2012-07-01

NIH Faces Budget Crisis as Sequester Looms

As Congress begins to work on fiscal year (FY) 2013 appropriations, lawmakers warn that, because of federal budget constraints, the funding line for the National Institutes of Health (NIH) will be flat at best. After nearly a decade of modest budget increases that were consistently below the annual rate of biomedical industry-related inflation, NIH’s inflation-adjusted funding is close to 20 percent lower today than in FY 2003. Further complicating the appropriations process is the fact that FY 2013 spending is subject to a $97 billion across-the-board cut as a result of “sequestration.” Sequestration is looming because of the failure of last year’s Joint Select Committee on Deficit Reduction (commonly referred to as the “Super Committee”) to reach agreement on a workable approach to the deficit reduction. Sequestration goes into effect in January of 2013 unless Congress can agree on an alternative plan to control deficit spending. Barring a compensatory increase in FY 2013 appropriations for NIH, the effects of sequestration on biomedical research could be devastating. The Bipartisan Policy Center has estimated that if Congress does not enact an alternative plan that would obviate sequestration, most nondefense discretionary programs, such as the NIH, would be cut by as much as 9.3 percent for the year.

ASH is urging Congress to provide NIH with at least $32 billion in funding in FY 2013. This funding level represents the minimum investment necessary for NIH’s budget to keep pace with biomedical inflation. A smaller NIH budget would necessitate a reduction in the number of grants awarded, further lowing the percentage of funded applications that is already at a critically low level. More information about NIH funding is available at www.hematology.org.

House and Senate Debate Bills on User Fee Programs & Drug Shortages
Vote on Final Legislation Expected Near July 4 

On May 30, the U.S. House of Representative passed its version of the Prescription Drug User Fee Act (PDUFA) legislation including important provisions to mitigate drug shortages, most notably mandating an early warning system for manufacturers. The U.S. Senate passed its version of PDUFA on May 24, which includes similar provisions to combat drug shortages. In addition to addressing drug shortages, both the House and Senate bills would create user fee programs for generic drugs and generic biologic drugs, or biosimilars, and include provisions that focus on the safety of the drug supply chain and other issues.

The House and Senate are now expected to begin the conference committee process to reconcile differences in their respective legislation and set up quick votes in both chambers for final passage. House and Senate leaders have set a goal of delivering a final bill to President Obama by July 4.

While ASH believes the bills help address drug shortages, the Society is concerned that the Senate bill exempts biologics from all provisions and both bills specifically exempt products derived from human plasma proteins and recombinant products replacing human tissue — products used for the treatment of hemophilia and other bleeding disorders — from the early reporting mandate in the legislation. As the legislation is finalized, ASH will continue to work with Congressional leaders to ensure that biologics, human plasma protein derivatives, and recombinant products are included.

Once again, physicians face a significant reduction in the rate of Medicare reimbursement for services beginning January 1 unless Congress passes a legislative fix to correct the flawed physician payment formula.

For almost a decade, Congress has overridden the reductions in payment rates mandated by the Sustainable Growth Rate (SGR) act of 1997 that included a formula intended to keep Medicare costs under control. Although the draconian nature of the cuts dictated by SGR have been recognized by Congress, a permanent solution to the problem has been elusive.

Representatives Allyson Schwartz (D-PA) and Joe Heck (R-NV) have introduced bipartisan legislation that would eliminate the SGR-based formula and begin a series of pilot programs designed to test new payment models that could serve as a replacement. The Schwartz-Heck legislation (H.R. 5707) would establish a five-year transition period during which physicians would get small rate increases in reimbursement and the Centers for Medicare and Medicaid Services would develop and test various payment models. The $300 billion cost of fixing the SGR program would be covered by savings on military expenditures expected to accrue as the wars in Iraq and Afghanistan wind down.

Ironically, the flawed formula created by the SGR program has exacerbated the problem it was intended to address. Each time the SCR-mandated cuts are overridden, no Medicare savings are realized and a funding source for the higher reimbursement must be identified while the cost of developing and implementing an alternative strategy continues to rise. ASH strongly opposes the nearly 30 percent physician payment cut scheduled to begin in 2013 and continues to advocate for a permanent fix to the Medicare physician reimbursement problem. The Society supports the Schwartz-Heck bill.

The Society continues to vigorously represent the interests of its members to the Congress and federal agencies. Below is a summary of recent activities: 

• ASH shared its Agenda for Hematology Research with congressional offices, federal agencies, professional societies, and patient advocacy groups. ASH will use the Research Agenda as a tool both to educate the Congress on the value of NIH and to highlight the most promising areas of research that require continued government support. 

• ASH submitted testimony to the House and Senate Appropriations Committees in support of a budget of at least $32 billion for NIH.

• In conjunction with the Committees on Government Affairs, Scientific Affairs, and Practice, ASH conducted three Capitol Hill Days. Committee members visited approximately 100 congressional offices to discuss the Society’s concerns about funding for NIH, persistent drug shortages, and the proposed reduction in physician reimbursement through Medicare.

• ASH joined with more than 160 organizations to urge Congress to restore the salary limit imposed on extramural NIH researchers to Level I of the Executive pay scale. Last year, Congress included a provision in the Consolidated Appropriations Act to reduce the salary limit to Executive Level II and extended this limit to all HHS funding agencies. This change represents a reduction of $20,000 (10 percent) in the salary cap and is particularly onerous as it comes at a time when the pool of discretionary funds generated from clinical revenues and other sources is smaller and more constrained, limiting the capacity of investigators’ home institutions to support research. Having to make up the difference resulting from NIH’s reduction in salary support further diminishes institutional research coffers.

• In the report accompanying the FY 2013 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations bill, ASH successfully persuaded the Senate Appropriations Committee to include language aimed at improving communication by the FDA with physicians on problems related to ongoing and impending drug shortages.

• ASH launched a grassroots advocacy campaign to strengthen legislation concerning drug shortages by ensuring that it included biologics, such as recombinant proteins, in all provisions.

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