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FY 2004 FDA Budget Request


Statement of

Mark B. McClellan, M.D., Ph.D

before

the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
House Committee on Appropriations

March 6, 2003

INTRODUCTION

Mr. Chairman and distinguished members of the Subcommittee, I am honored to be with you today as we discuss FDA's 2004 budget request. As a way of acknowledgement, for those of you who have not met me, I served as a member of the President's White House Council of Economic Advisers since July 2001. About three months ago, Vice President Cheney swore me into the most important job I have ever had, the Commissioner of the Food and Drug Administration. I am a fourth-generation Texan, and I am proud to be one of many Texans serving in Washington.

As a practicing internist and a former professor of both economics and medicine, I am well aware of the importance of the FDA and the enormous contribution to our nation's health. Ensuring adequate and properly targeted resources is vital to the continued success of the agency and the success of the President's efforts to promote quality health care. As FDA carries out its primary mission of protecting and promoting the public health, the importance and complexity of the FDA's work will only increase in the years to come. This means that while more medical products will be available to save and improve lives, the FDA also must think critically and carefully about how it uses its resources to improve the public health. I want to thank you for your past support for the FDA which clearly demonstrates your recognition of the important role this agency plays.

Mastering this great responsibility in the 21st Century requires FDA to meet some unprecedented challenges. There are five major steps to conquering the challenges we face. A strong FDA that attracts and retains the most talented scientists; dynamic and responsive regulation utilizing new and better ways to reduce risks to the public health; promoting quick access to new medical technologies that are safe and effective thus helping to reduce adverse events involving FDA-regulated products; helping consumers get truthful and non-misleading information about the products they use; and, quick responses to the new challenges of bioterrorism and food security. These are among the many critical challenges the agency faces as it looks forward into the 21st century. I will first talk about these challenges and our strategic planning effort, and then will discuss the specifics of FDA's budget request.

STRATEGIC PLANNING

Under the leadership of FDA’s Executive Council I have established five broad strategic goals to frame the Agency’s future. FDA’s leadership is formulating a strategic framework to identify objectives and strategies within each of these goals. Cross-cutting work groups, led by members of the senior management team, are being established for each goal area. Each group is initiating its work based on the Secretary’s and my priorities, proposed initiatives, and a broad range of objectives and strategies that are already underway or proposed in recent planning initiatives. Our next steps will be leadership development of agency strategic objectives; development of the long-range strategic plan based on the framework; and translation of the strategic plan into a specific action plan for FY 2003 and 2004. This effort encompasses my 5 critical challenges and lays the foundation for our action plan. I look forward to discussing this with you as this effort matures. Now let me review the challenges ahead.

STRONG FDA

The critical challenge for a strong FDA remains unchanged. FDA’s FY 2004 budget request supports the Administration’s priorities also supports the hundreds of recently hired investigators and analytical staff. In the near future, FDA will be challenged to resolve complex issues connected with emerging technological and demographic developments that include the human genome project, breakthrough device technology, and biotechnology medicines and development. FDA must also contribute to the protection of our homeland by being ready to respond to bioterrorism challenges. These include the ability to protect the food supply and to increase the availability of medical products, including the development of vaccines to protect the public against anthrax and other biological threats.

The FDA has an enormous task ahead. No nation has a greater resource than the health of its people, or a duty more imperative than augmenting this asset for the coming generations. Looking forward, the opportunities to improve our health and reduce health risks are greater and more diverse than ever. The challenges are increasingly global, growing trade and international travel increase the importance of promoting public health protections; leveraging resources for inspections; and harmonizing technical standards for medical devices and for veterinary drugs.

For decades the FDA has worked to meet these critical responsibilities. The agency has matured and improved over time into one of the most respected public health agencies in the world. In the last four decades, the FDA has provided leadership for global improvements in food safety, engineering standards, and technical requirements for drugs and biologics.

A clear sense of our critical mission at FDA is important -- but a clear sense of mission is not enough to attract and retain highly qualified and motivated employees essential to meeting the challenges FDA faces in the 21st century. An organization that can keep up with the rapid changes in the industries that it regulates, and that is capable of developing and implementing effective and innovative public health measures, requires a very special workforce.

The continued success of our mission depends on a solid cadre of experienced scientists, physicians, mathematicians and other highly qualified and dedicated professionals. Their expertise is essential for making our regulatory decisions balanced and fair, and for keeping us on the cutting edge of the technology and science.

We are also striving to improve the efficiency of our administrative structures. FDA is committed to supporting the Secretary’s “One Department” initiative and the goal of “Improving Department Management” through numerous strategies addressing management of human capital, competitive outsourcing, financial management, e-government, and the integration of budget and performance. Most importantly we will be transitioning to a new model to deliver administrative services in FY 2004 known as shared services.

As FDA Commissioner, it is one of my foremost goals to make sure that the FDA's working environment encourages creativity, efficiency, and superior performance -- an environment in which the FDA functions effectively as a single agency that consistently supports top-quality work by all of its employees.

RISK MANAGEMENT

Second, to strengthen our agency's ability to meet the challenges of food and drug regulation in the 21st century, we must rely on the best science available. We must use creative thinking and science-based risk management to increase public health benefits while minimizing the public health risks. We must work to ensure that our regulations and our decisions are firmly anchored in the latest science; that they are fair; that they are dynamic; that they are focused on public health risks; that they are cost-effective; and above all, that they are responsive to the changing circumstances we face.

We must do all we can to ease the regulatory burden. We need to adjust our policies, methods and practices to the increasing volume, variety and complexity of products under our purview, as well as to the new threats -- such as bioterrorism. We have to broaden the application of the science of risk management through a committed, constant and consistent effort to find ways to reduce health risks and increase health benefits to the public as efficiently as possible.

We are already advancing changes that will help us meet these criteria. For example, our agency has developed a detailed plan for an overhaul of the practices on which the FDA as well as manufacturers rely on to ensure that pharmaceutical products are safe. The new initiative will encourage manufacturing innovation while continuing to assure the highest drug quality. I am also interested in new areas of research, including innovative statistical methods and outcomes research, to help us find better ways to improve health outcomes. This is essential for the industries under our purview as well as for the FDA if it is to keep pace with an economy that generates new products at a staggering rate.

The food industry and pharmacies are good examples of creativity, innovation and expansion. The average supermarket now stocks more than 30,500 different items. In 1982, our pharmacists filled prescriptions for 7,300 FDA-approved drugs. Today, they dispense more than 11,700 prescription drugs, and the approval of many of them required a much more complex and sophisticated evaluation by the FDA.

This wealth and variety of new products are a great benefit for our citizens. It helps them improve their health which, in turn, allows them to enjoy better lives. But the speed of innovation also presents our agency with new questions to be resolved and novel guidelines and regulations to be developed. To meet this formidable task, we've been given new resources and new authorities; but there is no substitute for new ideas. Creativity and innovation must be the FDA's hallmarks in the 21st century.

In FY 2004, FDA is continuing a new initiative, “Pharmaceutical Good Manufacturing Practices or GMPs for the 21st Century: A Risk-Based Approach.” Over the last two decades, significant changes of pharmaceutical regulations have resulted in incremental adjustments in FDA’s regulatory approach to product quality. Included in these changes are an increased number of pharmaceutical products and a greater role of medicines in health care; more targeting of FDA manufacturing inspections; FDA’s accumulation of experience with and lessons learned from, various approaches to the regulation of product quality; advances in the pharmaceutical sciences and manufacturing technologies; application of biotechnology in drug discovery and manufacturing; advances in the science and management of quality; and, globalization of pharmaceutical industry.

The cumulative impact of these changes warrants a systematic reappraisal of FDA’s approaches to product quality regulation. Five principles will guide implementation, Risk-based orientation: a systematic and rigorous approach that matches 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; and, Strong Public Health Protection: strengthen the public health protection achieved by FDA’s regulation of drug product manufacturing.

There are several issues in the food arena that are very much at the center of our attention. One of them is ensuring the safety of genetically modified feed and foods, and strengthening the public's confidence in these new products. Genetically engineered crops are increasingly common field tests of new plants in the U.S. have increased more than eight-fold in the last eight years, and bioengineered crops are now grown on 130 million acres world-wide. The public's concern about these food products is also strong, as was recently illustrated by the media coverage of the commingling of small amounts of bioengineered corn with soybeans that had been intended for consumption.

The incident, which involved corn modified to express pharmaceutical proteins, was handled quickly and effectively. When it was discovered that some leaves and stalks of the experimental corn had been mixed with 500,000 bushels of soybeans, the FDA, USDA, and the State of Nebraska made sure that the entire lot was secured in a warehouse, and ProdiGene, the firm that had modified the corn, agreed to buy back and destroy the entire affected lot. None of it entered the human or animal food supply.

The pharmaceutical material in the ProdiGene corn was being studied under an Investigational New Drug application, a process by which the FDA makes sure that the safety and effectiveness of each new drug is tested in properly designed and conducted trials. But this is only one of several ways in which we are ensuring the safety of genetically engineered plants.

In the last ten years, the FDA has evaluated more than 50 new varieties of bioengineered plants that had been submitted to our agency by their developers. The basis of this cooperation was an FDA policy, supported by the industry, of voluntary consultation before the bio-rengineered products are marketed. To help expand similar protections beyond the U.S. borders, FDA's scientists have worked with the Codex Alimentarius Commission of the World Health Organization/Food and Agriculture Organization (WHO/FAO) to draft guidelines for the assessment of safety of foods derived from rDNA plants. And to get the best outside advice on food biotechnology issues, the FDA has established a new Food Biotechnology Subcommittee of its Food Advisory Committee.

Currently, as part of a project organized by the White House Office of Science and Technology Policy, we are preparing draft guidance for industry to provide early food safety evaluations for new proteins in bioengineered crops for food or feed. If developers establish that these new proteins are safe for consumption -- meaning, that they do not raise questions about their allergenicity and toxicity -- then the foods containing low levels of these innovative plants could be marketed. We will remain vigilant in addressing concerns about genetically modified food and feed.

Next, I want to bring you up-to-date on the FDA's progress in addressing an issue that has stirred great interest among food scientists. I am referring to the studies released earlier this year that show that baked, fried or roasted foods rich in carbohydrates -- including such dietary staples as bread -- contain acrylamide, which, at high doses, is a known animal carcinogen. In soft bread, the reported levels of acrylamide range from 30 micrograms to 162 micrograms per kilogram, and in potato chips, to mention another example, the range is from 1.4 micrograms to 100 micrograms per ounce.

Acrylamide is well known to manufacturers who use it for water treatment and production of dies and plastics, but it is largely a terra incognita for food scientists. There were epidemiological studies conducted in the past that did not show increased cancer risk in people, but the studies were limited in scope, and did not include ingestion of the acrylamide in food.

Given the key role of carbohydrates in our diet, it's been incumbent on our scientific community to subject acrylamide to a close scrutiny. Some of the questions that need to be answered are, for example, is it genotoxic? How is it formed? What is its level of exposure in the general population? What is its bioavailability in food? And what are the biomarkers of acrylamide exposure? And, what steps can be taken to reduce the levels of acrylamide in food?

I am glad to report that these questions are being vigorously tackled by many scientists in government, industry and academia. The WHO/FAO has created a special network for sharing the emerging data - and new information is coming in fast.

The FDA is making a significant contribution to this research. Our agency has developed a method for measuring levels of acrylamide in foods, and used it so far on about 300 types of products, including cereals, breads, and chips. We're developing an understanding how acrylamide is formed, which is very important for finding ways how to keep it out of food; and we are probing the chemical's toxicity. Recently, we reported these and other findings to our Food Advisory Committee.

Finally, I want to give you an update on chronic wasting disease (CWD), which was first identified in Colorado in the 1960s and has now been found in farmed or wild deer and elk in 12 states and two provinces in Canada. CWD belongs to a group of transmissible spongiform encephalopathies, or prion diseases, which also includes BSE in cattle, scrapie in sheep and goats, and classical and variant Creutzfeldt-Jacob diseases in humans. There are currently no vaccines or treatments available for these diseases which are invariably fatal. Compared to other TSEs, CWD spreads readily between susceptible species. However, because CWD’s route of transmission is poorly understood, there is considerable uncertainty whether CWD poses a threat to humans or livestock.

The FDA is collaborating with other federal agencies in studies of the risk of CWD in the food supply, and the transmissibility of CWD to humans. In order to minimize any risk to public health, FDA publicly announced last November that material from CWD-positive animals should not be rendered for use in feed for any animal species. FDA further recommended that animals from positive captive herds and animals from high risk areas, such as those parts of Colorado, Wyoming and Wisconsin where the prevalence of CWD is high, also not be used in animal feed.

I have described several FDA food safety programs that are high on our agenda, but I need to add that although important, these projects are only a small part of entire spectrum of our food concerns. In addition to the programs I've talked about, we're preparing good manufacturing practices for dietary supplements; trying to improve the food labeling with respect to allergens; doubling our food inspections at the ports of entry; and we are stepping up our enforcement against potentially harmful nutritional supplements. We even test typical home-cooked meals for residues of pesticides and other contaminants.

MEDICAL ERRORS/PATIENT SAFETY

A third critical task of our agency is to reduce adverse health events, a large number which are preventable. These health problems are far too common, and they carry a staggering economic tab. One type of often preventable adverse events is foodborne disease. According to a 1999 survey by the Centers for Disease Control and Prevention (CDC), foodborne diseases cause annually 76 million cases of illness, 325,000 hospitalizations, 5,000 deaths, and an economic damage of up to $23 billion. In addition, inadvertently consumed food allergens result in thousands of avoidable emergency room visits.

The statistics on the prevalence of avoidable health complications that often involve the use of FDA-regulated products presents a huge challenge for our agency and for all of us. The misuse of pharmaceuticals is associated with thousands of deaths and about 3 million hospital admissions a year. In 2000, the economic cost of drug-associated errors alone was estimated to reach over $75 billion a year. Finding creative ways to prevent even a fraction of the preventable medical errors, will improve the lives of hundreds of thousands of Americans, and greatly reduce the burden on our health care systems.

There are more health care products in use than ever before. As one example, it is estimated that our pharmacists will fill 3.1 billion prescriptions by the end of this year, 60 percent more than ten years ago. Manufacturers everywhere are increasingly presenting their new pharmaceuticals for FDA's review and approval: 60 percent of the world's drugs are introduced first in the United States. And R&D pipelines hold the promise of dramatic advancements in treatment, thanks to breakthroughs in genomics, proteomics, nanotechnologies, and other biomedical sciences. In the years ahead, we can look forward to more sophisticated, individualized, and effective treatments. This is a good thing for our citizens but brings with it increasing challenges for FDA.

Yet sometimes, highly valuable treatments are associated with adverse events. Virtually all medical therapies have side effects, and it is important for these side effects to be well understood so that we can be sure that the benefits of the products we approve outweigh their risks. But preventable adverse events are a different health hazard they are avoidable medical complications that should not occur. The FDA does a great deal to improve health outcomes as part of its core mission to protect and promote the public health. Our agency works to ensure the safety and effectiveness of new medications and medical devices by helping guide their development, evaluating the results of clinical trials, and monitoring the performance of the approved products after they reach the market.

The FDA’s MedWatch program has developed and is improving a system of voluntary reporting of adverse events associated with the use of agency-approved products. The agency's MedWatch program receives about 250,000 adverse event and medical product problem reports each year, mostly from health care professionals and consumers. Our Vaccine Adverse Event Reporting System (VAERS) is shared with CDC and includes participation by large health plans. The Centers for Education and Research on Therapeutics (CERTs), which was authorized by the FDA Modernization Act and is administered through grants from AHRQ, is helping collect information on safe and effective use of FDA-approved medications. And we see the most promising emergence of increasingly sophisticated electronic databases that make possible public-private collaboration in learning more about the ways to improve the safety of medical treatments. Another bright spot is MedSun, FDA's pilot program for devices that requires rapid adverse event reporting on medical devices by a group of hospitals and nursing homes. The system advances the public's health by giving FDA quicker and more detailed information, without identifying involved individuals, on potential problems with health care products in actual medical practice. FDA’s VAERS received more than 14,000 reports of adverse reactions in fiscal year 2002, most of which were volunteered by health care providers, patients and their parents. I am looking forward to the debut in June of the newest adverse event reporting system in FDA, the Center for Food Safety and Applied Nutrition Adverse Events Reporting System (CAERS) that follows the voluntary submitted food and cosmetic adverse reports and incorporates some of the latest advantages.

We are working to improve the quality and comprehensiveness of this information, and to make it easier for health professionals and consumers to report adverse events to a single 800 number. But despite the FDA's efforts, we suspect that, for reasons ranging from case reporting to concerns about potential liability, these systems do not capture the full spectrum of serious adverse events. I am confident that we can do much better in this arena with the help of new tools that are becoming available. Many of these technologies and devices parallel the capabilities of modern electronic information and technology, IT, systems that in numerous ways have become part of our lives.

I intend to expand the use of new information technology (IT) to improve our understanding of what causes preventable adverse events. In medical care, it is conceivable to develop of an electronic network that would provide automatic updates on adverse events and the circumstances that may have contributed to their occurrence. Such information network could also enable the FDA to disseminate automatically updated, relevant information on medical labels and warnings, and thereby help prevent the adverse events from happening again. Our agency is already conducting pilot IT programs in our centers for medical devices, drugs, and biologics.

The potential health benefits of an effective use of today's IT are great. For example, IT can help professionals monitor the patient's progress and deliver a health care that "gets it right." Many of the new, complex treatments have an inherently higher potential for toxicity, and their use requires careful monitoring for liver, kidney and other toxicities, as well as for interactions with the patient's conditions and other medical treatments. IT could provide significant assistance in this area. The technology could also aid in the sophisticated monitoring and support required by many seriously ill patients who have undergone complex and sometimes lifesaving surgical procedures. Used comprehensively and on a nation-wide scale, information technology (IT) would form the backbone of an Interoperative Health Information Infrastructure (IHII), a system capable of rapidly and securely transmitting significant health-related data to institutions and public health professionals who need them to ensure better care for patients. My vision is for the FDA to support and use these new tools of health information technology and their incorporation in IHII, and thereby open new opportunities for advancing our mission of promoting the public health.

The Department of Health and Humans Services (DHHS) is well into the process of implementing the administrative simplification provisions of the Health Insurance Portability and Accountability Act (HIPAA). The primary focus of this law is to create standards supporting common administrative transactions in health care -- such as claims payment, insurance enrollment, eligibility confirmation, etc. HIPAA activities involve a national collaborative process through which health care industry, providers and standards development organizations seek to identify and adopt standards. The Administration along with other federal agencies are working on this matter. The CDC's National Electronic Disease Surveillance System (NEDSS) is focusing on the development of information standards for more complete and comprehensive integration of public health reporting systems. The National Institutes of Health (NIH) is expanding the Unified Medical Language System. The Administration is hard at work to issue the remaining standards required by the act and to ensure their successful implementation

There are many other efforts, not all of them governmental, to realize the IHII potential. One example is the Health Legacy Partnership, an impressive program of AHRQ and the Joseph H. Kanter Family Foundation. This partnership, with assistance from FDA and others, supports work toward three key goals: improving healthcare decision-making through IT and print media; advancing the development of a national outcomes database; and standardizing outcomes data necessary for the database. As part of this effort, the FDA is involved in a project that will demonstrate a standards-based electronic model of data transmission and exchange, involving key producers and consumers data. In this demonstration, important drug-safety information collected at a hospital can automatically be sent to the FDA.

These and other great strides are part of a vision of what can be accomplished if all of us in government, the health professions, academia and industry continue to work toward better health information systems -- and more generally, toward a health care system that helps patients and health professionals make better decisions supported by safer and more effective medical treatments.

We have a major opportunity to help people improve their health by providing them with the up-to-date information they need to choose a healthy way to live. As the Secretary pointed out this is a human tragedy and a shocking result of a failure to realize many of the potential benefits of modern medical treatments. In my new post, I look forward to supporting FDA's efforts to fulfill its important role in this process, and to help secure the benefits of a robust 21st century health care system.
CONSUMER INFORMATION

A fourth top FDA priority is to help consumers get reliable, accurate, and relevant information about the FDA-regulated products. For all that the new medical technologies in the pipeline can accomplish, they cannot match the public health benefits of sound lifestyle and dietary choices that individuals can make themselves. It’s vitally important for consumers to have accurate and truthful information about the risks and benefits of the medical products they use. Americans know this, and they increasingly want to learn more what they can do to keep or improve their health. That’s why I am placing such a high priority on clearly communicating that information - not only to consumers, but to health care providers and others who can help ensure that consumers make important decisions about their own health on the basis of reliable information.

To mention a couple of familiar examples, our agency is introducing more and better information about the foods and dietary supplements to help American consumers prevent diseases and improve their health by making sound dietary decisions. One is nutrition labeling, which encourages shoppers to select foods low in cholesterol and saturated fats, and high in fiber. We will soon be adding a requirement to include “transfat” on the nutrition label.

But consumers today expect us to do still more, and we must not disappoint them. We must disseminate up-to-date and reliable scientific information on the health effects of foods and nutritional supplements; and we must make sure that the ads and claims for medical products, foods, and dietary supplements are truthful and not misleading. Moreover, we must make use of all means to get this information to consumers in a way that would most benefit their health.

There is no example more persuasive of the need for innovative approaches than the national epidemic of obesity. This is a very serious, and growing, public health problem. According to a CDC survey, in 1985 fewer than 14 percent of Americans were overweight.

Today, more than a third of our adult population is obese, 64 percent of U.S. adults are obese or overweight, and 15 percent of 12-19 year-olds are overweight. The health consequences include greater incidence of diabetes, stroke, coronary artery disease, cardiovascular disease, and high blood pressure -- and that's not the complete list. The economic costs of diseases linked with excess weight run into hundreds of billions of dollars each year.

Although the FDA has approved drugs for curbing appetite and breaking down dietary fat, their use usually does not result in a weight loss greater than 10 percent. There is no better remedy for excessive weight than healthy lifestyle choices -- and to make them, consumers need better information on how their diet affects their health. Our agency has been helping to provide such information through educational articles, guidelines and press releases.

But FDA cannot achieve the goal of a well-informed public through labeling requirements and agency educational campaigns alone. We also need to find better ways to encourage food producers to compete on the basis of scientifically sound nutritional claims. As a recent study by the Federal Trade Commission noted, ads with scientifically-based health claims can have substantial positive effects on the choices of consumers. Here is one area where we may be able to get more useful nutritional information to consumers.

By putting credible, science-based information in the hands of consumers, we hope to foster competition based on the real nutritional value of foods rather than on portion size or spurious and unreliable claims. Such labeling can help empower consumers to make smart, healthy choices about the foods that they buy and consume. Our consumer health information initiative comprises three related actions. First, we will issue guidance on qualified health claims for conventional foods and dietary supplements. Any such claims must be pre-approved by FDA and meet the "weight of the scientific evidence" standard, including support by a credible body of scientific evidence; Second we will strengthen enforcement of dietary supplement rules. Today, FDA is emphasizing its commitment to carrying out the intent of Congress in the Dietary Supplement Health and Education Act of 1994 by outlining its enforcement strategy against false or misleading claims about dietary supplements. As an example of its commitment to strong enforcement, FDA has seized dietary supplements making unapproved drug claims. Third, we have established a Task Force on Consumer Health Information for Better Nutrition. This task force will develop a framework to help consumers obtain accurate, up-to-date, and science-based information about conventional food and dietary supplements. This includes the development of additional scientific guidance on how the "weight of the evidence" standard will be applied, as well as the development of regulations that will give these principles the force and the effect of law.
Our mission at FDA is to improve health outcomes for the nation, and some of the best opportunities for improving health involve informed choices by consumers. Through the Better Health Better Information initiative, we are committed to improving opportunities for consumers to get scientifically accurate information about the health consequences of the foods they consume, and to enhancing our enforcement efforts against those who would make false or misleading claims for their products.

COUNTERTERRORISM

A fifth priority, since September 2001, is a critical new responsibility on the nation's front lines against terrorism. Helping protect our homeland is a privilege and our paramount public health job, and we are doing all we can to deserve the trust placed in our agency. Our centers responsible for pharmaceutical products are working to adapt their approval processes to the unique challenges of developing safer and more effective treatments for anthrax, smallpox, plague and other potential agents of bioterrorism. Our center for medical devices is supporting the development of methods for detecting biological agents with bioterrorism potential, and for radiological decontamination. These new tools are needed now, and we are doing our best to help bring them to the nation's defense as quickly as possible.

In his State of the Union Address, President Bush proposed Project BioShield -- a comprehensive effort to develop and make available modern, effective countermeasures against biological and other dangerous agents. This major cooperative effort will be a joint activity of the new Department of Homeland Security and the Department of Health and Human Services. The BioShield program will ensure resources to develop next-generation countermeasures for smallpox, anthrax, and botulinum toxin; expand research and development at NIH so that it in order to speed research and development on medical countermeasures based on the most promising recent scientific discoveries and make promising treatments available quickly for emergencies. The BioShield program would provide FDA with the ability to make new and promising treatments under development available quickly in emergency situations – potentially saving many more lives than treatments otherwise available today.

The President believes that, by bringing researchers, medical experts, and the biomedical industry together in a new and focused way, our Nation can achieve the same kind of treatment breakthroughs for bio-terrorism and other threats that have significantly reduced the threat of heart disease, cancer, and many other serious illnesses.

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.

We have no responsibility more important and challenging than to protect the safety and security of the United States food supply. This is especially true as 80 percent of foods are within the FDA's purview and we are also involved in ensuring the safety of many new types of food. We all know the problem of food safety did not originate in September of last year, however, during the last decade, rising incidence of food contamination with Listeria, Salmonella and other pathogens -- combined with our more diverse and aging population, greater preference for prepared foods, and rapidly growing food imports -- sharply increased foodborne outbreaks that produced the CDC statistics I mentioned.

Earlier this year, the CDC reported a 21-percent decline in illnesses from four more common serious foodborne pathogens, and a food safety survey conducted in 2001 reported substantial improvement in the way our consumers handle food. But the terrorist attacks last year highlighted new potential risks of deliberate food contamination. To counter this unprecedented menace requires new thinking on how to better safeguard our food.

Much work toward this goal has already been done. In the fall of last year, for example, our agency initiated a scientific assessment of the vulnerability of various categories of food to intentional contamination. The appraisal utilized an analytical framework called operational risk management that considers both the severity of the public health and economic impact of a potential bioterrorist attack on our food supply, and the likelihood of such an event taking place. The FDA has developed two guidance documents -- one each for domestic food producers and for food importers -- on how to protect their products against intentional contamination. And, we are developing additional guidance directed at the retail and cosmetic sectors.

One special emphasis is on the security of our food imports, the volume of which is increasing by as much as 21 percent a year. In particular, the FDA is taking part in two multi-agency efforts to give our bioterrorism counter-measures greater scientific depth and geographic distribution. Thanks to the leadership of the Undersecretary of the Food Safety and Inspection Service, (FSIS), we have joined with FSIS and several other federal agencies in laying the groundwork for PrepNet, a network focused on the prevention of -- and response to -- the introduction of microbial, chemical, radiological or physical contaminants into the food supply. And we are developing plans for cooperative work with and expansion of CDC’s cooperative Laboratory Response Network that will upgrade our ability to quickly recognize and identify a terrorist attack on food.

Our efforts to improve food security have received strong support from the President, the Secretary of Health and Human Services, and Congress. Thanks to a supplemental appropriation of $151 million received in FY 2002, we have been able to hire several hundred new employees whose job will be to keep watch on imports and whatever other avenues our enemies might try to use to contaminate our food or tamper with other regulated products. But it is important to keep in mind that reducing risks to food security requires more than hiring inspectors. Even with the great expansion of FDA's presence in the nation's ports of entry, we will be able to inspect only a fraction of the 5.6 million food shipments that will be imported this year.

Now you can understand why we need to find innovative ways to make our foods more secure without adding unnecessary costs. With this goal in mind, the President last June signed bipartisan legislation designed to give the FDA greater control over food in general, and imported food in particular. The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 does not generally affect farms or restaurants, but it does address practically every firm, domestic and foreign, that's involved in getting food processed, packaged, and put on the market.

The law's cutting edge contains four provisions whose requirements we are now in the process of addressing. This project is on the fast track, and I am committed to issuing the final rules by their statutory deadline. At the same time, I will allow as much time as possible for comments on the proposals, for their refinement, and for the necessary planning.

One of these regulations will require all facilities that manufacture, process, pack or hold food for consumption in the U.S. to register with the FDA by mid-December, 2003. A second regulation will require importers to provide the FDA with a prior notice of food shipments that includes information about the shipment's contents and origin, as well as the anticipated port of entry. A third regulation will obligate food businesses to maintain records to enable us to determine where the food came from and who was its subsequent recipient, so that we can quickly trace any food contamination back to the source. The fourth regulation authorizes the FDA to order the detention of food on the basis of credible evidence or information that it poses a serious health threat to humans or animals.

In finalizing and implementing these regulations, we intend to work with all affected parties to find the most effective, and least costly, ways of addressing significant risks to the security of our food supply. I look forward to your comments and suggestions as we tackle this critical new challenge next year.

I am confident of our agency's ability to rise to the many new challenges we face. However, I cannot emphasize enough that our continued vigilance and innovation in promoting the public health would not be possible without the cooperation, dedication and skill of our farmers, food processors, food distributors, and millions of others who are involved in getting safe and wholesome food products from the field to the consumers' tables.

FY 2004 BUDGET REQUEST

As I have mentioned, pivotal to the continued success of the FDA and the success of the President’s efforts to promote health care quality is the FDA budget Our FY 2004 President’s budget request totals $1.7 billion, including $1.4 billion in budget authority and $307 million in user fees. Budget authority increases above the FY 2003 President’s Budget request total $79.6 million and savings related to the President's initiatives total $58.2 million. The agency's reductions include transferring funding to the new Department of Homeland Security, management savings due to de-layering, and information technology consolidations. The user fee increases total $37 million. The full time employee total equals 10,753, which includes the adjustment for management savings.

We believe our budget request will allow FDA to fund ongoing operations at the current level and also support more than 1,000 recently hired investigators and analytical staff to fight counterrorism. In the near future, FDA will be challenged to resolve complex issues connected with emerging technological and demographic developments that include the human genome project, breakthrough device technology, and biotechnology medicines and development. We believe our specific budget initiatives as compared with our FY 2003 President’s request request parallels our top priorities.

As I am sure you are aware, the Administration is standing behind the FY 2004 budget as submitted. The President does not intend to change his 2004 Budget based on the program or agency levels included in the 2003 Omnibus bill the Congress approved in mid-February. The President's 2004 Budget was developed within a framework that set a proposed total for discretionary spending in 2004, and each agency and program request reflects the Administration's relative priority for that operation, activity or program. We recognize that you may believe there is a need to reorder and adjust some of these priorities and the Administration intends to work with you to remain within the 2004 top line amount.

COST OF LIVING $23.3 MILLION

Essential to FDA's success is its dedicated professional staff. FDA is a people-intensive Agency where payroll accounts for over 60 percent of the budget. Forty-five percent of that workforce is dedicated to "front line" efforts such as foreign and domestic inspections and coordination with States and cooperative education programs. The budget request includes $23,283,000 in inflationary cost-of-living adjustments which will be used to support the level of existing programs and also provide a minimum level of support to the hundreds of investigators and analytical staff hired in FY 2002 for Counterterrorism activities.

As I have said, the importance and complexity of the FDA's work will only increase in the years to come. Thus the continued success of our mission depends on the experienced and highly dedicated professionals who can make our regulatory decisions balanced and fair keeping us on the cutting edge of the technology and sciences used by industry. Making sure FDA’s working environment encourages creativity, efficiency and performance is one of my goals.

SECRETARIAL INITIATIVE: PROTECTING OUR HOMELAND: FOOD SAFETY – COUNTERTERRORISM $20.5 MILLION

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. We believe that a coordinated approach with state, federal and local partners, offers a better means of identifying and containing outbreaks associated with deliberate attempts to contaminate the food supply.

One of the cornerstones of the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 is the proposed regulation that would require domestic and foreign food facilities that manufacture, process, pack, or hold food for human or animal consumption in the United States to register with the agency by December 12, 2003. This act provided FDA new authority in protecting the nation’s food supply against terrorist acts and other threats. FDA is offering the public 60 days to comment on the proposed rule. FDA plans to issue a final rule by October 12, 2003, after considering the comments it receives. FDA also plans to have its registration system operational by October 12, 2003, to accept early registrations.

Under the Bioterrorism Act, it is prohibited for a facility not be registered by December 12, 2003. If a firm does not register by the deadline, the United States can bring a civil action in federal court to enjoin persons who commit a prohibited act, or it can bring a criminal action in federal court to prosecute persons who commit a prohibited act. The Bioterrorism Act also requires food from unregistered foreign facilities to be held at the port of entry unless the FDA directs that the food be moved to a secure location.

Under the proposal, all domestic food facilities would be required to register whether or not food from the facility enters interstate commerce. Except for specific exemptions, the new regulation would apply to all facilities for all foods and animal feed products regulated by FDA, including dietary supplements, infant formula, beverages (including alcoholic beverages), and food additives.

Improving the FDA’s food safety inspection, detection and monitoring capabilities is and has been a top priority of the Department and the agency before the events of September 11. This FDA effort is the latest in a series of measures to build stronger safeguards for the American people.

We believe these measures will bolster our ability to regulate effectively the more than 400,000 domestic and foreign facilities that deal with food within our country. Our ability to efficiently and effectively help protect the nation’s food supply is a critical part in our agency’s counterterrorism mission. Thanks to the leadership of Senators Gregg and Kennedy, and Representatives Tauzin and Dingell, the Bioterrorism Act gives FDA this important new authority.

FDA will also 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. By increasing the number of state contracts, grants and partnerships, we believe it will ensure application of appropriate preventative controls to ensure a safe, wholesome, and nutritious food supply. We expect the initial grants to be used by the states to build their infrastructure so that they may become part of the Laboratory Response Network. With better assessment capabilities of the risks to FDA regulated products we will focus efforts by directing the grants toward risk based inspectional activities or additional laboratory capability.

The infrastructure needed to support the Laboratory Response Network (LRN) for counterterrorism coordinated by the CDC, provide integrated laboratory solutions and disseminated testing capacity to support public health preparedness and response to an act of counterrorism involving the food supply, FDA will develop scientific practices, expand federal, state and local involvement in our 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. 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.

SECRETARIAL INITIATIVE: REALIZING THE POSSIBILITIES OF 21st CENTURY HEALTH CARE PATIENT SAFETY$4 MILLION

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. In some cases, products may not be used safely to prevent harm. 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, a large number 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 of $4 million, coupled with the $3 million from our Generics Drug request will allow FDA to expand the use of new information technology 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 as well as continue the implementation of Phase III to include drug products into the Medical Device 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, FDA will place greater emphasis on preventing adverse events involving generic drugs.

GENERIC DRUGS PROGRAM $13 MILLION

According to the Congressional Budget Office, generic drugs save consumers an estimated $8 to $10 billion a year at retail pharmacies. Billions more are saved when hospitals use generic drugs. 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 therapeutically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price.

Brand-name drug innovation requires great investment of scientific effort and other resources, with an uncertain return. We all therefore recognize that innovators must be able to receive adequate compensation through our patent system. Otherwise, pharmaceutical research and the development of better medical treatments could come to a halt.
But it is also clear that the high prices of many innovative drugs in the United States, where they are not restricted by government controls, are sustaining pharmaceutical research and development worldwide. This is good for pharmaceutical innovation, but it also creates a serious challenge for many of our patients, who are having difficulty paying the high and rising costs of up-to-date drug treatment.

This is where the generic drug industry plays an essential role in promoting the health of Americans. Generic drug manufacturers produce medications that are just as safe and effective as their brand counterparts, and part of the FDA's mission is to make sure that's the case. Yet the prices of generics are much lower: a generic version of a $72 average brand-name prescription costs about $17. And thanks to more brand-name medications coming off patent -- over 200 of them in the next few years -- as well as to the ever-improving scientific knowledge and public awareness about the benefits of generic drugs, the health and economic benefits of using generic drugs are constantly growing.

Encouraging rapid and fair access to generic medications after the expiration of appropriate patent protection is, therefore, one of my major priorities as FDA Commissioner. Americans need more generic drugs more than ever, and the FDA has to do its part to make these products available. There are many steps involved in achieving this goal, and I want to walk through some of them.

One part of achieving this goal - reducing the net review time - is largely under the control of the FDA. It's a function of the efficiency of our review process and our available resources. Our Office of Generic Drugs (OGD), has been making progress in this area. Despite the growth in the submissions of original abbreviated new drug applications (ANDAs) from 309 in 1999 to 361 in 2002, our generics program during the same time increased the proportion of applications reviewed within 180 days from about 28% to 80%. The average time required for a first review of an ANDA is down to 100 days, from 135-140 days in the late 1990s.

These substantial improvements were made possible by rising efficiency in the generics office, as well as by increased resources. The appropriations for this office increased by $1.4 million in 2001, by $2.5 million in 2002, and another $5.3 million in 2003. I thank you for your continued support of this vital program. We can and will do more to improve the efficiency of our reviews, and acting quickly on generic drug applications is well worth even greater FDA resources. Moreover, we hope and expect that the number of generic applications will continue to grow above this year's record level of almost 400 ANDAs. We will use the $13 million requested in 2004 to improve our reviews and to handle the growing workload. It will increase the size of the generics programs by about 30 percent.

With this funding request, we will be able to hire about 40 additional staff in generic drugs, and add to OGD an additional division for the review of chemistry. This expansion should help reduce the average review time by at least 2 months, move up the proportion of 180-day reviews still closer to the 100% goal, and further reduce the waiting time in the ANDA queue. What we need is actual improvement in generic drug availability. And to get more generics in the pharmacies and to our patients' bedsides, we have to meet two additional requirements.

First, the products we review must be safe and effective -- meaning, they must demonstrate therapeutic equivalence to the brand drug, and they must be appropriately labeled and safely manufactured. And second, there must be the minimum of legal challenges to the marketing of generic drugs. And in considering both of these very important factors, we see some positive developments -- as well as some concerns.

On the positive side, the number of full and tentative generic applications approved has gone up significantly, from 242 in 1999 to 384 last year - an all-time record. On the other hand, median time to the issuance of an approval or "tentative approval" letter -- which used to be longer than two years -- is yet to drop below 18 months. That means, even as we are making large strides in reducing our review time, there is still substantial room for improvement in total time to approval. And although many generic applications have been approved within one year, this timeframe is still the exception rather than the rule. Moreover, even after the FDA issued a tentative approval, some potentially important generic drugs have remained unavailable because of legal challenges.

The reason that total time to approval or tentative approval is not declining as much as we might hope is that, very often, multiple review cycles are required. Unfortunately, a large share of the initial generic applications are not up to the FDA's requirements. And this critical obstacle to increasing generic drug availability cannot be removed by the FDA alone
The second main obstacle to effective communications has been FDA's internal policies that discouraged early consultations between OGD reviewers and sponsors of ANDAs. In part, these policies were necessary because the generic drugs staff has been -- and is -- overwhelmed with review work, and could not take on additional tasks.

We are considering modifications to our policies on communications involving generic applications during the review process. I have therefore asked the Director of our Center for Drug Evaluation and Research (CDER), and the Director of the Office of Generic Drugs to lead an effort to identify steps, such as improving the clarity, consistency, and timeliness of our guidance and communications for generic drug applicants, to help improve the level of understanding and quality of applications by generic manufacturers.

A third key factor affecting the availability of safe and effective generic drugs is manufacturing processes. To ensure safety and prevent adulteration, generic manufacturers must comply with Good Manufacturing Practices (GMPs). Pharmaceutical GMPs, and the system that enforces them, still get the job done. But they have not been updated in many years, and it's time for reform to make sure that we have a GMP system that achieves its critical goals as efficiently as possible.

We are preparing a major overhaul of GMPs for all pharmaceutical firms. Our plan will incorporate new concepts of risk management and quality assurance, encourage innovation in manufacturing and technology, and synchronize GMP inspections with the product review process. This is part of a major effort and we look forward to your input on what we are doing.
I will now turn to another critical factor affecting generic drug availability: uncertainties in the legal landscape that generic manufacturers face. Recently, as you well know, there has been tremendous interest in whether reforms are needed in FDA's regulations to implement the Hatch-Waxman law that governs generic drug competition, or whether there need to be reforms in the law itself.

While hundreds of generic drugs enter the market each year without substantial legal obstacles, some aspects of FDA's current interpretation of the law have been associated with disruptions, delays, uncertainty, and added costs for some generic manufacturers who are trying to compete fairly against some of the most important brand-name drugs in the country. On occasion, generic manufacturers who have geared up to compete following the expiration of what they thought were the relevant brand-name patents, only to learn that they had new patents to contend with. This practice lead to the repeated use of the so-called "30-month stays" of full approval of ANDAs and 505(b)(2) applications.

To address this problem, the FDA proposed a new regulation last fall. The proposed rule would allow only a single 30-month stay when a generic application includes, or is amended to include, a certification that the innovator's patents are invalid or won't be infringed. The generic applicant provides a notice of that certification to the innovator, and the brand firm has 45 days after receiving notice to file suit alleging infringement of a legitimate patent.

The proposed rule would clarify that certain types of patents (for example, for packaging, metabolites or intermediates) are not allowed to be submitted for listing in the Orange Book, while others (for method of use, formulation process, product by process, and different forms of the pending or approved drug substance) must be submitted for listing. We are also reviewing comments on the listing of product-by-process patents. Further, the proposal would substantially strengthen the signed declaration accompanying the patent submission. These measures will reduce the submission of patents for Orange Book listing that do not represent true innovation

SECRETARIAL INITIATIVE: ACCELERATING THE AVAILABILITY OF LOWER COST DRUGS– IMPROVING HEALTH SCIENCES: OVER-THE-COUNTER DRUGS (OTC) $ 1 MILLION

OTC drugs play an increasingly vital role in America’s health care system, and provide an effective means to significantly reduce consumer prescription costs for specified ailments. The trend to self-medication has increased significantly in recent years as health care costs have risen and consumers want to be empowered to treat minor ailments with safe and effective OTC drug products.

The increase will support the hiring and training of seven FTE to (1) improve the OTC drug review 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.

BEST PHARMACEUTICALS FOR CHILDREN ACT $5 MILLION

Pediatric provisions of the FDA Modernization Act of 1997 have had a profound impact on the study of drugs in children. On January 4, 2002, Congress enacted the Best Pharmaceuticals for Children Act (BPCA), to continue providing incentives for the effective development and dissemination of information on how to properly use therapies in children.

Currently 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 dangerous health risk in terms of under dosing or over dosing. This is a particularly serious and dangerous situation for the newborn and those infants born prematurely. We know the bodily functions of infants are different than adults and in particular their response to various therapies. We believe this law will result in pediatric patients being given medicines that have been properly evaluated for their use in the intended populations.

With the increase, FDA seeks to expand availability of drugs for children. We will strengthen our coordination with NIH on the safety and efficiency of pediatric drugs. FDA and the NIH will develop, prioritize, and publish an annual list of approved drugs for which there is a referral, an approved or pending new drug application, or no patent or market exclusivity protection and for when additional pediatric safety and effectiveness studies are needed, establish a research fund for the study of drugs that no longer have exclusivity or patent protection and specifies the process for obtaining contracts; provide a public summary of all studies. In FY 2004 NIH is requesting an additional $25 million for a total of $50 million to support this effort.

FDA will hire new staff for our Center for Drug Evaluation and Research, (CDER) 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; oversee ethical issues related to studies; and disseminate appropriate information to the public. The increase will also support the hiring of 4 FTE in the Office of Pediatric Therapeutics, under the heading of Other Activities, to address all activities related to the increasing number of new pediatric studies submitted by the pharmaceutical sponsors.

SECRETARIAL INITIATIVE: IMPROVING DEPARTMENTAL MANAGEMENT

FDA is also supporting various administration and department initiatives associated with the President’s Management Agenda by 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 improving management 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.

FDA plans a major consolidation of its Headquarters Offices in the Washington D.C. metro area going from 16 locations to two – White Oak and College Park, Maryland. These locations were selected to create greater economies of scale and scope with the co-locating, 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; and significantly reducing management layers. College Park has been completed.
CENTER FOR DRUG EVALUATION AND RESEARCH MOVE $6 MILLION

FDA headquarters currently occupies approximately 40 buildings in 16 locations. A long term goal has been for these facilities to be consolidated into two locations which will result in considerable annual operating savings. Receipt of the request will complete 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, primarily by supporting cabling and relocation services.

ARKANSAS RESEARCH LAB $3.5 MILLION

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.

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. 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.

Completion of 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 critical to the Agency and the American 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.

UNIFIED FINANCIAL MANAGEMENT SYSTEM $2.3 MILLION

FDA’s management needs timely, reliable, and current information. The DHHS 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 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 portion of UFMS titled, Financial Enterprise Solution by beginning to design and test the General Ledger with payroll interface, which will account for over 60 percent of FDA’s transactions; and purchase Oracle licenses, hardware, training and program support and meet increased contractor costs for site implementation.

RENT DISTRIBUTION $10 MILLION

FDA is working with GSA to obtain space around the country to accommodate the more than 800 counterterrorism personnel hired with FY 2002 Emergency Supplemental Appropriation. FDA anticipates redistributing some funds in FY 2003 for GSA rent costs, and we are working to determine the exact 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 additional management efficiencies, FDA intends to redirect funds from the programs, including field activities, to cover cost increases. Similar redistribution of increased GSA rent costs may all take place in FY 2003.

REORGANIZATIONS AND IMPROVING MANAGEMENT

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 and 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 Office of Combination Products. In addition, the therapeutic biologics review function is being transferred from CBER to CDER to consolidate the similar drug review functions. Organizational de-layering to achieve a flat, streamlined Agency where decision-making and better communications exists is being aggressively pursued. FDA is also 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. These efforts will place the Agency in a position to more effectively and efficiently meet the challenges of providing better protection to consumers and promoting better health.

IT CONSOLIDATION $29.6 MILLION

Information technology infrastructure functions are also being consolidated. This consolidation effort will reduce IT infrastructure and development expenditures in FY 2004 by $29,587,000. Similar systems will be combined, IT processes reviewed and there will 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.

USER FEES

Current Law User Fees $27.6 million

The budget request includes $249,825,000 in PDUFA III user fees for the drug and biological product review process, an increase of $26,925,000 over FY 2003. This consists of pay and inflationary increases and new initiatives included in the PDUFA III legislation.

In addition, the request includes $29,190,000, for the Medical Device User Fee Act (MDUFMA) to significantly improve the medical device review process. This is a $4,065,000 increase over FY 2003. Our Medical Device and Radiological Health program has re-engineered itself over the last decade to accomplish more 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 have streamlined the processing of premarket notifications (510 (k)s) by using accredited third parties. The results were improvements in the review times and review processes. MDUFMA builds on these successes by providing medical device user fees (beginning with FY 2003 submissions), authorizing the use of accredited third parties to conduct quality systems / GMP inspections under very rigorous conditions, providing for effective FDA oversight of reprocessed single-use devices, improving the focus on devices intended for pediatric populations, improving the coordination of reviews that involve combination products, and more. MDUFMA commits FDA to a comprehensive set of challenging performance goals that will lead to substantial improvements in the timeliness of device reviews. MDUFMA user fees, and the additional appropriations you provide for this important program, will ensure FDA's ability to bring new medical technologies to health care professionals and patients more ability to bring new medical technologies to health care professionals and patients more rapidly, through a strengthened program that can meet the public's expectation that the medical devices they use are safe and effective. These resources will also help us meet the challenges now facing us from the medical device industry that include increasingly cutting edge and complex technologies that are being applied to current medical device products being developed and a shortage of the right scientific expertise needed to review these products. We must ensure that our science base is up to date, that our reviewers receive appropriate training, improve our outreach to industry and other stakeholders, and improve our review information system. We believe the increase will work to enhance our infrastructure, respond to the expected growth in the number of PMA applications the Agency receives, and improve our performance.

The request also includes $23,225,000 in other user fees for mammography inspections, export certifications and color certifications, an increase of $464,000 over FY 2003.

Proposed User Fees $5,000,000: Animal Drug Review User Fees $5,000,000

A new user fee is proposed 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 this $5,000,000 request, FDA would improve and expedite the review of animal drug preapprovals.

CLOSING

I thank you for your commitment and continued support of FDA. We all have a shared responsibility of bringing to American homes safe, varied and plentiful food, and products devoted to providing the public with a healthy lifestye and healthy choices. I look forward to a long and harmonious working relationship with you, the Congress and other interested parties as we collaborate to promote and protect the health of our people.