Drug Makers Brace for Possible Cuts to FDA

After Midterm Elections, Pharma Wary of Congressional Appetite for Reduced Spending on Federal Agency

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NEW YORK (AdAge.com) -- The Nov. 2 elections that reshaped the structure of the U.S. House of Representatives are causing a headache in the pharmaceutical industry, which could lose millions as a hamstrung FDA leads to a clogged up drug pipeline.

FDA Commissioner Dr. Margaret Hamburg
FDA Commissioner Dr. Margaret Hamburg Credit: Andrew Harrer/Bloomberg
With many congressional candidates riding into office on a platform of reduced spending, drug makers are bracing for what they believe could be cuts to government agencies, particularly to the Food and Drug Administration.

Astra Zeneca CEO David Brennan and FDA Commissioner Dr. Margaret Hamburg last week both told the Reuters Health Summit in New York that cuts to the agency would be detrimental. "I don't think that would be good for our industry. It doesn't look to me like that would speed things up," Mr. Brennan told Reuters, speaking of the time it takes the FDA to review new products, where delays of several months can cost pharma companies millions.

Ms. Hamburg cautioned the new Congress to think twice about FDA cuts.

"Not every function of government can be cut to the same degrees using the same tools. I think we should proceed with real care," she told Reuters. "It should be recognized if we can't do our job and do it well, there isn't any other entity that will backstop behind us. What we do really matters to health."

"I think the threat to cut FDA funding is real and it's a signal that FDA has to deliver on the promises that it made during the last PDUFA negotiations," said former FDA associate commissioner Peter Pitts, referring to the Prescription Drug User Fee Act, or the fees that pharmaceutical companies pay to the FDA. "It's a shot across the bow."

The situation is still a catch-22 for Big Pharma and its ad agencies. Though politically it might not mean much to ad shops, a reduction in taxpayer funding means the FDA would likely have to reduce staff, which means Mr. Brennan's fear that a slowing of the drug-approval process is likely. In turn, that means a lessening of work for ad agencies.

Moreover, a reduction could also mean pharmaceutical companies cough up more fees when the PDUFA negotiations kick into high gear next year. The current five-year PDUFA contract is up in 2012. "I am concerned [the industry share] would go higher," Mr. Brennan told Reuters.

That said, there could be a silver lining -- from an advertising perspective. Dick O' Brien, exec VP-director of government relations at the American Association of Advertising Agencies, noted that this might be an instance that actually benefits health-care-centric ad shops.

"If these legislators are successful [in making broad spending cuts], the regulatory agencies will have to perform triage -- pursuing only those areas of the most vital importance to the public good," he said. "This will free businesses from having to fend off regulation in marginal areas and will likely promote an increased government reliance on industry self-regulation." And while a clogged-up drug pipeline isn't necessarily good news for ad agencies, they likely won't feel any immediate impact. "The drug pipeline hasn't been robust lately," said Marc Senak. "I don't see an impact in terms of budget cuts to the FDA affecting advertising. That's a lot of dominoes down the line."

Astra Zeneca CEO David Brennan
Astra Zeneca CEO David Brennan Credit: Bloomberg
Mr. Senak is a senior VP at Fleishman-Hillard in Washington and an authority on public health and policy issues. He authors the popular pharma communications blog Eye on FDA. He said it didn't matter that a Republican majority was taking over the House. The FDA, he says, "is often used as a bat against the administration by either party."

Mr. Senak noted that Rep. Darrell Issa (R-Calif.) will take over as chairman of the House Government Oversight Committee, "and he's raised plenty of issues with the FDA when he was the ranking minority member on the committee. Now he'll have subpoena power."

"It's safe to say that everything is on the table right now in Washington," he said.

The Prescription Drug User Fee Act of 1992 allows the FDA to collect fees from drug manufacturers to fund the drug-approval process. Many have criticized the so-called cozy relationship of pharma companies paying to have their own drugs approved, but the latest five-year contract has meant $2.75 billion in PDUFA fees to the FDA.

According to the FDA, 60% of its fee revenues is spent on employee salary and benefit costs.

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