Sequestration will hurt medical device reviews

March 05, 2013
by Loren Bonner, DOTmed News Online Editor
Dreaded across-the-board federal spending cuts that went into effect March 1 will not leave the medical device sector unscathed. Included in the $85 billion deal, also known as sequestration, are reductions to the U.S. Food and Drug Administration's budget.

For the medical device industry, this means timely reviews of devices could be impacted. However, some stakeholders are holding out hope that a continuing resolution deal taking place on March 27th might include a fix to funding levels.

The sequester cuts apply to the FDA's appropriated budget, as well as new industry user fees, which went into effect in 2013. The current federal budget continuing resolution, unless corrected on March 27th, limits the FDA's ability to access user fees, since FDA appropriations for fiscal year 2013 are set at 2012 funding levels.

"CR [continuing resolution] has pegged the user fee amount to be given to the agency at 2012 levels and was not taking into account the 2013 user fee increase," Lakshman Ramamurthy, director of FDA regulatory policy at Avalere Health, a health care consulting firm, told DOTmed News.

The timing is far from ideal since sequester cuts coincide with the new Medical Device User Fee Amendments (MDUFA) for the FDA. New user fees that went into effect in 2013 were intended to help improve and speed up the review and approval of new medical products with additional FDA staff.

"If it happened in 2010 it would have had less of an impact than now — although still severe — but this is compounded by the fact that a new regime, MDUFA III, and a commitment made by the industry to hire more staff, has already been done to meet new ambitious goals," said Ramamurthy.

Dan Mendelson, CEO of Avalere, told DOTmed News last month that FDA budget cuts automatically imply layoffs.

"It's just the only way they can survive relative to a highly labor intensive environment."

Sequester cuts also included a 2 percent payment reduction to doctors and hospitals that provide care to Medicare patients. These kick in April 1, according to the Congressional Budget Office.

"We are disappointed, as is everyone, that the White House and the Congress could not reconcile their philosophical differences and come to agreement on an acceptable plan to meet the spending cuts target mandated in 2011. No one can think that a blunt force, across the board cut to critical federal programs is the appropriate way to make public policy," said Cindy Moran, assistant executive director for government relations and health policy at the American College of Radiology, in a statement sent to DOTmed News.

While many medical associations have come out in recent days to blast legislators for failing to prevent the Medicare reduction, some experts said that in the grand scheme of things sequestration is a much better option than what would result from a repeal.

The sequester was more or less a mechanism designed to compel Congress to cut the deficit and create a plan that would balance the nation's debt. Since lawmakers failed to reach an agreement on March 1, and over the weekend at President Obama's urging, the mandatory cuts took hold. They expire at the end of the federal fiscal year on Oct. 1, 2013.