FY 2004 FDA Budget In Brief

PROMOTING PUBLIC HEALTH THROUGH
PATIENT, FOOD, AND CONSUMER SAFETY

Agency Mission Overview

As a part of the Department of Health and Human Services (DHHS), FDA's mission is to promote and protect the public health by ensuring that safe and effective products reach the market in a timely way, and to monitor products for continued safety after they are in use.  FDA's mission is a blending of science and law directed at protecting consumers by focusing on patient, food, and consumer safety.

To fulfill its mission as effectively as possible, FDA must allocate its available resources to have the greatest impact on public health given the risks and opportunities available.

As the Federal Government enters calendar year 2003, it continues to foresee modest economic growth and scarce additional resources to distribute to non-defense related agencies such as FDA.  Although the economy is recovering from the downturn, progress is slow and uneven, with varying degrees of growth.

FDA plays a significant role in addressing the nation’s counterterrorism capability, and will continue to stress its needs in conjunction with the vast demands across the entire government.  Homeland security in its entirety is a costly, yet necessary, investment that will continue into the future.  Many other factors such as the current budget deficit and potential military conflicts place pressures on the Agency’s financial situation in FY 2004 and beyond.  As the nation relies upon the objective, science-based decisions at FDA and the Agency’s responsibilities continue to grow, it will strive to improve the health and safety of the American public within its financial means.      

Program Objectives

FDA decisions affect every single American every day, as last year consumers spent nearly $1.5 trillion, or more than 20 percent of all consumer expenditures, on FDA-regulated products.  Operating as a modern, scientifically up-to-date, responsive, and efficient Agency, FDA can provide better protection for consumers and more effectively promote their health.  FDA strives to assure a safe and secure food supply; ensure medical product safety through a rigorous premarket review process and by monitoring these products while they are in use; to bring safe and effective technologies to a global market; to monitor emerging hazards through postmarket surveillance systems and monitor about eight million import shipments annually; and, to ensure that Americans get reliable, up-to-date information about the health consequences of the products they use.

Our Commissioner believes a strong and effective FDA is paramount to meeting the challenges of food and medical product regulation in the 21^st century.  These challenges – dynamic and responsive regulation that is always searching for new and better ways to reduce risks to the public health; quick responses to counterterrorism and food security; promoting quick access to new medical technologies that are safe and effective; helping to reduce adverse events involving FDA-regulated products; and helping consumers get truthful information about the products they use to allow them to make informed decisions are among the many critical challenges the agency faces.  To strengthen the agency’s ability to meet these challenges we must rely on the best science, and use creative thinking and science-based risk management to increase benefits and reduce costs while minimizing the public health risks while providing greater value to the public.   

FDA’s objectives align with the strategic goals of DHHS to protect and improve the health and well being of the American public.  FDA’s FY 2004 budget request is targeted at additional support for the following Secretarial goals:

• “Protecting Our Homeland”
• “Improving Health Sciences”
• “Realizing the Possibilities of 21^st Century Health Care and,
• “Improving Department Management

On the counterterrorism front, FDA is facilitating the goal of  “Protecting Our Homeland” by assuring the availability of new counterterrorism tools. Our drug and biologic product centers are working to adapt their approval processes to challenges of developing safer and more effective treatments for anthrax, smallpox, plague and other potential agents of bioterrorism.  Our medical device center is supporting the development of methods for detecting biological agents with bioterrorism potential, and for radiological decontamination. FDA continues to strengthen its surveillance, investigation, and laboratory support for detection and management of product contamination for foods medical products, and blood.

To support the Department of Homeland Security, $583,000 will be redistributed through the DHHS to states and major cities to increase the preparedness of hospitals and public health systems.  The objective is local preparedness, with national resources ready to be deployed immediately whenever and wherever needed.

FDA must be vigilant in assessing and effectively reducing risks associated with unexpected and potentially widespread health and safety threats to the public.  To do this, FDA has developed a risk management framework that assesses the nature and extent of public health risks and manages these risks by developing strategies to reduce or minimize them.

• Over the last two decades, significant changes to pharmaceutical regulations have resulted in incremental adjustments in FDA’s regulatory approach to product quality.  In FY 2004, FDA is continuing to implement a new initiative, “Pharmaceutical GMPs for the 21^st Century:  A Risk-Based Approach.”  The following principles will guide implementation:

Risk-based orientation. A systematic and rigorous approach that matches the level of effort against the magnitude and probability of risk.

Science-based policies and standards.  A thorough evaluation of the science base to ensure that product quality incorporates up-to-date science, and encourages technological advances.

Integrated quality systems orientation.  Evaluate for applicability and innovative approaches to manufacturing.

International cooperation.  Collaborate with other regulatory authorities through the International Conference on Harmonization and other venues.

Strong Public Health Protection.  Strengthen the public health protection achieved by FDA’s regulation of drug product manufacturing.

Program Assessment Rating Tool – PART

The Office of Management and Budget (OMB) developed a program assessment process in preparation for the FY 2004 budget review.  The program assessment flows from the Administration’s efforts to link program performance with the budget process, and was seen in the

FY 2003 President’s Budget when it included explicit assessments of program performance.  Twenty percent of all federal programs were selected for evaluation.

A common analytic tool, “Program Assessment Rating Tool (PART),” was created to develop information that would enable OMB to evaluate the effectiveness of Agency’s programs and their budget request.  The PART instrument examines the program purpose, strategic planning, program management, and program results. 

OMB reviewed the five FDA programs:  Foods, Human Drugs, Biologics, Animal Drugs and Feeds, and Medical Devices and Radiological Health. OMB’s numerical scores for the five programs ranged from 54.8 to 58.9.  While the five programs scored well on the program purpose section, OMB identified strategic planning, program management, and program results as areas for improvement.   The results have enabled FDA to make improvements in developing long-term outcome goals, describing program strategies and mechanisms to achieve the goals, and strengthening the linkage between the budget and performance plan.

Based on feedback from the OMB on FDA’s responses to the PART, FDA leadership has agreed to pursue the following long-term outcome goals:

• Increase the national laboratory capacity to test food samples that may have been contaminated by biological, chemical or radiological contaminants introduced by terrorists;
• Ensure the safety and efficacy of medical countermeasures that are part of the National Pharmaceutical Stockpile; and,
• Achieve full establishment compliance of the rule, which prevents the establishment, and amplification of Bovine Spongiform Encephalopathy (BSE) through animal feed.

With the recent appointment of a new Commissioner, FDA leadership is developing a long-range strategic plan to show how agency efforts contribute to the achievement of these long-term outcome goals.  These efforts include developing agency and program strategies that will improve the likelihood that long-term outcomes will be achieved, identifying intermediate outcome measures which could serve as good leading indicators of ultimate health outcomes, identifying databases that will serve as valid and reliable sources of information on the selected intermediate and end outcome measures, and conducting analyses and evaluations to strengthen our understanding of the relationship between FDA program efforts intermediate and end health outcomes.

Although there is still much work to be done, both the long term outcome goals and agency as well as program strategies for pursuing these goals are outlined in FDA’s FY 2004 Performance Plan submission to Congress.

FDA’s FY 2004 Budget Request

To enable the FDA to meet future challenges, this budget request will fund ongoing operations at the current level and also support more than 800 recently hired investigators and analytical staff.  The FY 2004 management efficiencies have not been allocated to specific programs pending FY 2003 Appropriations.  In the near future, FDA will be challenged to resolve complex issues such as the human genome project, breakthrough device technology, and development of medicines through biotechnology.  FDA must also contribute to the protection of our homeland by being able to respond to counterterrorism challenges.  These include the ability to protect the food supply and to increase the availability of medical products such as vaccines to protect the public against anthrax and other biological threats.

FDA’s FY 2004 budget request includes the following programmatic changes:

FY 2004 Budget Summary
Requested Budget Authority Increases
(Dollars in $000)

Note:  The FY 2004 reductions have not been made to specific programs pending FY 2003 Appropriations.

Cost of Living : + $23,283,000

Highly skilled personnel are essential to accomplishing FDA’s technically complex regulatory mission.  FDA is a people-intensive Agency where payroll accounts for over 60 percent of the budget.  The budget request includes $23,283,000 in inflationary cost-of-living adjustments for existing program staff including the hundreds of investigators and analytical staff hired in FY 2002 for counterterrorism activities.

Secretarial Initiative: Protecting Our Homeland:

Food Safety – Counterterrorism:_+  $20,500,000

FDA has limited capacity to monitor or control the flow of imported foods, inspect domestic manufacturers, and detect foodborne pathogens before they cause human illness.  When these limitations are combined with the possibility of deliberate attempts to contaminate the food supply at any point along the food production, processing and distribution chain, the risks are greatly increased.  FDA believes that a coordinated response with state, federal and local partners, offers a better means to identify and contain outbreaks associated with deliberate attempts to contaminate the food supply.  Accordingly, FDA will provide grants to states for inspections under section 311 of the Bioterrorism Preparedness and Response Act, conduct direct federal food inspections, and improve Center and Field laboratory preparedness. FDA must develop and implement a system to register products manufactured abroad.  During FY 2003, FDA is using FY 2002 Emergency Supplemental funding to begin design of this system. 

Secretarial Initiative:  Realizing the Possibilities of 21^st Century Health Care

FDA’s public health and safety role requires a rigorous and effective postmarket surveillance activity.  When FDA approves drugs and other medical products such as devices, it has completed a thorough review to determine that these products are safe when they are marketed.  That is not always the end of the story.  New safety findings may emerge after approval, when a wider patient population uses products under a broader range of clinical circumstances.  In some of these cases, preventable complications and adverse events may occur that were not observed before product approval.  As a result, it is important for FDA to continually monitor these products and track trends associated with them.  A critical task of the agency is to reduce adverse health events, many of which are preventable.  Medical errors are estimated to account for 40,000 to 100,000 deaths per year in hospitals alone.

The requested increase will allow FDA to expand the use of new information technology (IT) to improve our understanding of what causes preventable adverse events.  FDA will continue to conduct pilot IT programs for medical devices, drugs, generic drugs and biologics and continue implementing Phase III of the Medical Product Surveillance Network (MedSun).   FDA’s new safety initiative, using modern health information systems, will provide faster and more complete information on safety problems associated with drugs and devices so adverse events involving these products can be avoided.  Additionally, as part of the increase requested for generic drugs, FDA will place greater emphasis on preventing adverse events involving generic drugs.

Secretarial Initiative:  Accelerating the Availability of Lower Cost Drugs – Improving Health Sciences

Generic Drugs Program:+  $13,000,000

A generic drug is therapeutically identical, or bioequivalent, to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.  Although generic drugs are therapeutically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price.

Savings from generic drugs were conservatively estimated by the Congressional Budget Office (CBO) to be $8 to $10 billion in 1994, a time when spending on prescription drugs was less than 40 percent of its current level.  Current savings to consumers from generics could now exceed $20 billion with billions more saved when hospitals use generic drugs.

The Generic Drugs Program has the primary responsibility for approving new generic drug applications, and assuring these products will perform the same as their respective brand name products.  Besides offering substantial cost savings to consumers, generic drugs must be safe and the possibility of adverse events after approval must be reduced. 

With the increase, FDA plans to hire 40 FTE to reduce review times and develop the science to increase the number of generic drugs.  These new resources will also support the effective implementation of improved regulations governing generic drug competition.  Additionally, the FDA Commissioner has prioritized intramural and extramural programs that expand the range of generic drugs available and help prevent adverse events, thereby allowing safe and more affordable drugs to be available.

This $1,000,00 increase will support the hiring and training of seven FTE to:  (1) improve the OTC regulatory process so that FDA is better equipped to provide the consumer faster access to OTC drug products without compromising safety issues;  (2) expedite the review of Rx-to-OTC switches; and, (3) develop and work toward finalizing standards

(e.g. monographs) for analgesic, antiseptic, laxative, and sunscreen drug products for OTC use.  All of these efforts help produce significant consumer benefits such as significantly reducing and/or eliminating all unsafe and ineffective products from the OTC market; providing greater and broader access to OTC drug products; reducing some health care costs; and increasing competition.

Specifically, FDA’s role will be to:  continue to define, develop, issue, and track written requests for pediatric studies; publish the final study reports on the docket; review submitted results from these pediatric studies within six months; disseminate appropriate information to the public; enhance the surveillance of adverse events in children; coordinate with NIH regarding the development of “off-patent” drugs for use in children; and, negotiate labeling concerns with listed drug holders and if necessary identify product labels requiring appeal activity and present to the Advisory Subcommittee to conduct these activities.

The requested increase will support the hiring of 36 FTE in the Human Drugs Program and 4 FTE in the Office of Pediatric Therapeutics, in Other Activities, to address all activities related to the increasing number of new pediatric studies submitted by the pharmaceutical sponsors.

The $1,000,000 increase in budget authority, coupled with the increase of $4,065,000 requested for user fees for medical device reviews, provides a total requested increase of $5,065,000.  This assumes an appropriation of $25,125,000 in device user fees in FY 2003.

The Medical Device and Radiological Health program has been re-engineered over the last decade to become more efficient and has changed its strategic direction by consciously shifting its focus to high-risk, high-impact products to maximize the benefits on public health.  Other innovations brought by the FDA Modernization Act have streamlined the processing of premarket notifications (510 (k)s) by using accredited third parties.  Despite these strategic shifts and resulting efficiencies, a rapidly growing and increasingly more complex market place is causing significant unmet needs.  This request would allow FDA to shore up its device review infrastructure and contribute towards maintaining review performance, and update guidance documents for industry.

Secretarial Initiative: Improving Departmental Management

FDA is also supporting various initiatives associated with the President’s Management Agenda.  These include consolidating human and IT resources to achieve greater efficiencies and economies of scale; consolidating the biologic therapeutic review function into the similar drug review function to achieve greater consistency and less duplication of effort; conducting outsourcing studies and rightsizing to achieve cost savings and maximum efficiencies; organizational de-layering for faster decision-making and better communications; and, implementing a new financial management system to provide agency  managers with timely and consistent financial information. 

The request also includes funding to support Departmental efforts to improve the HHS Information Technology Enterprise Infrastructure.  Approximately $8,700,000 was spent in FY 2003.  The amount for FY 2004 is yet to be determined.  This would enable investing in key information technology infrastructure such as security and network modernization.  These investments will enable DHHS programs to carry-out their missions more securely and at a lower cost.  Agency funds will be combined with resources in the Information Technology Security and Innovation Fund to promote collaboration in planning and project management and to achieve common goals such as secure and reliable communication and lower costs for the purchase and maintenance of hardware and software.

FDA plans a major consolidation of its Headquarters Offices in the Washington D.C. metro area, going from 16 locations to two.  The White Oak and College Park, Maryland locations were selected to create greater economies of scale and scope by collocating, standardizing and modernizing document handling; sharing facilities such as libraries and conference areas; reducing redundancies in a wide range of administrative management tasks; allowing the conversion to a single computer network; significantly reducing efforts lost due to traveling between meetings and relying on teleconferences when in-person meetings are more suitable; and significantly reducing management layers.  FDA is also strengthening its analytical capabilities in the field by completing Phase III of the Arkansas Regional Laboratory multi-purpose facility to support the increased need for domestic and import inspections efforts.

Arkansas Regional Lab:  + $3,500,000

FDA’s field laboratories provide critical laboratory and analytical support to domestic and import inspection efforts and are a key element in its science base.  These laboratories provide a cost-effective critical mass of scientific expertise in the fields of chemistry, microbiology, pesticide chemistry, animal drug research, and total diet research.  ARL, located in the middle of the U.S., will provide critical laboratory analysis for FDA-regulated products in a seventeen-state radius.

Completing Phase III of the ARL will enable FDA to fully utilize Building 50 and effectively collaborate with the National Center for Toxicological Research (NCTR) on scientific issues critical to the Agency and the U.S. public.  One of the issues addresses FDA’s preparedness for counterterrorism events.  The Jefferson Laboratories (ARL and NCTR) are developing DNA-based or mass spectrometry based technologies to permit the analyses of products for chemical and microbiological hazards.  These methods will assist public health officials in identifying the type of hazard and its appropriate counter-measure.

Without these funds, Phase III will not be completed in a timely manner and that delay may adversely impact FDA efforts to finalize development of methods, which could be used for chemical and microbiological hazards.

Phases I and II for Building 50 and Common Area completed exterior demolition, structural work, roofing repair, installation of an elevator and installation of a new exterior brick façade.  The interior fit-out of the space and the installation of mechanical and electrical infrastructure are not complete.

CDER Move:  + $6,000,000

While FDA headquarters currently occupies approximately 40 buildings in 16 locations, these facilities are currently being consolidated into two locations to achieve considerable annual operating savings. This funding will begin the second phase of the CDER relocation.  This portion of the second phase will consolidate the offices and laboratories of CDER into one office and laboratory complex, enhancing communication.  This funding will support cabling and relocation services.

Unified Financial Management System:  + $2,290,000

The Unified Financial Management System (UFMS) will be implemented to replace five legacy accounting systems currently used across the Operating Divisions.  The UFMS will integrate the Department’s financial management structure and provide HHS leaders with a more timely and coordinated view of critical financial management information.  It will also promote the consolidation of accounting operations and, thereby, reduce substantially the cost of providing accounting service throughout HHS.   Similarly, UFMS, by generating timely, reliable and consistent financial information, will enable Agencies and program administrators to make more timely and informed decisions regarding their operations.  FDA requests $2,290,000 to support this effort in FY 2004.

FDA’s management needs timely, reliable, and current information.  The DHHS Unified Financial Management System is designed to provide financial information in a manner that will enable FDA to maintain its clean audit opinion and meet all other financial information management requirements.

FDA is performing various preparatory activities, such as consolidating fifteen agency location codes to one; standardizing computer financial systems by implementing web-based versions; and, preparing its financial community for changes.  Additional funding in FY 2004 will enable the FDA to implement its Financial Enterprise Solution by:

• Beginning to design and test the UFMS General Ledger with the payroll interface, which will account for over 60 percent of FDA’s transactions; and,
• Purchasing Oracle licenses, hardware, training and program support and meeting increased contractor costs for site implementation.

Management Savings: – $25,698,000

Management savings will contribute to an environment in which the FDA functions effectively as a single agency that consistently supports top-quality work by all of its employees.

The challenges facing FDA cannot be confronted adequately without adequate resources in the right places. The decline of available personnel dictates a more thoughtful allocation process.  By rightsizing the Agency is thinking critically and carefully about how it uses its resources to improve the public health.  Innovation and change is the norm in the American health care system, and programs must be designed with the future in mind.

To accomplish this, FDA is reallocating resources, realigning and reorganizing functions. Implementation costs for the UFMS in FY 2004 will be redistributed across all program areas.

Other Management Savings - $2,290,000

Increased implementation costs for the UFMS in FY 2004 will be redistributed to the Other Activities program.

Rent Redistribution:  [$10,000,000]

FDA is working with GSA to obtain space around the country to accommodate the more than 800 counterterrorism personnel hired with FY 2002 supplemental funds as well as several hundred staff added through the FY 2002 annual appropriations act. FDA anticipates having to redistribute some funds in FY 2003 for GSA rental costs, but have not yet determined the total amount of this redistribution. FDA expects its GSA rent costs to increase by at least $10,000,000 in FY 2004.  In an effort to achieve management efficiencies, FDA intends to redirect funds from various programs, including field activities, to cover these cost increases.  A similar reallocation of increased GSA rent costs may take place in FY 2003.

Reorganizations and Management Savings

To meet the Commissioner’s priorities of a strong and effective organization, risk reduction, counterterrorism and food security, and reducing medical errors and consumer communications, FDA has reorganized several functions within the Office of the Commissioner.  These include the Office of the Senior Associate Commissioner, the Office of Crisis Management, the Office of Legislative Affairs, and the creation of the Office of Combination Products.

In addition, the therapeutic biologics review function is being transferred from CBER to CDER to consolidate similar drug review functions.  Organizational de-layering to achieve a flat, streamlined Agency where decision-making and better communications exists is being aggressively pursued.  Agency-wide, the reorganization and management savings will save an estimated $25,698,000 in FY 2004, while better aligning FDA’s staff resources with its operational needs and priorities.  Combined, these efforts will place the FDA in a position to more effectively and efficiently meet the challenges of providing better protection to consumers and promoting better health.

Administrative Consolidation

FDA is consolidating its administrative functions into a Shared Services Organization (SSO).  The SSO concept will allow FDA to provide administrative support functions to Agency components to meet critical mission needs in the most efficient and effective manner possible.  It is planned that the new organization will be in place October 2003.

IT Consolidation:  -$29,587,000

FDA’s FY 2004 President’s Budget includes funding to support Departmental efforts to improve the HHS Information Technology Enterprise Infrastructure.  The request includes funds to support an enterprise approach to investing in key information technology infrastructure such as security and network modernization.  These investments will enable DHHS programs to conduct their missions more securely and at a lower cost.  Agency funds will be combined with resources in the Information Technology Security and Innovation Fund to promote collaboration in planning and project management and to achieve common goals such as secure and reliable communication and lower costs for the purchase and maintenance of hardware and software.

Information technology infrastructure functions are also being consolidated.  This will reduce FY 2004 IT infrastructure and development expenditures by $29,587,000.  Within FDA, similar systems will be combined, and IT processes reviewed.  There will also be reduced efforts on lower priority projects.  Standardization of management processes will be fostered to increase the effectiveness of IT even as overall costs are reduced.

The Agency will fully implement its IT infrastructure consolidation by October 2003, therefore reducing infrastructure expenditure in FY 2004.  The CIO’s office will look for opportunities that, based on a sound business approach using a rigorous cost benefit analysis, would benefit from the integration of new technology.  FDA seeks to reduce spending on specific systems across the entire Agency by identifying savings through one of three rationales:  consolidation or the combining of similar systems either within FDA/DHHS that will provide savings and reduce potential unnecessary duplication; streamlining or improved work processes and better project management; and, postponement or elimination of lower priority projects.  These improved processes will ensure that the Agency commits to the right projects for the right cost.

User Fees

Current Law User Fees:  + $31,725,000

The budget request includes $249,825,000 in PDUFA user fees for the drug and biological product review process.  This increase of $26,925,000 over FY 2003 will improve the product approval process and enhance postmarket safety activities.  This consists of pay and inflationary increases.

The request includes $29,190,000, in the second year of the Medical Device User Fee Act (MDUFMA) to significantly improve the medical device review process.  This consists of a requested increase of $4,065,000 in user fees.  This will be complimented by a requested increase of $1,000,000 in budget authority for medical device review, for a total request of $30,190,000.

The total increase for current law user fees is $31,725,000, and includes increases of $464,000 for Mammography Quality Standards Act (MQSA), $70,000 for Food Export Certification and $201,000 for Color Certification.  The MQSA was not authorized by the 107^th Congress because FDA’s FY 2003 appropriation was not finalized.  However, Agency staff  have been working with Congressional staff and it is believed this issue will be resolved in the first quarter of the 108^th Congressional session.

Proposed User Fees:  + $5,000,000

Animal Drug Review

The budget also proposes a new user fee for the review of animal drug products.  This proposal is patterned after the successful Prescription Drug User Fee Act (PDUFA) that has enabled FDA to add over 1,000 employees to the drug review process over the last ten years.  With these resources, FDA would improve and expedite the review of animal drug preapprovals, applying the same types of quality improvement techniques as in drug and device reviews. 

IMPROVED MANAGEMENT
COST OF LIVING

Desired Outcome

Maintain FDA’s ability to fulfill its mission of protecting the public health by focusing on counterterrorism efforts, improving patient safety, improving the safety of the food supply, and improving patient access to safe and effective medical products.

Program Objectives

The public trusts FDA to ensure that food on the family table will be safe and wholesome; that new medical products, drugs, biological products, medical devices, and radiological products are available in a timely manner with demonstrated benefits that outweigh risks; and, that product information is useful and understandable.

How Will Built-in Increases Affect FDA's Mission?

Personnel are essential to accomplishing FDA’s mission, as it is more people-intensive than many government agencies with payroll accounting for more than 60 percent of its total budget.  Forty-five percent of the workforce is dedicated to “front line” efforts, such as inspections, coordination with states, and cooperative education programs.  Congress has recognized this need by providing pay increases in FY 2002 and hopefully in FY 2003. Personnel are essential to accomplishing FDA’s regulatory mission because:

• FDA must continue to support recent hires for counterterrorism under the

FY 2002 Emergency Supplemental;

• Inspectional responsibilities requires hands on coverage of not only the entire country, but also around the world;
• FDA's product review function requires numerous interdependent specialists in product areas who interact with industry on a regular basis;
• Regulatory responsibilities require staff to monitor the entire life cycle of all FDA regulated products. For example, a drug is monitored from clinical trials through drug application review, to approval of advertising to include the product's effect on patient health; and,
• The Agency's regulatory mandate is to protect the public health.  Interpretation and enforcement of these regulations is an inherently governmental function.

Requested Pay Increases for FY 2004
(Dollars in $000)

This budget request includes $23,283,000 in pay related increases.  These increases help FDA to continue its programs at the current level and:

• Support more than 800 investigators and analytical staff hired in FY 2002 and FY 2003 for counterterrorism activities;
• Support more food import examinations.  By the end of FY 2003, FDA estimates an increase of 100 percent over FY 2002 food field examinations;
• Support the development of new counterterrorism tools to accelerate the availability of medical products (i.e., drugs, devices, vaccines) necessary to protect the public health, and provide support to the Centers for Disease Control and Prevention in managing the quantity and quality of stockpiled drugs and vaccines;
• Provide some payroll increases for about half of the drug application review process staff that are not supported by PDUFA fees; and,
• Improve FDA’s ability to assure the safety of regulated products, inspect and investigate domestic and foreign manufacturers, and participate in Mutual Recognition Agreements (MRAs) with countries to establish global standards for foods and pharmaceuticals.

Consequences of Not Receiving Pay Increases

Without the full increase, staff reductions across all product areas, including those that would undermine recent gains in counterterrorism activities would be likely.  Additional consequences would include:

• Reduced coverage at the borders;
• Reversal of the recent gains in combating foodborne illnesses;
• Reduced testing and inspection of foods, animal drugs, medical devices, and radiological products;
• Limit the ability to improve the safety of the blood supply;
• Delay in alleviating drug review workload, affecting staff turnover and program effectiveness; and,
• Increase the inability to strengthen FDA's radiological health program that currently inspects only five percent of all x-ray, sunlamp and laser products, and tests only one percent of all other radiation products.

How are we doing?

The Agency shows progress in program areas that continue to receive adequate funding, and can perform efficiently and effectively when provided adequate resources.

COUNTERTERRORISM
ASSURING FOOD SAFETY

Desired Outcome

Help ensure the safety of all domestic and imported FDA-regulated food products marketed in interstate commerce in the United States. 

FDA is the primary agency within DHHS responsible for food safety.  FDA- regulated products include everything except meat and poultry including, such as seafood, eggs, fruits and vegetables, foods produced by bioengineering, dietary supplements, animal feed and veterinary drugs.

FDA ensures the safety of the food supply through research, surveillance of the food supply, education and training, development of preventative standards, premarket review of food and color additives, inspection of domestic producers, and order surveillance activities.  These combined efforts will enable the Agency to take the appropriate corrective action to identify and reduce human exposure to food-related health hazards and the possibility of food-related illnesses and injuries.

Program Objectives

FDA is an integral part of a multi-departmental effort with the U.S. Department of Agriculture (USDA), the Center for Disease Control (CDC), and the Environmental Protection Agency (EPA), working in conjunction with the states, to maintain a safe food supply. 

FDA will:

• Identify, assess and control food security hazards that pose a risk to public health;
• Take action to ensure food safety for all Americans through the development of appropriate science-based prevention standards for all FDA-regulated foods; and,
• Measure the success of a food safety system by analyzing surveillance systems data, maximizing consumer confidence, and enhancing global competitiveness to ensure that consumers are protected to the best of the Department’s ability.

Further, DHHS has established a goal, “To Protect Our Homeland”; which is to "enhance the ability of the Nation's health care system to effectively respond to counterterrorism and other public health challenges." To achieve this goal FDA will focus efforts on:

• Building the capacity of the health care system to prepare for and respond to public health threats, especially counterterrorism; and,
• Initiating steps to ensure the safety of food, drugs, biological products, and medical devices.

Why is FDA's Contribution so Important?

Consumers rely on the FDA to prevent dangerous and unreliable products from entering into commerce.  Public safety and confidence could be jeopardized by a failure to increase surveillance activities. 

The Agency has developed a Food Counterterrorism Plan focusing on three strategies-- Deterrence, Surveillance and Threat Assessment, and Containment Through Rapid Response -- to achieve the goal of protecting the food supply.  FDA’s plan to better protect the food supply will be executed at home and abroad.

FDA has also developed an integrated strategic approach to address the threat of terrorism in the U.S. and protect our citizens.  These strategies are complementary to DHHS’ Strategic Goal “To Protect Our Homeland”. 

The total effect is the creation of a safety net that significantly reduces the probability that terrorists will ever achieve their aims; and minimizes the impact of these threats if they do occur.  Key components of this strategic approach include deterring, detecting, investigating and interdicting terrorist threats before they become a reality.  Because FDA is responsible for such a large segment of the nation’s food supply, food safety is a significant component of this strategy.

The Federal government has assumed the major responsibility to protect the food supply from such threats as microbial contamination, harmful animal drug and pesticide residues, and environmental contaminants such as dioxin.  Nearly 60,000 establishments that process, distribute, or store food products within the U.S. fall under FDA's purview.   In FY 2001, FDA reviewed more than 4.5 million food import entries.  By FY 2004, FDA will make more than six million food import line entry decisions.  Food safety activity is a "front line" personnel-intensive effort, necessitating increased human resource levels in specific scientific disciplines and/or functional roles, such as inspection activities.

The nature of food and foodborne illness has changed dramatically, and FDA's role to ensure a safe food supply has become increasingly difficult.  FDA faces new challenges manifested in a variety of trends.  In the last 50 years, examples of some of these challenges include: a five-fold increase in the U.S. of new and more deadly foodborne pathogens; consumers eating an increased variety of foods grown or produced in distant places; more meals eaten outside the home; and a growing U.S. population (at least 25 percent) considered at-risk for developing foodborne illnesses. Each raises new challenges for maintaining the safety of the food supply.  Together these challenges have contributed to an estimated 76 million foodborne illnesses annually, resulting in an estimated 325,000 hospitalizations and 5,000 deaths.

Most foodborne illness is preventable, and FDA's food safety activities have played a crucial part in significantly reducing the enormous societal costs related to these illnesses.  For example, CDC data from 1996 to 2001 indicate that faster responses to outbreaks and improved prevention programs continue to result in reductions in foodborne illnesses for the nine most common pathogens.  According to the new data, the four major bacterial foodborne illnesses—Campylobacter, salmonella, listeria, and E coli O157 – posted a 21 percent decline in the past six years.  Campylobacter infections dropped 27 percent, infections from Listeria fell 35 percent, and Salmonella infections decreased by 15 percent.  E. coli O157 infections dropped 21 percent, but all of that decline occurred since 2000.  These declines signify important progress toward meeting HHS’ Healthy People 2010 objectives for reducing the incidence of disease caused by these bacterial infections.

Other less common bacterial foodborne illnesses have also shown significant declines since 1996.  Yersinia infections decreased 49 percent, and Shigella infections dropped by 35 percent. 

Food products enter the U.S. through one of approximately 300 land, sea, and airports.   FDA will be responsible for ensuring the safety of approximately 6,000,000 food and food related products import line entries that will cross the U.S. border in FY 2004.  The sources of these entries are diversified and increasingly include more products from countries that are typically categorized as emerging economies, with start-up regulatory infrastructures.

Inspections and surveillance are the primary means of assuring the safety of marketed products, but only a small percentage of imported food entries are directly inspected through field examinations and analyzed through laboratory analysis.

Requested Increases for FY 2004
(Dollars in $000)

While food safety efforts to date have clearly been successful, these are only the first steps toward achieving a strong, credible food safety system.  In FY 2004, FDA requests an increase of $20,500,000 for food safety activities related to counterterrorism.  This amount includes  $5,000,000 for grants to states for inspections under section 311 of the Bioterrorism Preparedness and Response Act; $5,000,000 for laboratory preparedness;  and $10,500,000 for the Congressionally mandated Food Registration and Prior Notice Systems.  With the requested funds FDA will focus on the following areas:

State Contracts and Grants:  +$5,000,000

• Increase the number of state contracts, grants and partnerships related to FDA regulated products to inspect and monitor the food industry frequently enough to ensure application of appropriate preventative controls to ensure a safe, wholesome, and nutritious food supply.  It is expected that the initial grants in FY 2004 will be for the states to build up their infrastructure so that they may become part of the Laboratory Response Network.  As we have a better assessment of the risks to FDA regulated products and the resources available, we will focus our efforts by directing these grants towards risk based inspectional activities or towards additional laboratory capability.  The exact use of the grant funding will be determined when the proposals are announced.  FDA will coordinate these actions with the CDC efforts to provide funds to States for other health programs;
• Continue FDA's Field oversight of state food firm inspections, by contract or in partnership with FDA, by expanding the implementation of FDA audit procedures for state conducted inspections in order to ensure these inspections are standardized and meet FDA inspection requirements and to ensure overall effectiveness of these inspections;

Laboratory Preparedness:  + $5,000,000

• Initiate development of the research, knowledge, and scientific methods within FDA to support the critical infrastructure needed for the Laboratory Response Network (LRN) for counterterrorism coordinated by the CDC, to provide integrated laboratory solutions and disseminated testing capacity to support public health preparedness and response to an act of counterterrorism involving the food supply;
• Continue the Agency’s laboratory accreditation program covering all of foods facilities to harmonize food laboratories to ensure that laboratory results are universally accepted;
• Develop uniform scientific practices by accrediting the Field’s 8 general-purpose and 5 specialty labs to the international standard for regulatory sample analysis.  This is a critical component toward the acceptance of FDA laboratory results throughout the worldwide regulatory community; and,
• Expand federal/state/local involvement in FDA's eLEXNET system by having 79 laboratories around the country participate in a common, shared microbial agent electronic data system, while assuring coordination with other members of the Public Health Information Network.

Food Registration System: + $10,500,000

• Comply with the Food Registration provision (Section 305) of the Public Health Security & Bioterrorism Preparedness and Response Act of 2002, which applies to both domestic and imported establishments.
• If FDA does not develop and implement a system to register products manufactured abroad, the products “shall be held at the port of entry for the article, and may not be delivered to the importer, owner, or consignee of the article, until the foreign facility is so registered.”
• Additionally, non-compliance with the Prior Notice provision (Section 307) of the Public Health Security & Bioterrorism Preparedness and Response Act of 2002 has specific ramifications that state “[a]n article of food imported or offered for import without submission of such notice in accordance with the requirements under this paragraph shall be refused admission into the United States.” 
• If FDA does not have both of these systems in operation by December 12, 2003, U.S. food imports could be severely delayed, and possibly halted.  This situation would disrupt international trade, with a ripple effect across the entire U.S. economy. 

Consequences of Not Achieving the Objectives

For FDA to achieve its mission to assure a safe, nutritious, wholesome, and truthfully labeled food supply, FDA must simultaneously support multiple program activities, such as a well coordinated research programs, surveillance and risk assessment program, regulation and enforcement, as well as education and training efforts on the food safety system.  Without the requested increase for these activities that are needed to address the growing challenges to the food safety system, FDA's objective to ensure a safe food supply will be much more difficult to achieve.

 FDA activities to implement sections 305 and 307 of the Bioterrorism Act of 2002 are critical. By statute, FDA must issue a regulation for the registration of domestic and imported food facilities and a regulation for prior notice of imported food shipments, both by December 12, 2003.  Without these regulations, food imports will be held at the point of entry and refused admission into the U.S.  If this occurs, the results on the U.S. economy could be catastrophic. 

Sufficient standards and new scientific methods for detecting foodborne hazards are critical to protect domestic and import food from farm to table.  A strong science base is a prerequisite to meeting these food safety challenges and maintaining the Agency's leadership role nationally and in the new global economy.  FDA currently monitors the human food and animal feed supply to identify known and emerging risks to public health, especially in light of evolving pathogens and new food production technologies.  FDA educates domestic and foreign producers, retailers, food service industry, and consumers about the appropriate precautions to take to reduce foodborne illness, and trained state and local governments so that they can increase their assistance in Federal food safety efforts.

How Are We Doing?

FDA hired 600 Consumer Safety Officers, Laboratory Analysts, and OCI Investigators authorized in the Foods program by the (FY 2002) Bioterrorism supplemental appropriation.  This will result in substantially more inspections and sample analyses in FY 2003 and beyond, when these inspectors and laboratory staff are all on board and become fully trained.

Reallocating existing resources within the foods program has also bolstered many of FDA’s activities that are so critical to the full implementation of the Bioterrorism Act of 2002. 

FDA has developed an in-house training curriculum in Office of Regulatory Affairs (ORA) to address the present and future training and development needs of the 4,000 ORA staff and estimated 50,000 state, local and tribal officials involved in the regulation of food, drugs and related commodities.  This curriculum uses a blended training approach with web-based courses, discussions, exercises, on-the-job training, and classroom courses to assure staffs have the knowledge and skills to do their job. 

FDA's food safety activities have been highly successful in helping to control and reduce foodborne pathogens in the U.S. food supply.  Faster outbreak response and stronger prevention programs continue to result in reductions in foodborne illnesses for the nine most common pathogens. Over the last few years, FDA  has significantly strengthened U.S. food safety system across the entire food distribution chain.  These same systems will assist us in preventing or responding to incidents of food contamination overseas.

Through a combination of FDA and state inspections, FDA expects to inspect at least 95 percent of all high-risk establishments again in FY 2004.

In addition, FDA scientists have developed rapid methods for detecting microbial and viral food contaminants.  FDA has leveraged this expertise with public and private sector partners to operate national rapid identification systems used to control outbreaks of foodborne diseases.

In FY 2004, FDA expects to spend $116,346,000 on Counterterrorism Food Safety activities.  The FY 2004 reductions have not been made to specific programs pending FY 2003 Appropriations.

Desired Outcome

Reduce preventable deaths and injuries associated with the use of medical products.

Program Objectives

FDA’s central public health role is to ensure that medical products (drugs, biologics, and devices) are demonstrated safe and effective prior to marketing, and that these products continue to be safely used once approved and marketed.  Yet, approximately 1.3 million patients each year are injured in association with medical therapy with up to two-thirds of these events secondary to errors in management. This Patient Safety Initiative is a collaborative effort between FDA’s three medical product centers that support the Secretary’s goal to “Realize the Possibilities of the 21^st Century Health Care” and “Preventing Disease and Illness”.  Patient Safety addresses the challenges inherent in managing the risks of and reducing preventable adverse events associated with medical product use by creating a seamless interaction among the FDA and consumers, health care personnel, and the regulated industry.

This initiative harmonizes efforts across the three medical product centers in each of the following areas:  1) systems to identify and quantify medical product risk, and to investigate, analyze and understand these risks and their consequences (risk assessment);  2) response programs to take action, to inform, and intervene as needed to prevent harm (risk management and risk communication), including targeted intramural and extramural programs that will expand the range of generic drugs available and help prevent adverse events involving generic drugs; and, 3) development of regulatory tools to implement risk assessment, management and communication strategies.  This initiative builds on the current risk assessment, risk management, risk communication, and regulatory tools now used in FDA’s three medical product centers.  It also leverages each center’s ongoing programs and other FDA resources to provide uniform, consistent approaches in this arena.

By implementing this initiative, FDA will speak with one voice on medical product safety issues, regardless of whether the issue concerns a drug, a biologic, or a device.  It will provide a single, readily accessible entry portal for consumers, health care personnel, and representatives of the pharmaceutical, biotechnology, and device industries to obtain important medical product safety information.  It will assure the use of the latest technology to improve health care and protect patients.

The Patient Safety Initiative goals are fully complementary to promoting safe and effective generic drug use.  Two important components of this initiative are to reduce preventable deaths and injuries associated with human medical products, including the use of generic drug products, and to target education and outreach efforts associated with generic drug products.  Improving such communication is a high priority for FDA, as timely and reliable information is a key element in the safe and effective use of generic drugs.  Furthermore, the Agency is collaborating and leveraging with a broad spectrum of groups to improve information for generic drug prescribers and consumers.  Industry and consumers are increasingly turning to our information sites, e.g. Internet, for important and up-to-date information on our regulatory programs and on generics they take to improve their health.

A lack of accurate and timely information about medical products should never result in harm to patients.  We will conduct aggressive risk assessment of the products we regulate to design proactive preventive risk management and risk communication plans to assure patients and providers have the right information at the right time at the right place.

Why is FDA's Contribution so Important?

Many errors are associated with the misuse of drugs, biologics, and medical devices.  The estimated costs of these medical errors ranges from

$37 to $50 billion annually.  The Institute of Medicine estimates that as many as 100,000 Americans die annually as a result of preventable medical errors and the proliferation of new products may increase this number.

FDA has assumed a significant watchdog role regarding postmarket surveillance.   When FDA approves drugs and other medical products, it takes every precaution to ensure these products are safe when they are marketed.  However, product safety continues throughout the product's lifetime. Because the clinical trials that help gauge product safety are conducted on relatively small groups of patients--usually ranging from a few hundred to several thousand--problems can remain hidden, only to be revealed after hundreds of thousands or even millions of people use the product over a prolonged period.  For these reasons and more, FDA relies on MedWatch and MedSun to provide a significant amount of data on postmarketing surveillance of medical products to identify safety concerns and take necessary action. These programs depend on doctors, dentists, nurses, pharmacists, and other health professionals to provide FDA details of serious adverse reactions and medical product problems.

MedWatch reports played major roles in recent decisions to remove the painkilling drug Duractâ (bromfenac sodium) from the market following reports of deaths and injuries. FDA also moved to withdraw the blood pressure treatment Posicorâ (mibefradil dihydrochloride) after learning of serious adverse reactions.

Requested Increases for FY 2004
(Dollars in $000)

With increased funding of $4,000,000 FDA will:

• Hire three FTE in the Human Drugs Program to review, evaluate, and analyze the data generated by: 
  (1) enhanced electronic adverse drug event reporting;
  (2) increased knowledge and understanding of risk management and communication; and,
  (3) research.
• Design and implement improvements to the Adverse Event Reporting System (AERS) to enhance medication errors monitoring for drugs, biologics, or blood-derived products; increase AERS web access; enhance electronic reporting of adverse events; and increase efficiencies in surveillance, safety related risk management, and risk communication research.  All of these improvements will encourage more reporting by making it easier for manufacturers to enter reports and increase harmonization with manufacturers;
• Work with the Center for Medicare and Medicaid Services, the U.S. Department of Veteran’s Affairs, and the Department of Defense to gain access to databases to improve our data collection efforts for adverse events;
• Continue developing the Medical Product Surveillance Network (MedSun) Phase II by adding additional user facilities to reach a projected total of up to 240 by the end of FY 2004, and continue the inclusion of drug products into the system; and,
• Include special reporting for in vitro diagnostic devices. 

GENERIC DRUGS

Desired Outcome

Increased availability of generic drugs to help provide safe and effective lower-cost alternatives to the escalating costs of brand name prescription drugs, and improve generic drug safety and reducing adverse events after approval.

Program Objective

Reduce the total approval time for new generic drug applications and improve the review process without sacrificing product quality, and help prevent adverse events involving generic drugs.

Also, assure that safe, effective, high-quality, and equivalent generic products are approved for use by consumers and health care professionals.

Why is FDA's Contribution so Important

Savings from the availability of generic drugs were conservatively estimated by the Congressional Budget Office to be $8 to $10 billion in 1994, a time when spending on prescription drugs was less than 40 percent of its current level.  Current savings to consumers from the use of generics could now be in excess of $20 billion. Even more is saved when hospitals use generic drugs.

The Generic Drugs Program has the primary responsibility for approving new generic drug applications.  A generic drug is identical, or bioequivalent to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use.  Although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price.

FDA’s review process ensures that generic products will perform the same as their respective brand name products.  In the same manner, generic manufacturing and packaging sites must pass all of the same quality standards as those of brand name drugs.

FDA will use the $13,000,000 increase to:

• Establish intramural and extramural research programs to develop standards for bioequivalence methodology for products that currently do not have established feasible, reliable methods such as topical and inhalation dosage forms and complex drugs; help prevent adverse events involving generic drugs; fund and support related research contracts; and equip FDA laboratories;
• Expand the range of generic drugs available by targeting intramural and extramural programs, and help prevent adverse events involving generic drugs;
• Hire 35 FTE to enable the Agency to complete review and action on 90 percent or better of original applications within 180 days and decrease the median time to full approval from 18 months to 16-17 months to gain efficiencies in the review process;
• Hire five FTE in the field to support increased and enhanced inspections of generic drug manufacturing firms to allow for faster action on generic drug applications; and,
• Enhance the Office of Generic Drugs (OGD) information technology capabilities to further refine and develop electronic submissions of generic drug applications to gain efficiencies in the review process; and train staff on the use, development, and expansion of electronic review efforts.

While these resources will allow FDA to complete review and action on 90 percent of original applications within 180 days, achieving 100 percent review of original ANDAs within 180 days is not possible because of the following items that contribute to delays:

• Petitions that raise complex  scientific, medical, or safety issues;
• Petitions raising legal issues such as eligibility for periods of exclusivity, and,
• 30 month stay of approval of generic products to allow for resolution of law suits.

Three million of this request, coupled with the Agency’s $4 million request for Patient Safety, will support the Secretary’s and the Commissioner’s patient safety initiative.

Consequences of Not Achieving the Objectives

The cost of prescription drugs has risen dramatically over the last decade.  Many retired Americans, living on fixed incomes, can no longer afford the cost of the medications they depend on.  For all Americans, the cost of prescription drugs today can have a significant effect on the family’s ability to meet all expenses. 

Generic drugs provide safe and effective lower-cost alternatives to the escalating costs of brand name prescription drugs.

Without additional resources, it would be difficult for FDA to achieve its review process efficiencies.  In addition, lack of funding to support bioequivalence methods research negatively impacts the long-term horizon and stalls the availability of generic alternatives where none are currently available, such as for topical, inhalation, and novel dosage form drug products.

How are we doing?

The American public can be confident that when a generic drug product is approved, it has met FDA’s rigorous standards regarding identity, strength, quality, purity, and potency.

Congressional interest in this program continues to be strong.  Past increases have been instrumental in improving the efficiency of the Generic Drugs Program.  In FY 2001, due to increased staffing, FDA was able to review and act upon 55.6 percent of original generic drug applications within 180 days of submission, 27 percent faster than in FY 1999. 

The backlog is defined as the number of ANDAs awaiting OGD action for greater than 180 days.  The backlog is a subset of all applications awaiting action.  At the end of FY 2002, the backlog consisted of 23 out of a total of 395 applications.  In comparison, at the end of FY 2001, it was 40 out of 374 applications.  FDA anticipates future increases in the number of ANDA submissions.  The requested increase would further improve review times and maintain the backlog at a manageable level.

In FY 2002, FDA received an increase of $2,500,000, including $250,000 for generic drug education, to accelerate the review and approval of generic drug applications.  In the FY 2003 President’s Budget, FDA requested an additional $4,582,000 to continue to improve the statutory requirements for review and approval times.

Over the years, FDA has approved several thousand generic drugs that have been used successfully by millions of patients. The use of these products has resulted in substantial savings.  The most recently approved generic drugs were for anxiety, heartburn, depression, and pain management.

Generic Approvals by Fiscal Year

FY 2002 includes data through July 2002.

In FY 2004, FDA anticipates it will spend approximately $58,138,000 on the generic drugs program.  The FY 2004 management efficiencies have not been made to specific programs pending FY 2003 Appropriations.

OVER-THE-COUNTER DRUGS

Desired Outcome

Increase efforts to promote safe and effective over-the-counter (OTC) drug products in the U.S., including a number of products formerly marketed by prescription, which is especially relevant given the rising costs of prescription drugs.

Program Objective

To become more proactive in recommending key potential “prescription (Rx)-to-OTC” switches that could result in further consumer empowerment in self-medication as well as provide an expedient way to significantly reduce consumer health care costs for certain ailments; to increase consideration and identification of drugs with only foreign marketing experience as candidates for the U.S. OTC market; and to continue efforts to finish the ongoing review of OTC drug products.

FDA’s goal is to increase RX-to-OTC switches by 50 percent on average. However, the Agency cannot control this on a year-to-year basis and has not made it an annual performance measure.

Background

Over time, many drugs have been switched from Rx-to-OTC status under the OTC drug review (e.g., nasal decongestants, antihistamines, and hydrocortisone for topical use).  The OTC drug industry has stated in the past and continues to state that Rx-to-OTC switch has been the impetus for and is the future for growth of the self- medication movement.  These can occur by way of a specific product application from industry or by other means such as citizen petitions.  FDA’s roles in reviewing the safety of active ingredients and requiring accurate labeling are critical in ensuring safe and effective consumer use of these products. 

In 1972, FDA began a regulatory review process, known as the OTC drug review, to evaluate the safety, effectiveness, and labeling of over 300,000 OTC drug products marketed in this country without new drug applications.

To date, the FDA has finalized 52 monographs, which are “recipes” for marketing OTC drug products without the need for preclearance.  The monographs list the allowed active ingredients and the dosage or concentration, the required labeling, and packaging and testing requirements if applicable.  The OTC program began its focus on monograph reviews in 1972.  By the end of 2004 it is expected that total work efforts will include the reviews (e.g. submit as advance notice of proposed rulemaking (ANPR) for as many as 110 major drug category monographs.

In FY 2004, FDA expects to review and complete approximately 6 monographs, a number of which are major product categories (e.g. internal and external analgesic, and health care antiseptics).  The road from ANPR to when a monograph is finalized is a complex and time-consuming rule-making process and can take several years.

Why is FDA's Contribution so Important

OTC drugs play an increasingly vital role in America’s health care system.  The trend to self-medication has recently increased as health care costs have risen.  Consumers want to be empowered to treat minor ailments with safe and effective OTC drug products, and, in some cases, cost savings would be passed to the consumer. 

FDA’s efforts to finalize monographs for major drug categories help manufacturers save costs and reduce barriers to competition, as they allow both large and small companies to enter the market place with OTC drug products.  All meet the same, uniform criteria.

FDA will use the $1,000,000 increase to:

• Hire and train seven FTE to:  (1) improve the OTC drug review process issues; (2) expedite the review of Rx-to-OTC switches and plan to evaluate five to ten foreign OTC drugs as candidates for Rx-to-OTC switches in the U.S.; and, (3) develop and work toward finalizing standards (e.g. monographs) for analgesic, antiseptic, laxative, and sunscreen drug products for OTC use. 
• Provide funding for consumer behavior research to identify and manage the risks associated with the use of OTC drug products; and,
• Initiate a process and establish timelines for completion of unfinished OTC drug monographs; initial projects will include the remaining monographs that need to be completed for major OTC drug product categories.

Consequences of Not Achieving the Objectives

FDA would need enhanced capability to improve the OTC review process and expedite this work.  Without the additional resources, this could delay the consumer from having broader access to the drug product and could impede the consumer from realizing reductions in health care costs.  Safety, effectiveness, and proper labeling have not always been characteristic of OTC drug products in the U.S.  Without the intervention of a health care professional, implicitly, FDA’s role becomes more significant regarding the safety of OTC drug products.  Without adequate resources to complete the unfinished OTC drug monographs, the Agency will be limited in its ability to minimize health risks concerning any unsafe OTC drugs that are currently marketed.

Without additional staffing dedicated to the OTC drug review, the Agency will be constrained from expediting the internal FDA clearance processes.  OTC drug monographs have a number of time-consuming regulatory hurdles to overcome before they are published and available for public use.  After all the scientific issues have been addressed, legal issues often arise.  In many situations Citizens Petitions objecting to the monographs require substantial additional legal analysis that must be addressed before final publication.

Furthermore, resources must be available to support FDA’s effort to become a leader in developing research to better understand consumer behavior.  Consumers often make errors in judgment either in selecting to use OTC products or not using OTC products correctly.  These errors may lead to increased risk for adverse events for consumers or very little likelihood of benefit.  The ability of consumers to appropriately use products marketed as OTC is one of the more difficult hurdles for manufacturers to overcome.  Many manufacturers are not willing to expend the resources needed to identify possible solutions to errors in consumer use and selection. Research needs to be directed toward understanding the factors that contribute to these consumer behaviors and identify mechanisms for influencing appropriate consumer use of products.

Finally, from an economic standpoint, if FDA does not have the resources needed to dedicate to the review of OTC drug products both consumers and manufacturers of OTC drug products will be at a disadvantage, as both will experience rising health care costs.

How are we doing?

FDA is keenly aware that OTC drug products are the drugs Americans use most often.  Hence labeling and the providing of clear, accessible, and accurate information are crucial.  The OTC regulation FDA finalized in March 1999 requires a standardized format for the labeling of the drugs. May 16, 2002 marked the date most OTC drug manufacturers had to display on their products FDA’s new and easier-to-read drug facts label. 

To-date, the OTC drug review has been an evaluation of OTC drug products marketed only in the U.S.  Recognizing the importance of OTC drug products marketed in other countries and in response to manufacturers’ requests, FDA expanded the OTC drug review in 2002 to allow OTC drug products without any U.S. marketing experience to become eligible for the review if they meet certain criteria.  The Agency anticipates that a number of products will be submitted for consideration, and that eventual inclusion of these products into the OTC drug monographs will help reduce some health care costs, increase competition, and may introduce some new self-medication concepts into the U.S.

In FY 2004, FDA expects to spend $10,398,000 on the OTC drug program. The FY 2004 management efficiencies have not been made to specific programs pending FY 2003 Appropriations.

BEST PHARMACEUTICALS FOR CHILDREN ACT

Desired Outcome

Increase the safety and efficacy of pharmaceuticals for children.

Program Objective

FDA seeks to expand availability of drugs for children in accordance with the Best Pharmaceuticals for Children Act (BPCA), enacted January 4, 2002.  This act provides for: · Renewal of exclusivity incentives for conducting pediatric studies to 2007;

• Establishment of a procedure to study “off-patent” drugs in children;
• Coordination with the NIH to develop, prioritize, and publish an annual list of approved drugs for the following:  (1) for which there is a referral, an approved or pending new drug application, or no patent or market exclusivity protection; and (2) for when additional pediatric safety and effectiveness studies are needed; 
• Establishment of a research fund to study (in children) drugs that no longer have exclusivity or patent protection;
• Publication of a summary of all studies;
• Process to ensure revisions to labeling are made as a result of pediatric studies; and,
• Establishment of an FDA Office of Pediatric Therapeutics, within Other Activities, to coordinate all of FDA’s pediatric activities and to perform certain specific tasks.

FDA will also strive to strengthen its coordination with NIH on the safety and efficiency of pediatric drugs.  In FY 2004, NIH is requesting $25,000,000, with the potential for another $25,000,000, for a total of $50,000,000 to support this effort.  The increased collaboration and efforts to leverage resources will enhance Federal activities targeted at pediatric medicine.

In FY 2003, two physicians will be hired by the Human Drugs Program to address two specific activities mandated by the BPCA:  ethics of clinical trials in children and review of the safety data from products marketed for use in children.  A third physician, the Office Director, currently the Director of the CDER Office of Pediatrics and Counterterrorism, who will be assigned collateral duties as the Director of the Office of Pediatric Therapeutics.

Why is FDA's Contribution so Important

There is inadequate information regarding the pediatric use of about 75 percent of prescription medicines.  Prior to the pediatric provision, 80 percent of medications had not been tested on children, forcing pediatricians to guess at dosage for children, subjecting our children to a dangerous health risk in terms of under dosing or over dosing. Pediatric patients should be given medicines that have been properly evaluated for their use in the intended populations, and product development programs should include pediatric studies when pediatric use is anticipated.  Ultimately, with adequate incentives available to prompt involvement, there will be a greater willingness for shared responsibility among companies, regulatory authorities, and health care professionals.

Requested Increases for FY 2004
(Dollars in $000)

Note:  FDA pediatric medicine also is supported by PDUFA funding.

FDA will use the $5,000,000 to implement and support the accompanying workload of the recently mandated BPCA as follows:

• Hire 36 FTE to continue to define, develop, issue, and track Written Requests for pediatric studies; publish final study reports on the docket; review submitted results from these studies within six months; oversee ethical issues related to studies; and disseminate appropriate information to the public;
• Coordinate with NIH regarding the development of “off-patent” drugs for use in children; and, where appropriate, consult with NIH to issue a written request for pediatric studies concerning particular drugs, as identified in Section 505 of the FFD&C Act; 
• Enhance the surveillance of adverse events in children;
• Negotiate labeling concerns with listed drug holders and, if necessary, identify product labels requiring appeal activity and present to the Advisory Subcommittee;
• Further develop the science to address new pediatric endpoints, long-term follow-up in the pediatric population, and other issues specific to the neonatal population; and,
• Hire four permanent staff in the Office of Pediatric Therapeutics to address all activities related to the increasing number of new pediatric studies submitted by the pharmaceutical industry.

Consequences of Not Achieving the Objectives

Six out of 10 of the drugs most commonly prescribed to children are “off- label,” based on limited, if any, pediatric studies and/or on the personal experiences of health professionals.  As much as possible, children’s health care should not be a guessing game.

Since children only account for 30 percent of the population and less than 12 percent of personal health care spending, this population of our society is not getting the kind of pediatric-focused research that they should.  Furthermore, children of various age groups may metabolize drugs at different rates compared to adults.  This significantly limits the predictive ability of information derived from adult adverse events to be used for children’s circumstances.  Without additional resources, at present staffing levels, FDA would only be able to review a handful of off-label drugs per year, forcing health professionals to make important decisions for children based on limited information and in some cases not a great deal of hard science.

FDA currently lacks sufficient staff with expertise in pediatrics to respond efficiently to the increasing number of new pediatric studies submitted by the pharmaceutical industry, and the number of such studies is expected to increase.  The staffing shortage will delay initiation and review of studies that will stall the entire pediatric drug development program.  Without additional staff, it will be increasingly difficult for FDA to provide constant attention to ethical issues in the conduct of pediatric studies.

Although BPCA eliminated the PDUFA fee exemption for pediatric supplements, the fees are not self-financing, fund only the pediatric supplement, and only cover a very small portion of costs for the pediatric drug program.  Hence, without appropriated resources, it will be increasingly difficult for FDA to review the pediatric studies within statutory time frames and implement all of the BPCA provisions.

How are we doing?

The pediatric exclusivity provision has resulted in a greater level of pediatric drug development than has been achieved by any previous regulatory or legislative initiative.  The provision has accounted for invaluable contributions to children’s health care.

Pediatric drug development in the 1990s has led to over 400 studies on the safety and dosage efficacy for use of drugs in children.  This provides physicians with the critical labeling they need to safely prescribe medication to children.

The public is beginning to receive better and more dosage, safety, and adverse event information that was not previously available to help provide children the correct dose of these medicines and to avoid potential adverse effects.  As a result of Section 5 of the BPCA, prescription drug user fees may now be collected for pediatric supplement submissions. In FY 2004, FDA expects to spend $11,620,000 on BPCA.  Of this amount, $4,130,000 is PDUFA. 

The FY 2004 management efficiencies have not been made to specific programs pending FY 2003 Appropriations.

MEDICAL DEVICE REVIEW

Desired Outcome

FDA requests an appropriation increase for the review of medical device applications to shore up some parts of its infrastructure and allow for some minimal performance gains.

Background

The Medical Device and Radiological Health program has been re-engineered over the last decade to accomplish more with fewer resources and has changed its strategic direction by consciously shifting its focus to high-risk, high-impact products to optimize the effect on public health.  Other innovations brought by the FDA Modernization Act (FDAMA) have streamlined the processing of premarket notifications (510 (k)s) through the use of accredited third parties.  Despite these efficiencies and strategic shifts, a rapidly growing and increasingly more complex market place, is causing significant unmet needs such as IT and reviewer training. 

Why is FDA’s Contribution so Important?

Medical Devices marketed in the U.S. are subject to rigorous premarket review.  Prior to marketing a device, manufacturers must obtain FDA approval of the safety and effectiveness of their products.  With the complexity and degree of risk or benefits of these devices varying widely, not all need the same degree of regulation. 

Premarket Approval Applications (PMAs) involve potentially high-risk devices with the most chance of significantly improving the treatment of patients.  It is essential that FDA review these products quickly and thoroughly.  Significant growth in the number and complexity of PMAs is anticipated, as many new devices will incorporate computer technology as a part of the diagnostic capability and as continuing improvements in image technology will require more sophisticated review skills. 

Premarket functions support the Department’s Prevention Initiative, and the request supports the E-government component of the President’s Management Agenda by redesigning its Medical Device and Radiological Health website to be more informative to citizens, radiological health practitioners, and other interests.

Requested Increases for FY 2004 
(Dollars in $000)

With this $1,000,000 increase, FDA will:

• Sustain performance on premarket review applications; and,
• Revise, update and maintain the currency of guidance documents for industry.

Consequences of Not Achieving the Goal

Recent improvements in review times have been achieved at a heavy cost – sacrificing time for training and maintenance of technical skills and letting essential computer infrastructure become obsolete. Additional funds are essential to sustain these performance goals as FDA no longer has the option of reducing other programs without harming public health and since reengineering has reached its limits.  FDA has already mortgaged the future in this program and once backlogs begin to accumulate, experience shows that significant delays in review time are inevitable.

How are we doing?

FDA workloads have risen following the enactment of FDAMA and growth in industry R&D expenditures provides an early indicator of even higher workloads in the future.

Recent improvements in review time have been achieved primarily by diverting significant resources from training, infrastructure, and other programs and, by comprehensive reengineering of the device review processes.  Neither of these options is available to finance similar gains especially given growth in actual and expected workloads

FDA is challenged in meeting its statutory requirements for device review, as technologies grow increasingly complex. There are more clinically significant products on the horizon and their impact is more global. Despite these trends, over 60 percent of our device guidance documents have not been updated in five years. To accomplish its review mission for devices, FDA must also work with many small first time innovators that are unfamiliar with our regulatory process and information needs.  Twenty five percent of PMAs for the most risky products are from first-time submitters, many of whom are attempting to bring to market breakthrough technologies that present novel questions and issues that often go beyond the experience and training of FDA reviewers. Unlike large, established pharmaceutical companies that are well-versed in FDA procedures, the process is a challenge to these smaller firms and requires a great deal of technical assistance from FDA reviewers

To meet these challenges, FDA must ensure that its science base is up to date and that its reviewers receive appropriate training, improve outreach to industry and other stakeholders, and improve its review information systems.  If FDA reviewers do not keep up with emerging issues and technologies, reviews will be delayed as they are forced to react to these concerns on an application-by-application basis.

In FY 2004, FDA expects to spend $83,934,000 on medical device review.   The FY 2004 reductions have not been made to specific programs pending FY 2003 Appropriations.

Desired Outcome

Implement the President’s Management Agenda by improving FDA operations and the quality of its facilities.

Program Objective

FDA supports the President’s Management Agenda through continuing the planning for the White Oak consolidation, continuing competitive outsourcing activities; and, implementing a “shared services” organization for certain administrative functions.  The Agency is performing various preparatory activities such as consolidating accounting, reconciling and reporting functions nationwide; maintaining existing systems or upgrading them to web-based versions; and, preparing its financial community for changes.  FDA anticipates that certain funding arrangements, such as a Working Capital fund, may be necessary to support this new organization once it is up and running.  Funding in FY 2004 will enable the FDA to:

• Contribute to the unified “One HHS” concept;
• Work towards finalizing workforce planning and financial management initiatives;
• Enhance operational efficiencies and effectiveness by competitive outsourcing; and,
• Enhance the use of electronic commerce.

Resource adjustments have been distributed at the program level.  After final decisions on FDA’s FY 2003 appropriation, further resource adjustments may be required in   FY 2003 and FY 2004 for individual initiative base resource levels.

Initiatives include:

Arkansas Regional Laboratory:  +  $3,500,000

The field laboratory consolidation plan seeks to complete construction of Phase III of the Arkansas Regional Laboratory (ARL) project.   This initiative includes a fully functional state-of-the art multi-purpose regional facility, with the completion of Building 50 providing a common administrative building for the National Center for Toxicological Research and the Office of Regulatory Affairs at the Jefferson Laboratories in Jefferson, Arkansas.

In FY 2004, FDA is requesting $3,500,000 to complete Phase III of the Arkansas Regional Laboratory and the entire ARL project.

Why is this Action so Important to FDA? 

FDA’s field laboratories provide critical laboratory and analytical support to domestic and import inspection efforts and are a key element to the FDA science base. 

FDA’s large laboratories provide a cost-effective critical mass of scientific expertise in the fields of chemistry, microbiology, pesticide chemistry, animal drug residue research, and total diet research areas.  ARL, located in the middle of the U.S., will provide these important services for FDA-regulated products in a seventeen state radius.  

Proposed Outcome from Requested Resources

Completing Phase III of the ARL will enable FDA to fully utilize Building 50 and effectively collaborate with the National Center for Toxicological Research on scientific issues that are critical to the Agency and the American public.  One of these critical issues addresses FDA’s preparedness for counterterrorism events.  The Jefferson Laboratories (ARL and NCTR) are developing analytical DNA- or mass spectrometry-based technologies to permit the analyses of products for chemical and microbiological hazards.  These methods will assist public health officials in identifying the type of hazard and its appropriate counter-measure.

How are we doing?

Phases I and II for Building 50 and Common Area completed exterior demolition, structural work, roofing repair, installation of an elevator and installation of a new exterior brick facade.  The interior fit-out of the space and the installation of mechanical and electrical infrastructure are not completed.

CDER Move:  + $6,000,000

FDA plans a major consolidation of its Headquarters Offices in the Washington, D.C. metro area from 16 locations to two.  The White Oak and College Park locations were initiated to create greater economies of scale and scope and, consistent with the President’s Management Agenda, will standardize and modernize document handling, use shared facilities such as libraries and conference areas; reduce redundancies in a wide range of administrative management tasks; allow conversion to a single computer network; and significantly reduce management layers.   These consolidations will provide readily identifiable locations for the citizens to interact with FDA.

This funding will begin the second phase of the relocation of CDER into newly constructed offices and laboratories, primarily for cabling and relocation support contract services.  The move will consolidate CDER offices and laboratories into one complex, and enhance communication and operating efficiencies with considerable annual operating savings expected when the consolidation is complete. 

Rent Absorption:  [$10,000,000]

FDA expects its GSA rent costs to increase by at least $10,000,000 in FY 2004 as we obtain space around the country for field offices, Headquarters Centers, and also to accommodate the more than 800 counterterrorism personnel hired with FY 2002 Supplemental funds.

Once final leasing arrangements are completed, FDA intends to redirect program funds, including field operations, to cover these costs, likely beginning in FY 2003.

Unified Financial Management System:   + $2,290,000

FDA’s management needs timely, reliable, and current information.  The proposed HHS Unified Financial Management System (UFMS) is designed to provide financial information in a manner that will enable FDA to maintain its clean audit opinion and meet all other financial management requirements.  FDA’s Financial Enterprise Solutions (FES), as a part of UFMS, will provide for real-time reporting and allow for easier development of the DHHS/FDA financial statement.

FDA is performing various preparatory activities such as consolidating accounting, reconciling, and reporting functions nationwide; maintaining existing systems or upgrading them to web-based versions; and, preparing the Agency financial community for changes.  Additional funding in FY 2004 will enable the FDA to:

• Begin designing and testing the General Ledger with payroll interface which will account for over 60 percent of FDA’s transactions; and,
• Purchase of Oracle licenses, hardware, training and program support and site integration costs for implementation.

In FY 2003, the FDA will continue preparation for UFMS and ease the migration of financial data to the new system. 

Other steps to be taken for the new financial system are:

• Develop a data conversion plan to identify, build, and test system interfaces and analyze FDA’s data reporting requirements in FY 2003; and,
• Implement the new financial system that will start in October 2004 with the General Ledger and then with Accounts Payable and Receivable function.

Other Management Savings: - $2,290,000

In FY 2004 costs for preparing for and implementing UFMS will be absorbed from within base resources of Other Activities.

IT Consolidation: - $29,587,000

Desired Outcome

IT consolidations will result in improved processes that will ensure that the Agency commits to the right projects for the right cost.

Objectives

FDA’s budget request includes savings of $29,587,000 in the IT budget from both ongoing infrastructure consolidation efforts as well as reduced expenditures through the consolidation, streamlining, postponement or elimination of specific lower priority projects.

The Agency will fully implement its IT infrastructure consolidation by October 2003; therefore, reducing infrastructure expenditures in FY 2004 by $15.0 million.  These reductions will be achieved, in part, by the ability of the Agency’s CIO to exercise better control over IT decision making, including the identification of inefficiencies as targets for reduction.  The CIO will also look for opportunities that, based on a sound business approach using a rigorous cost benefit analysis, would benefit from the integration of new technology.  As a further by-product of consolidation, the Agency will also foster standardization of management processes, thereby increasing the effectiveness of IT even as FDA reduces overall costs.  These improved processes will ensure that the Agency commits to the right projects for the right cost.

Additionally, FDA will reduce spending on specific systems across the entire Agency by $14.587 million.  Managers of information technology organizations allocated reductions to systems based upon one of three rationales:

• Consolidation - The combining of similar systems either within FDA or the Department that will provide savings in the cost of contracts and government personnel while reducing unnecessary duplication;
• Streamlining - The Agency will commit to improving work processes and underlying IT processes to provide additional savings.  Some of the improvements to IT processes will include better project management, more reliable tools to estimate costs and schedule for use in improved contract performance management, and consistent development practices; and, 
• Lower Priority - FDA will reduce efforts or even eliminate lower priority projects. The impact here will be mitigated by improvement in work processes achieved through consolidation and streamlining efforts.

CBER/CDER

After a lengthy process of fact-finding and deliberation, FDA has decided to reorganize the biologics therapeutic review function in CBER into the similar drug review function that resides in CDER.  The categories of products being transferred include, generally:  Monoclonal antibodies intended for therapeutic use, cytokines, growth factors, enzymes, and interferons intended for therapeutic use, and proteins intended for therapeutic use that are extracted from animals or microorganisms, other than human blood and blood components and derivatives.  Resources to be transferred represent approximately 208 full-time equivalents from CBER and 5 FTE from FDA’s field operations, and the possibility of an additional 8 FTE if the President’s FY 2003 budget is adopted.  The $32,872,000 to be transferred from the Biologics Program to the Human Drugs Program represents the full year costs of therapeutic product reviews.

The transfer will allow CBER to concentrate its scientific expertise and effort in the crucial areas of vaccines, blood safety, cells, gene therapy and tissue transplantation – top priority items critical to our national defense and public health.

The consolidation of these review functions is expected to produce a more efficient, effective, and consistent review program for human drugs and biologics.

Reorganizations:
Office of the Commissioner

FDA proposes to reorganize certain functions within this office to achieve maximum efficiencies.  They include:

• The Office of the Senior Associate Commissioner (OSAC) will be called the Office of External Relations and will consist of some OSAC components to include Advisory Committee Oversight and Management Staff, the Office of Executive Secretariat, the Office of Public Affairs, the Office of the Ombudsman, and the Office of Special Health Issues.
• Total funds for women’s health activities will be moved from various programs into the Office of the Commissioner, Office of Women’s Health, to improve the tracking of women’s health resources.  Resources will continue to be managed as they have been in the past.
• Resources for the administration of Orphan Products grants by the Office of Orphan Products Development located in the Office of the Commissioner will be provided. Funds will continue to be managed as they have been in the past.
• The Office of Crisis Management will include ORA’s Emergency Operations Center, Office of Counterterrorism Programs already located in the OC, Division of Security Operations, OMS, which will improve communication and coordination with the Department of Homeland Security.
• The Office of Legislative Affairs will be transferred from the Office of Policy and Planning to the Office of the Commissioner as a direct report to the Commissioner.
• As mandated by the Medical Device User Fee and Modernization Act of 2002, FDA has established a new office, the Office of Combination Products (OCP), to streamline the processing of complex drug-device, drug-biologic, and device-biologic combination products that play an increasingly significant role in health care.

• Acquire and train additional staff to meet a set of aggressive goals to expedite the review of medical device applications effective FY 2005;
• Promote public health with major improvements in review of expedited devices; and,
• Make major improvements in review performance in areas where fees are collected, while maintaining performance in other areas.

• New animal drug review staff to work toward achieving statutory review timeframes, and facilitate the elimination of the backlog of overdue submissions;
• Upgrades for the new animal drug review support systems, including systems such as the animal drug listing system, Submission Tracking and Reporting System, electronic document management system; and,
• Provide support personnel for the implementation of the animal drug user fee program to ensure the efficient use of the new reviewer capacity hired.

Consequences of Not Achieving the Objectives

New technologies have increased the level of scientific expertise needed to conduct animal drug review.  FDA must ensure reviewers have a sufficient level of scientific expertise to do quality reviews and meet the challenge of changing technology, or the Agency will not be able to keep pace with the increased volume and complexity of review workload. 

Up-to-date information technology systems facilitate the review of electronic applications.  Without this, FDA will not be able to utilize the technological advances that would improve efficiency of agency reviews.  Review times would increase, slowing the availability of new animal drugs that are safe and effective from reaching the market.

How Are We Doing?

For five years prior to 2001, the backlog of overdue animal drug submissions became increasingly overdue relative to statutorily, internally, or historically established timeframes for certain types of submissions.

During FY 2000, the Agency began shifting resources within the program to reduce the backlog of overdue applications, and to streamline the review process, focusing on cost drivers to improve effectiveness. 

In calendar year 2001, the Agency took additional initiatives, including development of a 5-year business plan and a project management type tracking system; contracted with an outside consultant to conduct an activity-based costing study; and developed new, more meaningful metrics to measure performance and distribute resources to meet changing workload requirements.  Through these initiatives, FDA accomplished an overall 51 percent reduction in the review backlog. 

Although there have been significant accomplishments in overall backlog reduction with focus on the most overdue applications, the percentage of submissions completed on time decreased from 65 percent to 50 percent.  This trend is likely to continue until the backlog is significantly reduced.

The reduction was achieved through the use of resources that would have provided review infrastructure, such as international harmonization efforts, staff development, and the development of standard operating procedures and guidances for industry. 

In order to ensure the long-term health of the animal drug review program, the Agency must restore funding to these critical areas. FDA, working closely with industry, has developed this animal drug preapproval user fee proposal to compliment the premarket review activities currently conducted by the Agency with its appropriated resources.

The President's Management Agenda (PMA), announced in the summer of 2001, is an aggressive strategy for improving the management of the Federal government. It focuses on five areas of management across the government where improvements and the most progress can be made to deliver results to the American people.  It reflects the Administration’s commitment to achieve immediate, concrete, and measurable results in the near term, while focusing on remedies to serious problems, and commits to implement them fully.

The five government-wide goals are Strategic Management of Human Capital, Workforce Planning and Restructuring, Expanded E-government, Competitive Sourcing and Budget and Performance Integration.   These goals are mutually reinforcing. For example, Workforce planning and restructuring undertaken as part of Strategic Management of Human Capital will be defined in terms of each agency’s mission, goals, and objectives-a key element of Budget and Performance Integration. Agency restructuring is expected to incorporate organizational and staffing changes resulting from Competitive Sourcing and Expanded E-government. Likewise, efforts toward Budget and Performance Integration will reflect improved program performance and savings achieved from Competitive Sourcing and will benefit from financial and cost accounting and information systems which are part of efforts in Improved Financial Management.

Strategic Management of Human Capital

FDA moved aggressively by awarding an administrative services contract to Booz, Allen, Hamilton (BAH) in January 2002 to study all administrative functions for restructuring and/or consolidation.  The study process included interviews, briefings, meetings, and several day- retreats.  BAH completed the organizational review and recommended the use of a Shared Services Organization (SSO) concept to consolidate administrative functions. 

Shared Services is a service delivery model for internal administrative support functions that has been successfully implemented in the private sector for more than 10 years and combines the best of centralized and decentralized organization structures.  An SSO behaves as if it were providing services in a competitive market environment, ensuring effective and efficient services.  Customer advocates, service level agreements, performance management, governance boards, and integrated strategic planning are several of the key components of shared services.  As a result, the business unit has considerable input into the makeup of services it receives. 

During FY 2003 a combined FDA/BAH team will work to develop the portfolio of services for the SSO to include the identification of processes requiring re-design.  Implementation of the SSO is expected to take place by October 1, 2003 as mandated by HHS. 

In addition to the BAH study of administrative consolidation, there is a major consolidation of FDA’s Headquarters Offices in the Washington, D.C. metro area from 16 locations to two.  The White Oak and College Park locations were initiated to create greater economies of scale and scope.  By collocating these functions, FDA will standardize and modernize document handling; use shared facilities such as libraries and conference areas; reduce redundancies in a wide range of administrative management tasks; allow conversion to a single computer network; and significantly reduce management layers.  These consolidations will provide readily identifiable locations for the citizens to interact with FDA.  The consolidation is funded through the GSA appropriation. Occupancy of Phase I (CDER laboratory) is expected to take place in the summer of 2003.

Flat, streamlined organizations result in faster decision-making and better communication.  The goal of the FDA de-layering initiative contained within the overall Strategic Management of Human Capital concept is to achieve faster decision-making by reducing the number of organizational layers to no more than four levels; increase the number of employees who provide services to citizens; and eliminate duplicative functions.  An assessment of eight major organizational components is taking place.  Each of these components’ organizational structures, staffing, number of decision-making levels, and services provided are being assessed.  Upon completion of the assessment in early FY 2004, proposed reorganization changes will be implemented.

In support of the PMA, the Department will consolidate administrative services within HHS agencies as well as within the Department, where feasible.  Accordingly, in August 2001, the Secretary requested FDA to look carefully at its administrative functions to determine how such functions can be carried out more efficiently with a realignment of resources.  HR services throughout the DHHS will be consolidated fro 40 offices to four.

Competitive Outsourcing

The FY 2004 competitive outsourcing study goal is 145 FTE.  During FY 2002 and 2003, FDA will meet the competitive out-sourcing goal of 15 percent, or 230.6 FTE, by September 2003.  Full cost comparison studies of web publishing, graphic arts/visual information services, medical/scientific library services, and a television studio began in April 2002 and will be completed (the initial decision) by May 2003.  Performance by the selected service provider, the contractor or the Most Efficient Organization (MEO), will begin in October 2003. 

Full cost comparison studies of facilities/real property management, biological and physical science technician services, and general accounting in field offices began July 2002 and will be completed by September 2003.  Performance will begin in March 2004. The study of clerical support services will begin in April 2003.

Improved Financial Performance

The Unified Financial Management System (UFMS) will replace five legacy accounting systems currently used by Operating Divisions (OPDIV) in HHS.  The UFMS will integrate the financial management structure of the Department providing more timely and consistent information, and promote the consolidation of accounting operations that will substantially reduce the cost of accounting services throughout HHS.  OPDIV Heads and program administrators can make more timely and informed decisions regarding their operations.

The FDA implementation of UFMS is called Financial Enterprise Solutions (FES).  FES demonstrates FDA’s commitment to the Department’s efforts and a dedication to create innovative solutions to:

• Improve financial management services at Headquarters and ORA Regions using the latest web-based technology to integrate systems;
• Improve response time and financial reporting to OMB, HHS and to FDA components;
• Replace 30-year old legacy systems and provide real-time access to financial information; and,
• Maintain a clean audit opinion.

For the past four years, FDA has received clean (unqualified) audit opinions by emphasizing training and communications; putting increased emphasis on completing critical reconciliation’s, and holding managers accountable for their assigned areas of responsibility.  FDA’s financial management systems do not completely comply with federal financial management system requirements.  This noncompliance will not be an issue once FES is fully operational. 

Financial performance measures are included in the performance plans of all senior executives at FDA.  The Office of Financial Management managers are accountable for financial decision-making and compliance with regulations through their performance plans.  Audit reports for the past two years have not included any material weaknesses or reportable conditions for internal control deficiencies related to financial reporting because strong internal controls over financial reporting are in place.  Monthly and quarterly reconciliations are prepared to ensure the balances reported in financial reports are accurate. In

FY 2003 FDA will continue to consolidate all Treasury Disbursement and Collection locations. This will improve internal controls by streamlining and standardizing field office accounting procedures, and by utilizing web-based software to provide increased edit capabilities.

Integrate Financial and Performance Management Systems

The requirement to support the integration of performance and financial reporting that meet the specifications in OMB Circular A-11, Part 2 has been identified within UFMS.   Currently, no method exists for reporting.  A custom reporting solution in the Oracle Federal Financial software will be created to comply with this requirement.  In addition, the FDA’s Chief Financial Officer’s annual report includes both cost information and performance results.  The performance results come from select performance goals and measures chosen by FDA programs.  The cost information is derived from the Statement of Net Costs, one of the required financial statements.  The combining of these elements provides a picture of the program, its accomplishments and costs.

Procedures for authorizing expenditures are structured to ensure multiple levels of review and approval for expenses including travel, publications, and conferences. Centers establish their own procedures for review of travel orders and procurement documents.  Program and administrative personnel review these documents to ensure the expenses are necessary and appropriate. All travel and procurement documents are reviewed for funds availability prior to final approval.  FDA staff manual guides outline approval authority for authorizing travel and expenditures. 

Expanded E-Government

FDA leverages IT to make it results-oriented and customer-focused with goals that link to the President’s Management Agenda and the DHHS Goal of “One Department.” FDA is developing and using electronic information that enables more efficient and cost effective access for citizens, industry, and other branches of the government without compromising privacy and information security.  To become more citizen-centered the Agency is increasing the availability of information on the Internet; enhancing electronic communication with industry by increasing collaboration, retooling processes to improve data integration, enhancing the knowledge of the workforce; and, expanding long-term IT capital planning to focus on high payoff investments.  The following initiatives will be pursued in FY 2004 to further coordinate and enhance the structure of E-government priorities:

• Establishment of an Enterprise Architecture to implement data standards and system integration strategies to eliminate redundancy and increase effectiveness;
• Use of established IT investment review and decision making mechanisms to include the Technical Review Board and the IT Capital Investment Review Board and to review progress of E-government initiatives and identify new opportunities;
• Continued collaboration with the DHHS on its Enterprise-wide program to expand information technology and E-government improvements across the Department; and,
• Consolidation of IT systems and processes through:
  • Establishment of an IT shared services organization by the start of FY 2004 to manage and operate IT infrastructure that includes a formalized governance process to improve the review and approval of new IT initiatives, including potential E-government candidates;
  • Meeting PDUFA III goals that include the secure exchange of e-mail and electronic regulatory content, a single point of entry for processing electronic submissions, infrastructure consolidation, format for electronic submission of Common Technical Documents, implementation of industry best practices for PDUFA infrastructure and investments; and,
  • Using the same software for common business needs exist.

The Agency will continue to formalize its operations process and management structure for E-government in FY 2003.   In addition, the E-government program strategy, objectives and goal are also addressed in the Agency’s IT Business and Government Paperwork Elimination Act plans.

FDA currently operates two systems that use digital technologies exemplifying effectiveness, efficiency, and service delivery, and are not specific to the Agency that they can be applied to other Agencies within the Federal Government. 

Although the remainder of FDA’s systems fit well within the criteria of E-government, most are FDA specific and may not qualify as systems benefiting other Agencies.  FDA has been working closely with the EPA, HHS, OMB, DOT, and others during the past year to develop a government-wide website exclusively devoted to accepting electronic comments for all Federal regulatory agencies.  The website, http://www.regulations.gov began as a pilot and will be rolled-out for government-wide use in early 2003.  All aspects of the manual travel process to include document preparation, approval and payment to the traveler are being re-engineered.

PERFORMANCE PLAN EXECUTIVE SUMMARY

As part of the Department of Health and Human Services, FDA has broad responsibilities for promoting and protecting the health of American consumers.  Although FDA’s mission statement clearly outlines these general responsibilities, it does not convey the tremendous scope of activity that we oversee.  Decisions made by FDA affect every American every day.  

To illustrate: Last year consumers spent almost $1.5 trillion – more than 20 percent of their money on products that we regulate. We judge the safety and often the efficacy of an expanding scientific revolution.  Public and private entities invest an estimated $50 billion annually in biomedical research and technology. We assure the compliance of the Nation’s manufacturing and processing with FDA regulations: FDA is a 10,000-person agency, and is responsible for monitoring over 100,000 U.S. firms that manufacture or process FDA regulated products.  We also monitor the safety of 8 million import shipments that enter this country each year.

FDA's Mission The public trusts FDA to ensure that: Foods are safe, wholesome, and properly labeled Drugs for both humans and animals, and vaccines for humans, are safe and effective Blood used for transfusions is safe and in adequate supply Medical devices, from scalpels to MRI scans, are safe and effective Transplanted tissues are safe and free of contamination Equipment that uses radient energy, such as X-ray machines and microwave ovens, is safe Cosmetics are safe and properly labeled.

To successfully accomplish its mission, FDA leadership has identified five strategic goals.  Each goal reinforces the importance of risk management as the Agency’s primary tool to address the Nation’s health and safety concerns.  Progress towards these goals will be made using both FDA’s base resources and those additional resources requested in the FY 2004 Budget request.

Risk management, to FDA, means that we use all means available to minimize health or safety risks facing the American people by: 

1. Correctly assessing the risks based on scientific understanding and rigorous risk analysis;
2. Establishing risk priorities based on this analysis; and,
3. Effectively managing risks with the appropriate intervention - beginning with the most critical.

Our Strategic Goals:

• Risk Management – FDA will minimize risk to U.S. consumers, weighing risk versus risk, throughout the product life cycle – from research and development through production, distribution and use.  Rigorous science-based assessment of hazards and thorough risk analysis will provide the foundation for effective risk management decisions.  Because of the Agency’s timely science-based decisions, millions of Americans will have access to the medicines and medical devices they need, and can be assured that these products are safe and effective.

• A Strong FDA - FDA will maximize return on its human capital by recruiting and adequately compensating the highest caliber scientists and health professionals to carry out its mission.  It will also support the President’s Management Agenda to create a streamlined, citizen-centered government agency.  Key strategies to achieve this goal include:

• De-layering the bureaucracy; restructuring Agency functions so that they are more supportive of mission-critical activities;
• Reconfiguring information technology systems to more effectively support decision making at all levels in the Agency;
• Outsourcing traditional government functions where cost efficiencies can be realized;
• Capitalizing on e-government efficiencies;
• Strengthening financial management systems; and,
• Establishing accountability to the U.S. taxpayer by linking Agency resources to performance and public health outcomes.

• Counterterrorism: FDA will prepare for the possibility of terrorist attacks on the U.S. population, and respond rapidly and appropriately in the event of an actual attack.  This will require:
  
• Detection, deterrence and interdiction of potentially dangerous foods and medical products overseas, at our borders and throughout domestic commerce;
• Having adequate supplies of safe and effective medical products to treat victims of an attack;
• Sharpen FDA’s emergency preparedness and response plan that will protect the American Public and maintain the internal security of FDA; and,
• Minimizing threats from radiological sources.

• Consumer Information – FDA will engage in a variety of activities designed to provide the best available information to consumers, patients and health professionals to make them full participants in managing risks associated with FDA-regulated products.  
• Adverse Events and Medical Errors - FDA will accomplish this health care goal by collaborating to establish a comprehensive reporting capability with the cooperation of the health care community; analyzing and quantifying the risks surfaced in these reports; and taking appropriate actions to prevent future harm. 

To effectively carry out these priorities the Agency will adhere to fundamental principles that frame all of its actions and which will lead to more effective public health results.  These principles support:

• Using rigorous science and risk analysis to make accurate and timely decisions regarding the safety of products and processes;
• Thinking and acting in a global context – Since the products we regulate are produced and marketed worldwide, our risk management strategies must also be approached from a global perspective;
• Making decisions that consider the total product life cycle – We must use both premarket and postmarket product experience/data in making regulatory decisions.  Our practices and regulations must be focused on keeping products safe and effective throughout their entire life cycle; and,
• Working with partners in all sectors to strengthen the Agency’s prevention efforts.  We cannot accomplish our public health mission unless we collaborate with our stakeholders.

Table 1 below summarizes FDA’s strategic goals, the desired outcomes of these goals, and key performance targets for FY 2004.  Table 2 summarizes the specific results that will be achieved as a direct result of each FY 2004 Increase request. 

Appropriations Language

TITLE VI
RELATED AGENCIES AND FOOD AND DRUG ADMINISTRATION
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration

For necessary expenses of the Food and Drug Administration, including hire and purchase of passenger motor vehicles; for payment of space rental and related costs pursuant to Public Law 92-313 for programs and activities of the Food and Drug Administration which are included in this Act; for rental of special purpose space in the District of Columbia or elsewhere; for miscellaneous and emergency expenses of enforcement activities, authorized and approved by the Secretary and to be accounted for solely on the Secretary's certificate, not to exceed $25,000; and not withstanding section 521 of P.L. 107-188;  [$1,647,036,000] $1,673,632,000, of which not to exceed [$230,700,000 in ] $249,825,000 shall be derived from prescription drug user fees authorized by 21 U.S.C. 379h and shall be credited to this account and remain available until expended: Provided, That of the amount provided under this heading, $29,190,000 shall be derived from medical device user fees authorized by 21 U.S.C. 379j and shall be credited to this account and remain available until expended; Provided further, That fees derived from prescription drug and medical device applications received during fiscal year 2004 shall be subject to the fiscal year 2004 limitation; Provided further, That any prescription drug or medical device user fee collected in fiscal year 2004 that exceed this limitation shall be credited to his account and remain viable until expended, in accordance with 21 U.S.C. 379h(g)(4) and 379j(h)(4).

In addition, mammography user fees authorized by 42 U.S.C. 263b may be credited to this account, to remain available until expended. 

In addition, export certification user fees authorized by 21 U.S.C. 381 may be credited to this account, to remain available until expended.

BUILDINGS AND FACILITIES

For plans, construction, repair, improvement, extension, alteration, and purchase of fixed equipment or facilities of or used by the Food and Drug Administration, where not otherwise provided, [$8,000,000] $11,500,000, to remain available until expended (7 U.S.C. 2209b).

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