user fee cuts and the sequester, see Patrick O’Leary’s Bill of Health blog post)
  • Cuts by department (assuming 8% across-the-board cuts): $71 million to Foods, $39 million to Human Drugs, $17 million to Biologics, $11.3 million to Animal Drugs, and $26.5 million to Devices
  • Longer drug approval process is likely
  • Layoffs and furloughs likely
  • 2,100 fewer food safety inspections

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The Future of Biomedical Research Funding

By Patrick O’Leary

As I’ve written about previously on this blog, the consequences for the FDA of budget sequestration under the Budget Control Act of 2011 could be fairly severe (as well as raise some interesting legal questions). In a recent Online First piece for the Journal of the American Medical Association (JAMA), Hamilton Moses and E. Ray Dorsey note that sequestration would also have a serious impact–to the tune of $2.5 billion–on the National Institutes of Health (NIH), the primary source of public funding for biomedical research in the United States.

While Doctors Moses and Dorsey acknowledge that the immediate consequences of such a cut would primarily affect young researchers and new applicants for funding, “exacerbat[ing] tensions between large infrastructure projects . . . and small investigator-initiated grants, which historically have been the primary source of new clinical insights,” they also argue that sequestration presents an opportunity to reevaluate our emphasis on publicly funded biomedical research. In their telling, sequestration would be just the most recent step in a nearly decade-long trend of reducing federal funding, a trend that “presents an opportunity to reshape biomedical research.” Moses and Dorsey call for new private sources of research support, ranging from specialized financial instruments like Biomedical Research Bonds to an increased role for public charities and private foundations. The future of biomedical research, they argue, will be built on the private sector, not the federal government.

The challenges of shifting the burden of funding research to the private sector are many, of course. One particularly challenging question is whether private funds could effectively replace NIH’s significant role in funding “basic” research. Bhaven N. Sampat’s new article “Mission-Oriented Biomedical Research at the NIH” in Research Policy provides some context for the scale of the problem. Citing a 2010 study by Dr. Dorsey himself, Sampat notes that although NIH funding accounts for only about a third of U.S. biomedical research funding, “there is a sharp division of labor, with NIH funding concentrated further upstream, on ‘basic’ research than private sector funding” from private sector pharmaceutical, biotechnology, and medical device firms. Although the role of private foundations has grown in recent years, Sampat notes that NIH funding continues to exceed all such funding “by a factor of six . . . .” Assuming we continue to value basic research, the capacity and willingness of private actors to fund such research thus remains a major question mark.

Is FDA’s 2013 Budget At Risk?

By Patrick O’Leary

Back in February, President Obama’s FY 2013 budget authorized $4.5 billion for the Food and Drug Administration (FDA), about $2 billion of which was to come from user fees, the fees paid by regulated industry under a variety of schemes including the Prescription Drug User Fee Act (PDUFA), the Medical Device User Fee Act (MDUFA) and newly-created programs for generic drugs and biosimilars. As of today, FDA’s ability to collect and use these fees is in question, endangering vital agency activities including drug and device premarket review.

The threat to FDA user fees crystallized on September 14, when the Office of Management and Budget released its Report Pursuant to the Sequestration Transparency Act of 2012, explaining what may happen if Congress fails to reach an accord on the federal budget as required by the Budget Control Act of 2011 (BCA). Such a failure would trigger sequestration resulting in an 8.2% reduction in non-exempt, non-defense discretionary funding. On pages 79-80, the report indicates that $3.873 billion of FDA’s budget for 2013 is considered eligible for sequestration. According to analysis by the Alliance For a Stronger FDA, this indicates that major user fee programs have been included as sequestration-eligible funds. According to the OMB report, the FDA budget would be reduced under sequestration by around $318 million.

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