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CLSA Wire

White House Releases Fiscal Year 2017 Budget Request
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Feb. 12, 2016

On Feb. 9, 2016, President Barack Obama released his $4.1 trillion budget request for fiscal year (FY) 2017.

Notably, the Administration proposed significant funding increases for several key agencies and activities throughout the document – however, most of these increases rely on the enactment of new authorizing legislation before congress could appropriate funds for discretionary funding and create, eliminate, or modify programs and policies in existing statutes. We are continuing to review budget materials more closely, and have noted throughout our analysis below, where possible, the “actual” amounts that would be provided to agencies, activities and programs through existing authority.

While the President’s budget serves as an important statement of the Administration’s priorities for the coming fiscal year, it’s important to remember that the President is in his last year of office, and Republicans control both chambers of Congress. Therefore, the President’s budget document really serves more as a political messaging platform (especially for those in his party eager to succeed him in the White House) than a bargaining tool. In fact, last week Senate Budget Committee Chairman Mike Enzi (R-Wyo.) and House Budget Committee Chairman Tom Price (R-Ga.) said in a joint statement they would not hold hearings with Shaun Donovan, the White House’s budget director, to review the president’s fiscal 2017 budget when it was released.

Nonetheless, the budget request provides a framework for discussion of our nation’s funding priorities. Republicans in Congress are expected to release their own budget proposal – which is also a non-binding document – in the next several weeks, and we can expect to see many priorities included in that proposal in direct conflict with those proposed by the White House. However, there are several priorities detailed here – such as bolstering response to public health threats like Zika virus, and advancing basic, clinical and translational research (see increased funding for NIH) into new treatments and cures for challenging diseases like cancer (see Moonshot initiative), and Alzheimer’s (see BRAIN initiative) – that have bipartisan support and are likely to be addressed in a substantial way in any final budget.

For more information on the FY 2017 budget proposal, click here to view the Office of Management and Budget’s (OMB) summary tables. The full Health and Human Services (HHS) budget-in-brief proposal is available here, and a more condensed HHS fact sheet is available here.

For your convenience, we have prepared a detailed summary and analysis of the President’s budget request’s many provisions of importance to the biomedical and life sciences sectors, below.

Questions? Please contact Jenny Carey, CLSA’s Director of Federal Government Relations & Alliance Development (jcarey@califesciences.org or 202-743-7559) or Meghan Drenan, CLSA’s Associate Director of Federal Government Relations (mdrenan@califesciences.org or 202-743-7560).

Department of Health & Human Services

The President’s budget requests a total of $82.8 billion in discretionary funding for the Department of Health and Human Services in FY17, representing an overall $1.0 billion reduction from the FY16 enacted level.

National Institutes of Health (NIH)

An essential focus-area for CLSA, the President’s FY17 budget request includes $33.1 billion for the National Institutes of Health (NIH), a roughly 3% increase above the $32 billion Congress appropriated for FY16. This figure includes funding for several key initiatives that would support the biomedical innovation ecosystem, such as:

  • The President’s budget request estimates that NIH will support a total of 36,440 research project grants, an increase of 600 above FY16, including a total of 9,946 new and competing grants.
  • $300 million to NIH to support the President’s Precision Medicine Initiative, a cross-Department project to help accelerate the ability to improve health outcomes and better treat diseases. This funding represents a $107 million increase from FY16.
  • $680 million in mandatory funding for new cancer-related research as part of the President’s newly-announced “Moonshot” initiative. (The President’s budget request also provides $75 million for FDA-related activities included in the Moonshot initiative.)
  • About $680 million would also be used to expand clinical trials to include more minorities and others suffering from higher cancer rates. The funds would also be used to develop new vaccine technology and research into the causes, treatment, prevention and detection of cancer.
  • $195 million, an increase of $45 million over FY16, to expand the Brain Research through Advancing Innovative Neurotechnologies (BRAIN) Initiative, the cross-agency brain-mapping project aimed at revealing the underlying pathology of a vast array of brain disorders.
  • $910 million included for Alzheimer’s research, the same as FY16, to invest in a variety of basic and translational research activities.

CLSA will continue to focus our education and advocacy efforts on securing a truly appropriate, stable and consistent level of funding for NIH (and other biomedical research agencies) in FY17 and beyond.

Food and Drug Administration (FDA)

The President’s FY17 Budget request includes $5.1 billion in total resources for the Food and Drug Administration (FDA), an increase of $358 million (8%) over FY16 levels. Of this proposed increase, $15 million is in budget authority, $269 million in user fees, and $75 million in new mandatory funding. Notably, the President’s budget documents achieve these significant increases by including several unauthorized funding proposals, such as new food user fees which Congress has repeatedly rejected. Excluding the unauthorized mandatory funding and user fees, FDA would receive $2.743 billion in budget authority appropriations, only $15 million above what the agency received in FY16.

Excluding funding that requires new authorizing legislation, key FDA programs would be funded as follows:
–        Human Drugs: $492 million for the Center for Drug Evaluation and Research (CDER), the same amount as FY16 levels.
–        Biologics: $215 million for the Center for Biologics Evaluation and Research (CBER), the same amount as FY16 levels.
–        Devices: $326 million for the Center for Devices and Radiological Health (CDRH), representing an increase of $3 million over FY16 levels.

Other funding increases of interest, whether or not currently authorized, include:

  • $2.8 billion to continue core medical product safety activities across FDA programs, an increase of $116 million above FY16. This total includes $1.3 billion in budget authority, $1.4 billion in current law user fees, and $75 million in new mandatory funding to “advance FDA’s highest priority activities to ensure that human and animal drugs, biologics, and medical devices available to the American public meet current requirements and standards for safety.”  Such activities include improving patient safety, developing the necessary infrastructure for a safer and more modern drug supply, and continuing expanded and improved oversight of human drug compounding.  Notably, this funding will in part support FDA implementation of three activities of the Food and Drug Administration Safety and Innovation Act (FDASIA): Unique Facility Identifier;  Unique Device Identifier; and Electronic Biological Product Application Submission programs.
  • $18 million to continue and extend FDA’s oversight of drugs produced by compounding pharmacies and outsourcing facilities. (This is an increase of $1 million above FY16 levels.)
  • $4 million, an increase of $2 million above FY 2016, to support Precision Medicine initiatives. Such funding will support FDA’s implementation of precisionFDA, a platform for academic and commercial collaboration, and other work with the scientific community to develop new reference datasets for validating genetic tests.
  • The Budget request also proposes the establishment of two new user fee programs: (1) the international courier user fee, which would provide $6 million to support activities associated with increased surveillance related to the increased volume of FDA‐regulated commodities, predominantly medical products, imported through express courier hubs; and (2) the cosmetic user fee, which would generate $20 million to support FDA’s role in ensuring the safety of cosmetic products in the United States as the volume of both domestic and imported cosmetic products continues to grow and manufacturing technology and ingredients become more complex.   [FDA would require new statutory authority – that is, authorization by Congress – to collect user fees under any such programs.]

Biodefense and Public Health Preparedness

Biodefense and Emergency Preparedness:  While we commend the Administration for recognizing the urgent need to address the public health crisis related to the reemergence of Zika virus (see next section), the budget proposal largely neglects the majority of identified biodefense countermeasures needed to address ongoing threats like smallpox, anthrax and other chemical, biological, radiological, and nuclear (CBRN) threats. On the whole, the President’s proposed funding for biodefense and emergency preparedness is woefully inadequate and will leave our nation extremely vulnerable to CBRN terrorism threats.  Specifically, the budget request provides:

–        Biomedical Advanced Research Development Authority (BARDA): The Budget includes $512 million for BARDA, which has directly supported the development of over 100 chemical, biological, radiological, and nuclear (CBRN) medical countermeasure product candidates.  This funding level is unchanged from the FY16 Omnibus funding levels.

–        Project BioShield: Disappointingly, the Budget only includes $350 million for Project Bioshield, which supports HHS efforts to protect the public against CBRN threats through rapid support of research, late‐stage development, and acquisition of high priority and novel medical countermeasures. Project Bioshield is funded here at $160 million below FY16 funding levels.

–        Strategic National Stockpile: The Budget includes $575 million for the Strategic National Stockpile, the same amount as FY16, to provide ongoing support to CDC’s management, delivery, storage, and replenishment costs to the medical countermeasures included in the stockpile.

–        Pandemic Flu: The Budget recommends $125 million in funding for HHS Pandemic Influenza activities, which is an important improvement from the $72 million appropriated in FY16 Omnibus.

Preparing for and Responding to the Zika Virus at Home & Abroad: The White House announced Monday that it is asking Congress for more than $1.8 billion in emergency funding to enhance our ongoing efforts to prepare for and respond to the Zika virus, both domestically and internationally. Below are specific agency funding level requests, and intended uses:

–        CDC: $828 million to support prevention and response strategies.

–        CMS: $350 million for Puerto Rico’s Medicaid Federal Medical Assistance Percentage (FMAP) to provide additional Federal assistance to support health services for pregnant women at risk of infection.

–        Vaccine Research and Diagnostic Development & Procurement: $200 million for research, rapid advanced development and commercialization of new vaccines and diagnostic tests for Zika virus.

–        Other HHS responsibilities: $210 million to establish a new Urgent and Emerging Threat Fund to address Zika virus and other outbreaks.  This funding would be available to support emerging needs related to Zika, including additional support to States for emerging public health response needs should mosquito populations known to be potential Zika carriers migrate to additional States.

–        U.S. Agency for International Development: $355 million to support affected countries’ ability to control mosquitoes and the transmission of the virus; support maternal health; expand public education on prevention and response; and create new incentives for the development of vaccines and diagnostics.

–        U.S. Department of State: The $41 million funding request includes support for U.S. citizens in affected countries, medical support for State Department employees in affected countries, public diplomacy, communications, and other operations activities.

Combating Antibiotic Resistant Bacteria:  The President’s budget request includes $877 million, an increase of $43 million, to continue expanding the Nation’s ability to fight antibiotic resistance across NIH, CDC, BARDA, FDA, Agency for Healthcare Research and Quality (AHRQ),  and the Office of Global Affairs. In part, this funding will support ongoing ground-breaking research to aid the development of new drugs and diagnostic products, building the Nation’s treatment options for these dangerous pathogens.

Biologics Exclusivity & Biosimilars Reimbursement

Unfortunately, the President’s budget request once again proposes to generate health system savings by dramatically reducing incentives for the development of innovative new biological therapies. CLSA continues to oppose such policies because of our serious concerns that these proposals would discourage biotech innovation, further reduce venture investment into life sciences and delay innovative lifesaving medicines for patients with unmet medical needs.

Notably, the budget request would:

  • Provide seven years of exclusivity to brand biologic manufacturers, rather than 12 years as awarded under current law and supported by CLSA.
  • Modifies Medicare Part B payment for innovator biological products allowing them to be classified in the same category as their biosimilars counterpart. Reimbursement would be based on the weighted average sales price (ASP) of the reference biological product and all of its biosimilars.
  • Combined, the above proposals will generate an estimated $6.9 billion in Medicare savings over 10 years.

Prescriptions Drugs

The President’s budget request also proposes to generate health system savings by (re)proposing a number of changes to prescription drug spending. Numerous of these provisions are opposed by CLSA and the broader biomedical industry. Specifically, the President’s proposal claims that drug spending increased by 12.2% in 2014, making cost and access to medications one of the “most urgent issues for patients and their families.” The budget includes a number of proposals allegedly aimed at cutting these “costs” and improving access to treatments:

  • Increasing Transparency of Prescription Drug Pricing and Ensuring Access to Generic Medications: The Budget proposes to provide the Secretary of HHS with the authority to require drug manufacturers to publicly disclose certain information, including R&D costs, discounts and other data through regulation research
  • Federal-State Medicaid Negotiating Pool for High-Cost Drugs: This proposal will allow CMS and participating state Medicaid programs to partner with a private sector contractor to negotiate supplemental rebates from drug manufacturers.
  • Require Evidence Development for Coverage of High Cost Drugs: This proposal creates a coverage with evidence development process for Medicare Part D. For certain identified drugs, manufacturers will be required to undertake further clinical trials and data collection to support use in the Medicare population, and for any relevant subpopulations identified by CMS.
  • Change the Part D Coverage Gap Discount Program Agreements from Annually to Quarterly: This proposal allows CMS to contract with pharmaceutical manufacturers on a quarterly, rather than an annual, basis for the Medicare Part D coverage gap discount program.

The budget request does propose to make an investment to tackle prescription drug abuse. The President’s budget request includes $1 billion in new mandatory funding over two years to expand access to treatment for prescription drug abuse and heroin use and help ensure that every American who wants treatment can access it and get the help they need. It includes funding to continue and increase current efforts to expand State-level prescription drug overdose prevention strategies, increase the availability of medication-assisted treatment programs, improve access to the overdose-reversal drug naloxone, and support targeted enforcement activities.

Health IT

The President’s budget request includes $82 million, an increase of $22 million over FY16, for the Office of the National Coordinator for Health Information Technology (ONC) to continue to encourage market transparency and competition, improving electronic health record usability, and to make strategic investments in standards development to accelerate industry progress in specific areas that require interoperability.

Agricultural / Industrial & Environmental Biotechnology

Agricultural Technology:

The Budget includes $106 million at USDA for competitive and intramural research funding to support development of bio-based energy sources that range from sustainable and economical forest systems and farm products to increased production of cellulosic biofuels.

  • A total of $2.9 billion for agricultural research, education, and extension activities, including $700 million for competitive grants through the AFRI including $325 million in mandatory AFRI funding for research and development that would bring the program up to its authorized level.
  • About $61 million to address antimicrobial resistance in pathogens of humans and livestock.

Renewable & Clean Energy Technologies:

The President’s budget includes $7.7 billion government-wide, a 20% increase over 2016, for fundamental clean energy research & development across 12 agencies.

  • $5.9 billion in discretionary funds to support the Department of Energy’s “Mission Innovation” initiative, the landmark commitment to accelerate public and private global clean energy innovation announced at the start of the Paris climate negotiations.
  • In addition to Mission Innovation funding, the President’s budget request provides over $1.3 billion to accelerate the adoption of clean energy sources such as solar, wind, and low-carbon fossil fuels, and energy-efficiency technologies.
  • $1.5 billion in mandatory funding in FY17 for clean energy technology development and deployment; $1.3 billion for advanced clean transportation ($11.3 billion over ten years) and $150 million for the Advanced Research Projects Agency – Energy (ARPA-E) ($1.85 billion over five years).

For more information about the FY17 Budget, contact Jenny Carey, CLSA’s Director of Federal Government Relations & Alliance Development (jcarey@califesciences.org or 202-743-7559) or Meghan Drenan, CLSA’s Associate Director of Federal Government Relations (mdrenan@califesciences.org or 202-743-7560).