White House Budget Undoes Hard-Won Pharma Deals

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Includes: IBB, XBI
by: EP Vantage

This article was originally published March 17, 2017.

Having already been cast in the role of villain in the winter drug pricing drama, the pharma sector woke yesterday to equally worrying news that US President Donald Trump is proposing a doubling in FDA user fees and a big cut to funding for the biggest source of early-stage biomedical research funding, the National Institutes of Health.

If Congress follows through on the proposals this promises to reverse the hard work of lawmakers, agency officials and advocacy groups who in 2016 negotiated rises to the NIH budget as well as a five-year plan on deployment of FDA user fees. White House budgets are merely blueprints and Congress will have substantial input into the federal government’s 2018 funding – however, the plan provides insight into the administration’s spending priorities.

Reopening

The NIH plan would roll back funding for the fiscal year beginning October 1, 2017, by $5.8bn, to $25.9bn. In nominal terms, this is the smallest budget the 27-department institute has seen since 2002, and in real terms returns the NIH to turn-of-the-century levels – the NIH has been one casualty of the budgetary stalemate between former President Barack Obama and Congress (see: "As pharma R&D engine surges US research backing sputters," January 2, 2015).

The bipartisan 21st Century Cures legislation that completed its journey to President Obama’s desk late in his tenure gave a boost to NIH funding, including the much-heralded cancer “moonshot.” The funding boost was part of a grand compromise that streamlined FDA processes, so advocates for the cures legislation will not be pleased that Mr. Trump is interested in unwinding it (see: "Cures bill races toward US enactment," December 1, 2016).

The American Society of Hematology was quick to point out that the funding cut represented a reversal of the 21st Century Cures Act compromise, as the group’s president, Kenneth Anderson, said it was “important that Congress continue its commitment to the national cancer moonshot and precision medicine initiatives, which set aside vital funding to accelerate research progress.”

The budget plan also discloses moves to reorganise the NIH and consolidate various centres, which could help reduce administrative costs, although a 20% cut will likely necessitate more than just reorganisation. The NIH primarily provides grants and other assistance to academics doing basic research into health interventions, some of which turn into clinical projects and marketed pharmaceuticals.

Read my lips – some new taxes

Raising the annual levy on pharmaceutical and medical device companies seeking FDA approval from $1bn to $2bn was unexpected in the context of a carefully crafted agreement to reauthorise the Prescription Drug User Fee Act (PDUFA) for the next five years. This would be the sixth time the federal government has renewed the programme, which uses the revenue to pay for drug review activities. The periodic assessment of PDUFA has been an opportunity to ask the agency to commit to goals such as decision deadlines.

An agreement worked out among industry groups, patient advocates and agency officials aimed at greater use of adaptive trial design and surrogate and patient-centred endpoints, as well as increased capacity to handle requests for breakthrough therapy designation, but did not anticipate a doubling of user fees (see: "Deregulatory mood spices PDUFA reauthorisation," March 9, 2017).

The budget blueprint states that the new funding stream from raised user fees would replace general tax revenues being used to support pre-market review activities.

The prospect of user fee increases has caught the attention of the Biotechnology Innovation Organization, which called on Mr. Trump and Congress to “preserve the commitments reflected in the carefully negotiated PDUFA VI goals letter, and ensure that this vital programme is reauthorised in a timely manner.”

Given that Congress has much to say about federal spending priorities, it is not necessarily time for biopharma to panic over user fees and NIH funding. However, given that the president is now on the record in support of these proposals, the risk for the sector is that they could eventually find their way into an enacted budget.