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Industry Braces as Sequestration Looks Likely


There's growing concern in the life sciences industry that Congress will fail to reach an agreement that will avoid sequestration. Several influential Republicans think sequestration will hit.

This article published with permission from The Burrill Report.

There’s growing concern in the life sciences industry that Congress will fail to reach an agreement that will avoid sequestration, triggering a broad range of cuts to federal agencies, including the U.S. Food and Drug Administration (FDA) and the National Institutes of Health (NIH). Industry advocates say the cuts could slow the approval of new drugs, reduce the FDA’s ability to meet its performance goals, and delay or halt scientific projects.

Sequestration is the result of a 2011 law that followed failed efforts to reach a national deficit reduction plan. It automatically triggers across-the-board budget cuts of about $1 trillion unless action is taken to delay or reach a resolution on how to increase revenue and cut spending in a targeted way. There is deep division along party lines as to what a solution would look like, with Democrats focused on raising taxes to solve the problem while Republicans push for spending cuts.

In his Feb. 12 State of the Union address, President Barack Obama warned that sequestration would have broad and dire consequences and urged members of Congress to take action.

“These sudden, harsh, arbitrary cuts would jeopardize our military readiness,” he said. “They’d devastate priorities like education, energy, and medical research. They would certainly slow our recovery and cost us hundreds of thousands of jobs.”

The White House has estimated that sequestration would cut FDA’s appropriated and user fee budgets by at least 5% or about $200 million by some estimates. In September, the Office of Management and Budget estimated the impact of sequestration to the FDA could be a cut of $318 million.

For the NIH, the cuts are expected to reach as much as $1.6 billion and force the agency to significantly cut the number of research awards it makes. The Medical Innovation & Competitiveness Coalition estimates that NIH will reduce grants by around 7% and says it “will have a real world impact on medical research and development.”

Though proposals are floating around that would avoid sequestration, there is skepticism about Congress’s ability to reach any kind of resolution in time. The legislative body is in recess for 10 days and returns just four days before sequestration is triggered. Sen. Roy Blunt (R-Miss.), a member of the Republican leadership, told Politico that he thinks sequestration will hit. His sentiments are echoed by other influential Republicans.

At a meeting earlier in February of the Alliance for a Stronger FDA, FDA Commissioner Margaret Hamburg would not discuss specific cuts the agency would put in place should sequestration occur, but said the agency is preparing to narrow its focus to its core functions, according to FDAnews.

“There is a lot to be concerned about,” she said.

While there is much speculation about possible scenarios as to how Congress may address sequestration and a deficit reduction plan, there is little visibility on what a resolution will look like today.

“All we can say with absolute certainty is: FDA’s funding is at risk,” wrote Steven Grossman, deputy executive director of the Alliance for a Stronger FDA, on the organization’s blog earlier this month. “Anything less than current levels will undercut the agency’s mission; any substantial cut puts the American people at risk along with the agency.”

Copyright 2013 Burrill & Company. For more life sciences news and information, visit The Burrill Report.

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