Food User Fees--the Good, the Bad and....the Possibilities
A little under half of the FDA’s roughly $7 billion budget is funded by user fees. Tobacco user fees pay for the entire tobacco program, while medical product user fees pay for between 20% and 70% of most medical programs.
Food programs are, effectively, “all taxpayer funding, no user fees.”[1]
Are food user fees a desirable option?
When a complex regulatory system is under resourced—as is the case with human food safety at FDA--you get what you get: a haphazard system that is mostly good, but very vulnerable. On any given day, it works fine, but it is hard to be confident it will always get the job done.
Properly resourcing the food safety components of FDA would allow the agency to develop and maintain a system that is intentionally and consistently excellent.
Realistically, the required level of funding is not going to come from taxpayer funding, so food user fees would be an alternative funding source.
How do FDA’s industry user fee programs work?
The medical products user fee programs--which would be the model for food user fees--can be described as: industry voluntarily enters into 5-year agreements with FDA for a specific workplan (metrics of efficiency and timeliness, not metrics of approval). What makes the medical products user fees work:
Broad industry buy-in; and
An equitable fee-able event that makes business sense for companies to support.
Tobacco user fees are mandatory and imposed upon industry, not a model for food user fees.[2]
Why aren’t there food user fees now?
Industry buy-in for user fees has never existed in the food domain, at least not long enough for anything to have been adopted and implemented. There are at least four barriers:
Barrier 1: Agreement on a fee-able event. With drugs and other medical products, market entry is barred by a requirement for product approval and an inspection of the facility in which the product will be made. This creates fee-able events that link with the corporate bottom-line. Although not always described in these terms, medical products user fees usually have a favorable ROI for companies.
There is no obvious fee-able event in food safety, although there is some potential in the narrower area of food additives.
Barrier 2: Different economic realities of food versus medical product industries. Comparatively speaking, medical products are a low volume, high profit margin industry and the food products are a high volume, low profit margin industry. Compared to a $30 billion food company, a $30 billion medical products company: will be far more profitable; will have a large R&D budget; and will be far more dependent on one specific product gaining market access. This results in a greater incentive for a medical products company to participate in a user fee program.
Barrier 3: Congressional gauntlet to enact a user fee program. House and Senate authorizers create FDA user fee programs, but House and Senate appropriators still need to appropriate the monies for it to be collected. If a segment of the food community were to oppose the creation of food user fees, they would only need to block action in one of four committees. That underscores the need for strong industry support if a food user fee program were to be considered.
There is precedent for the four committees not being in agreement. Around 2008, authorizers created a user fee program for medical product sponsors to bear the cost of the FDA office that reviews promotional materials and advertising. House appropriators were not enthused and would not allow funds to be collected. Eventually, the provisions were repealed, and the program never became active.
Barrier 4: Perception that a food user fee to support FDA is a tax on food. Even if we assume that all user fees are eventually paid by the end-users in the form of higher prices, this is not seen as an issue for medical products....and is a welcome feature of tobacco user fees. Food is perceived differently and opposition to food user fees would likely focus on how it is a tax on everyday consumers.
CONCLUSION: What would it take to establish a food user fee program?
The Food Safety Modernization Act, the recent FDA human food safety reorganization, and significant increases in funding have improved the FDA food safety programs over the last 20 years.
Yet, there is a near-universal feeling that we are a long way from an “intentionally and consistently excellent” FDA food program. While there are many potential paths for additional reform and improvement, none of them will work without more resources.
It is time to look at the issue of food user fees again--recognizing the barriers but also reflecting the enormous need for better funding. If some group is already exploring this, I am happy to join their efforts.
Meantime, if you are interested in being part of a new dialogue on food user fees, please contact me at sgrossman@fdamatters.com. I am not sure where renewed interest in food user fees will take us, but I want to find out.
[1] The extremely modest user fees received by FDA food programs come primarily from a reinspection program and a qualified importer program.
[2] Tobacco products user fees are imposed on industry without their consent, to implement a workplan with which they disagree. Permanent in law. It is not a model for food user fees.