Some Thoughts on Funding FDA's Food Contact Notification Program
Following recent articles in The New York Times and The Wall Street Journal, Keller and Heckman LLP's founding partner, Jerome H. Heckman, offered some thoughts on the subject of longer-term funding solutions for the U.S. Food and Drug Administration's Food Contact Notification (FCN) program, at Keller and Heckman's Seventh Annual Food Packaging Law Seminar, held on October 11-12, 2006, in Washington, DC. This article is based on Mr. Heckman's comments at that conference.
The Wall Street Journal recently featured a front-page article on the impact of "user fees" for the approval of new drugs on the FDA's budget. Among other things, the article asserted that FDA's growing reliance on those fees and the process of negotiating them with industry representatives every five years (which is currently underway) are affecting how FDA sets it priorities. Similarly, a New York Times article, which appeared late last month, referred to the user fee arrangement for drug approvals as "one of the FDA's biggest problems."
A broad range of industry and market participants are also concerned about FDA's funding arrangements. For example, the "Coalition for a Stronger FDA" has gathered together patient groups, consumer and public health advocates, and a number of companies to work on increasing public support for the FDA. Over a multi-year period, the Coalition plans to build public support for the FDA and work with the Executive Branch and Congress to ensure that the agency has adequate resources to fulfill its mission. The Coalition intends to convince lawmakers of the importance of increasing the FDA's entire budget.
From my perspective, these articles, lobbying efforts, and recent experience in securing continued funding for the FCN program for next year raise more fundamental questions of regulatory philosophy—how should FDA's activities be funded, generally, and for our packaginglaw.com readers' consideration, particularly, how should FDA's activities in the food and food packaging areas be funded? Do we want an agency that is, in effect, fully or substantially funded by industry paying for services, or do we want an agency that is fully funded by federal government appropriation?
In 1956, the U.S. Congress began considering legislation that was to become the Food Additives Amendment of 1958. The bills under consideration were drafted so broadly that they included packaging materials and aimed at making it necessary to file Food Additive Petitions (FAPs) for those materials. The Society of the Plastics Industry, Inc. (SPI), by way of its General Counsel (yours truly), offered an alternative, introduced in the House of Representatives as H.R. 8112, to establish a notification procedure for "indirect additives." Under this procedure, a notice would be filed with FDA and become effective in 90 days if the agency did not object. Unfortunately, the legislation that ultimately was enacted did not include this procedure.
Thus, in 1958, the era of the FAP system and efforts to avoid it whenever possible were underway. From the very beginning, the system was burdensome for users and makers of indirect additives because FDA was taking more than a year or two to act on a petition. Eventually, FDA began to put glosses on the legislation and FAP filings soon became even more cumbersome. This unhappy situation prevailed until 1996 when Congress seemed prepared to consider changing the FDA processes.
At that time, Keller and Heckman, on behalf of SPI, presented the FCN concept now embodied in the Food and Drug Administration Modernization Act of 1997 (the "1997 Act"). Part of the original proposal provided that the FCN program would be supported by a notification fee for those who filed FCNs. At the time, we estimated that the fees should be in the $1,000 to $2,000 range. However, this part of the proposal did not make it into the final legislation because it was blocked by Members of Congress who were strongly opposed to any fees for services from FDA. As a result, instead of a provision for fees, the 1997 Act included an arcane proposal under which funding for the FCN program would come from the FDA budget and the program could be dropped if at least $3 million were not included in each FDA budget to pay for it.
Under the FCN program today, when one seeks to clear a food contact substance, they: (a) file a "Food Contact Notification" on FDA Form 3480; (b) supply the necessary extraction, toxicology, and environmental data; and (c) await the passage of 120 days for the FCN to become effective and announced on an FDA Web page. The data filed are extensive and must be deemed adequate by FDA staff, but the entire process can be accomplished in 120 days for the most part.
This program has been in place and functioning extremely well since 2000, with more than 550 notifications having become effective. The program is funded by Congressional appropriations that were included in FDA's budget and cleared routinely until this year.
This year, FDA, faced with an urgent need to hold the line on its budget and still fund some additional work in the national security and avian flu areas, decided to drop the funding for the FCN program from its budget proposals. Upon hearing of this decision, the "Food Packaging Industry Coalition," Keller and Heckman, and others, set about seeking to convince Congress that the funds for the FCN program, estimated at about $6 million (a paltry sum in a budget of about $1.8 billion for FDA, and truly lost in the Department of Health and Human Services budget of nearly $700 billion), should be continued.
In due course, the House of Representatives Agriculture Appropriations Subcommittee issued a report recommending the continuation of the FCN program and those recommendations were carried forward when the House passed the Appropriations Bill (H.R. 5384). The Senate Appropriations Committee joined in the recommendations of the House and the matter is now before the full Senate where it is reasonably certain that the result will be a favorable one, although final action is pending.
The FCN program appears to have been saved for fiscal year 2007, but what about next year and the years thereafter?
More Fundamental Questions
FDA will most likely have to continue proposing to cut the FCN program in subsequent years because nothing has occurred to give it replacement monies. This portends long-term lobbying activity and annual fights to save the program. FDA is caught in a financial squeeze with little choice other than to cut programs in the food area—there being no programs in this area where fees are assessed.
FDA collects an estimated $220 million a year from the drug industry for New Drug Applications, and about $30 million a year for Device Applications. Thus, in the other two main areas of FDA jurisdiction—drugs and devices -- funds are paid by industry to trigger Congressional appropriations for the services required. Because this is not true in the food area, when FDA must cut its budget, the food area is where it starts, and packaging is a low health risk so packaging programs are especially vulnerable.
One can expect FDA to propose budget cuts in the future that are substantially the same as those that were proposed this year—unless something is done. Thus, the stage for the present dilemma has been set and we are now seeking solutions.
FDA must have some form of fee assessment in mind. However, if the FCN program were funded entirely from notification fees, then, using the present rate of filings as a factor in the equation, the fees for a single FCN could be as much as $60,000, which is an impossible amount, especially for smaller companies. Even if only half the total cost of the FCN program needed to be raised, the fee per filing would still be about $30,000, a sum that remains unacceptable in most cases.
Further, FDA may be concerned that a fee system for FCNs alone could leave the agency spending more money to collect the fees than it takes in. Thus, there could be support for broader funding programs that would put FDA's food budget on a rough par with the drug and device programs, perhaps by an assessment of say $1,000 or so annually for the more than 200,000 food plants registered under the agency's bioterrorism program. FDA could go to the broader food industry with its assessment of the problem and thereby put the idea of a fee program on the table. The concern is that while different ideas are being vetted, FDA will propose the same FCN program cut when it drafts its 2008 budget.
Clearly, the issue is complex. FDA faces a general budget crisis. The agency regulates more than 25 percent of what consumers buy, but its entire budget is only $1.8 billion annually. Of the $1.8 billion about 15 percent comes from fees and the rest is from general appropriations. Most knowledgeable people believe FDA is seriously underfunded.
As described by the Coalition for a Stronger FDA, and the Times and Journal stories mentioned at the beginning this article, there is a strong and perhaps intensifying sense among many that Congress should fund FDA completely so that it will not be subject to charges that it favors the industries it regulates. Longer term, and depending on how events develop in the next several years, the movement to take FDA away from any direct fee charging could succeed. There are industry coalitions working in this direction.
However, for now, it appears that we will need to live with the idea of either coming up with some form of acceptable fee proposal or conducting an annual lobbying initiative to seek a continuation of the FCN program. Stay tuned.