Food and Drug Administration: Selected Funding and Policy Issues

Food and Drug Administration: Selected Funding and Policy Issues

Order Code RS20033
Updated February 27, 2001
CRS Report for Congress
Received through the CRS Web
Food and Drug Administration:
Selected Funding and Policy Issues
Donna U. Vogt
Domestic Social Policy Division
Summary
The Food and Drug Administration (FDA) is responsible for ensuring the safety of
foods, drugs, medical devices, cosmetics, and other products. The Food and Drug
Administration Modernization Act of 1997 (FDAMA) [P.L.105-115], which amended
the Federal Food, Drug, and Cosmetic Act (FFDCA), created many regulatory changes
and reauthorized the Prescription Drug User Fee Act (PDUFA) through FY2002. The
FY2001 Agriculture Appropriations Act increased FDA’s appropriation by 4% over
FY2000; some say, however, that given the increase in regulatory responsibilities, this
funding is not enough for FDA to ensure the safety of the public’s health. The
appropriations act also contained a 5-year prescription drug import program that would
allow pharmacists and wholesalers to import FDA-approved prescription drugs into the
United States. The former Secretary of Health and Human Services refused to request
money for the program unless the statutory language could be changed to eliminate
certain “flaws.” Congress will also be facing requests to continue funding for the Food
Safety Initiative. Most of its activities attempt to prevent the occurrence of foodborne
illnesses. The 107th Congress will also be debating FDA’s proposed rule on regulating
bioengineered foods and its decision not to require the labeling of this food. This report
will be updated once a year.
Background
The Food and Drug Administration (FDA) is the agency responsible for regulating
the safety of foods, drugs, cosmetics, and medical devices. FDA is part of the Department
of Health and Human Services’ Public Health Service. Its legislative mandate comes
from the FFDCA,1 and the Public Health Service (PHS)Act. FDA also funds scientific
1 Federal Food, Drug, and Cosmetic Act of 1938 (FFDCA), as amended, (21 U.S.C. 301 et seq.)
gives FDA its broad regulatory and enforcement authority. In 1968 FDA became part of the
Public Health Service (PHS) within the Department of Health, Education and Welfare. In 1988
the FFDCA was amended by the Food and Drug Administration Act, Title V of the Health
(continued...)
Congressional Research Service ˜ The Library of Congress

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research on which it bases its regulations, and uses expert scientific advisory panels, when
needed, to help with difficult policy and technical decisions.
FDA’s mission is to promote and protect the public health. FDA also is responsible
for ensuring that regulated products are honestly, accurately, and informatively labeled.
In some cases, if the agency finds that the products do not conform to standards, FDA will
identify, warn, and, if necessary, force a product’s removal from the marketplace. FDA
also monitors, through inspections, whether manufacturers adhere to their legal
responsibility of producing products that are not defective, unsafe, filthy, or produced
under unsanitary conditions.
FDA approves products — human and animal drugs, biological products (such as
vaccines and blood products), medical devices, and food and color additives — through
a pre-market application review program under the authority in the FFDCA. The system
starts when the manufacturer or sponsor of a new drug or other product contacts the
agency with an application to gain approval to test the product. (Often there are
discussions prior to this application between the parties as the product is being
developed.) After clinical testing has been completed, and the results of the clinical
research are incorporated into a final application, the agency reviews these applications.
Under the PHS, FDA must require the same evidence for biologics. If the products are
shown to be safe and effective, FDA will approve them; if products are found not to be
safe and effective, FDA will postpone or deny approval. The agency is required to
complete reviews within statutory time frames. Most of FDA resources are used to give
pre-market approval to these products.
FDA also ensures that food is safe and not adulterated. Since the FFDCA prohibits
the entry into interstate commerce of adulterated or misbranded foods, FDA establishes
guidance and regulatory requirements for assuring that food is safe. The agency then uses
inspections to make sure that food manufacturers adhere to their legal responsibility of
producing safe foods. Critics, however, claim that these inspections are infrequent
because FDA would need more resources to inspect on a regular basis.
All these activities help the agency provide a broad safety net to maintain public
confidence in all FDA-regulated products. As products are developed, produced,
distributed, and consumed, the agency maintains contact with stakeholders (manufacturers
and sponsors of products) and monitors how well industries comply with FDA-
regulations. The agency maintains a monitoring system for reported injuries and illnesses
from the use of FDA-regulated products that allows them to intervene with enforcement
actions when necessary. It also has a surveillance system for imports of all regulated
products that allows the agency to target high risk imports for sampling at U.S. borders.
Although these systems appear adequate, critics contend that FDA has only the resources
to investigate after a problem is identified and not to prevent problems from occurring.
1 (...continued)
Omnibus Programs Act of 1988 (P.L. 100-607) which required that the FDA Commissioner be
appointed by the President and confirmed by the Senate.

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Funding
FDA is funded through both congressional appropriations and user fee programs.
The Agriculture, Rural Development, Food and Drug Administration, and Related
Agencies Appropriations Act, 2001, P.L. 106-387 (October 28, 2000, 114 Stat. 1549),
Congress appropriated $1.069 billion for salaries and expenses. Congress also set at $149
million the total level of collections under for Prescription Drug User Fee Act (PDUFA).
Congress also appropriated $31million for FDA’s buildings and facilities, and the agency
will receive $21 million in collected fees authorized under different laws. These sums
total $1.270 billion in budget authority for FY2001 or a 4.3% increase over the FY2000
appropriations.
Table 1. FDA Funding in Current and Constant (1996) Dollars,
FY1986-FY2001
(in thousands of dollars)
Current dollars
FY1996 constant dollarsb
Percent
change
from
Total appropriation
Percent change
Total appropriation for
previous
FY
for FDA programsa
from previous year
FDA programs
year
1986c
422,833c
2.5%
559,451
0.3%d
1987
439,322
3.9%
566,283
1.2%
1988
478,764
9.0%
597,857
5.6%
1989
510,544
6.6%
613,782
2.7%
1990c
597,301
17.0%
691,801
12.7%
1991
685,564
14.8%
765,737
10.7%
1992
755,255
10.2%
824,514
7.7%
1993
821,039
8.7%
874,190
6.0%
1994
923,524
12.5%
961,203
10.0%
1995
948,392
2.7%
966,662
0.6%d
1996
981,937
3.5%
981,937
1.6%
1997
982,627
0.1%d
966,202
-1.6%d
1998
1,026,499
4.5%
996,601
3.1%
1999
1,141,849
11.2%
1,094,354
9.8%
2000
1,217,636
6.6%
1,149,798
5.1%
2001
1,270,267
4.3%
1,175,955
2.3%
Source: Data comes from the annual “Justification of Estimates for Appropriations Committees.”
a The total includes salaries, expenses, GSA rent, reimbursable activities, and user fees. The total does not
include funds for a separate account for buildings and facilities. Reimbursable activities include
collections of fees when FDA certifies batches of insulin, color additives used in foods, drugs,
medical devices, and cosmetics, the certification of exports, and fees collected under the Freedom of
Information Act (FOIA). User fees include collections authorized under the Prescription Drug User
Fee Act (PDUFA), and the Mammography Quality Standards Act (MQSA).
b Computed by the Congressional Research Service using the Composite Deflator as published in Table 10.1
in the FY2001 Historical Tables of the President’s Budget.

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c The FY1986 and FY1990 amounts were available after the Gramm-Rudman-Hollings sequesters. The
amounts originally appropriated were $420,306,000 in FY1986 and $585,883,000 in FY1990.
d Less than 1%.
Table 1 shows FDA appropriations over 16 years from FY1986 through FY2001 and
includes collections from all the user fee programs and reimbursable activities. FDA’s
appropriations increased substantially between 1990 and 1994, the period during which
Congress significantly augmented FDA’s responsibilities with the passage of legislation
mandating changes in food labeling and drug approval activities, for example.
Appropriations leveled off from 1995 through 1998. Recently, Congress has increased
FDA’s appropriations by 6.6% in FY2000 and 4.3% in FY2001. FDA officials anticipate
that more funding will be needed in FY2002 to continue to carry out additional
responsibilities such as managing the safety risks of drugs, food products, medical
devices, or biological products in the marketplace.
In FDA’s total budget, excluding the amount appropriated for buildings and facilities
and fees collected under other statutes, the Center for Food Safety and Applied Nutrition
(CFSAN) received $285.3 million; the Center for Drug Evaluation and Research (CDER)
received $317.5 million; the Center for Biologics Evaluation and Research (CBER)
received $140.5 million; the Center for Veterinary Medicine (CVM) received $64 million;
the Center for Devices and Radiological Health (CDRH) received $165.2 million; and
National Center for Toxicological Research (NCTR) received $35.6 million. Congress
also appropriated $79 million for the Office of the Commissioner and other activities, and
$130.8 million for rent.
Agency
Staffing
Figure 1. FDA Total Full-Time Equivalent Positions
FY1998-FY2001
From FY1988
T h o u s a n d s
1 0
to FY1994, many
new employees were
8
hired to implement
6
programs established
by Congress. At the
4
same time, user fees
2
added resources to
hire specific staff.
0
8 8
8 9
9 0
9 1
9 2
9 3
9 4
9 5
9 6
9 7
9 8
9 9
0 0
0 1
Since 1994, staffing
F i s c a l Y e a r s
at the agency has
S o u r c e : F o o d a n d D r u g A d m i n i s t r a t i o n .
b e e n l e v e l .
Employee positions, or full-time equivalents (FTEs), are shown in Figure 1. As user fee
income increased, FDA was able to increase its numbers of FTEs paid for by these fees
from 204 FTE positions in FY1993 to 1,183FTEs in FY2001. In fact, 13% of FDA’s total
9,249 FTEs for FY2001 are positions paid for by user fees.
User Fees
PDUFA authorizes FDA to charge pharmaceutical companies user fees to expedite
the review process for human drug and biologic applications. There are three types of
fees: 1) application fees are paid when human drug applications or supplements are

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submitted; 2) product fees are due annually for each marketed prescription drug product;
and 3) establishment fees are also due annually for each establishment manufacturing
prescription drugs. PDUFA mandates performance goals for the review process, and the
fees are used to supplement existing FDA appropriations to allow FDA to hire more
reviewers to meet its goals. Congress annually approves the total collections for the
program in FDA’s appropriations bill. Both FDA and the pharmaceutical industry
consider PDUFA a success because 95% of the applications for new drugs and biologics
are reviewed within the time frames specified in the law.
The Mammography Quality Standards Act (MQSA) gives FDA authority to collect
user fees to pay for certifying mammography facilities and to set national standards that
each facility must meet. The fees pay for annual inspections of more than 9,000 facilities
by federal or state inspectors to ensure compliance with national standards.
Current Legislative Issues
Congress, in the Food and Drug Administration Modernization Act (FDAMA),
revised some of the ways that FDA reviews new products and codified some of FDA’s
own procedures. For example, FDAMA mandated reforms in the approval processes of
drugs, medical devices, biological products, and food additives. It also harmonized the
rules for biologics (serums, toxins, antitoxins, vaccines, etc.) with those for drugs. It
streamlined the process for reviewing manufacturing changes for drugs, and codified
procedures for enhancing collaboration between FDA and manufacturers. It placed certain
drugs and biologics on a faster review track and codified rules facilitating patients’ access
to experimental therapies. Meanwhile, although annual appropriations have grown over
time (see Table 1), FDA officials complain that current resources do not allow the agency
to complete some of the tasks Congress assigned to it. (See CRS Report 98-263, Food
and Drug Administration Modernization Act of 1997 — The Provisions)
With user fees collected under PDUFA, FDA has reduced its backlogs of pending
drug and biologic applications and reduced review times to 12 months in FY2001. Critics,
however, have charged that the shortened review time is compromising the quality of the
data review, leading to more recalls of prescription drugs. Even with a recent cluster of
drug recalls, FDA officials claim that no evidence has surfaced that shows shortened
review times cause more recalls than usual. Congress is considering several policy
changes related to PDUFA reauthorization in FY2002. For example, some have
suggested increasing the fees to widen the scope of activities funded by PDUFA, to
extend the use of these resources to cover more oversight of direct-to-consumer
advertising, and/or to strengthen the post-approval risk management of drugs.
As the cost of prescription drugs has risen in the United States in recent years, some
U.S. consumers began asking why they were paying more than citizens in other countries
for identical drugs. In the FY2001 Agricultural Appropriations Act, Congress established
a program to increase the supply of drugs in this country. The Act requires that FDA
promulgate regulations to establish a 5-year drug import program that would allow
pharmacists and wholesalers to import FDA-approved prescription drugs into the United
States. Known as the Medicine Equity and Drug Safety Act, it required that the imported
drugs be manufactured in an FDA-approved facility, have a documented chain of custody,
be tested by qualified laboratories, and have a brand name attached that is identical to the
drugs produced in the United States. It also included a 5-year sunset provision, and

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restricted countries from which the drugs can be imported. It authorized an appropriation
of $23 million subject to a President’s submission to Congress of an official budget
request and justification. (See CRS Report RS20750, The Prescription Drug Import
Provisions of the FY2001 Agriculture Appropriations Act, P.L. 106-387)
On December 26, 2000, Secretary of Health and Human Services, Donna Shalala,
said in a letter to President Clinton that she could not request money for this program
because of flaws and loopholes in the legislation. She claimed that these flaws would not
provide cost savings for consumers and could pose unnecessary risks to public health. The
Act prohibited manufacturers, for example, to contract with foreign buyers to interfere
with the sale and distribution of the reimported drugs. However, critics note that
manufacturers could circumvent this prohibition by demanding that distributors sell the
drugs only at a more expensive U.S. price. Others are concerned that drug companies
could limit the number of drugs available for reimportation. Still others complain that the
information needed to authenticate the purity of the imported drugs is proprietary, and that
this program opens the door for counterfeit drugs to enter the United States. Some
Members of the 107th Congress have asked that the Bush Administration implement the
program immediately; others have introduced legislation to remedy some of the flaws
identified by former Secretary Shalala.
Even though the last two Congresses have supported activities of the President’s
Food Safety Initiative (FSI), it is unclear whether the 107th Congress will continue to do
so. For FY2001, Congress appropriated a total of $217 million for FDA to use to support,
among other things, food safety research, including the development of rapid screening
for microbial contamination and to develop regulations for on-farm standards for the
prevention of Salmonella Enteritidis (SE) illnesses due to shell egg consumption.
Separate from FSI funding, the 107th Congress is likely to be debating concerns over
foods developed through biotechnology. There is pressure from consumers to ensure that
these foods are safe, allergy-free, and not harmful to the environment. On January 18,
2001, FDA published a proposed rule that would require all food companies to notify the
agency 120 days prior to marketing a bioengineered food and submit safety test data.
After a data review, as proposed, FDA would send the notifying company a letter which
would indicate that the agency has reviewed their tests and finds either no problems, or
extends the agency review period, or that the data are inadequate. The agency, also on
January 18, 2001, reaffirmed its policy that most genetically engineered foods are
substantially equivalent to their conventional counterparts and that no special labeling
would be required. However, they did publish guidelines for voluntary labeling. Some
in Congress disagree over whether bioengineered foods are substantially equivalent. They
are concerned about allergenic properties and long-term ecological risks from
bioengineered food. Legislation is likely to be introduced that would require the agency
to review independently the safety of the genetically modified food and to grant formal
approval prior to its marketing. Other Members want to require mandatory labeling of all
genetically modified food. (See CRS Report RL30198, Food Biotechnology in the United
States: Science, Regulation, and Issues, and CRS Report RS20507, Labeling of
Genetically Modified Foods.)