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FY 2007 Table of Contents

Performance Budget Overview

Introduction

As we prepare to celebrate the centennial of the 1906 Pure Food and Drugs Act, the Food and Drug Administration (FDA) faces important challenges and opportunities for the 21^st century.  Innovations in science and technology, shifting market trends in regulated industries throughout the global economy, and emerging diseases and other public health threats have magnified the importance of FDA's role in protecting and advancing the public health.  At the same time, budget realities challenge us to formulate new approaches to meet the expanding scope and complexity of our public health mission.  These challenges serve as catalysts for change.  FDA recognizes the need to modernize and transform our operations to address the emerging needs of the 21^st century.   FDA will meet these challenges while maintaining its century-old commitment to principles that have made us the world's "gold standard" for regulating food and medical products.  These principles reflect our: 

• Dedication to the safety of the products that we regulate.
• Dedication to protecting Americans against persistent and emerging public health threats.
• Commitment to advancing the public health by empowering consumers to make healthy nutrition choices.
• Commitment to accelerating the development and availability of promising new medical therapies and technologies that will extend and improve lives. 

FDA has designed a budget request for FY 2007 that responds to 21^st century challenges and meets the opportunities that lie ahead, including the following high-priority areas:

• Pandemic Preparedness - To prepare our nation for the threat of pandemic flu, FDA proposes a suite of activities to safeguard the public health.  These include collaborating with the U.S. and international health community to recognize and respond to emerging threats, accelerating manufacturing capability to quickly produce and deliver sufficient quantities of safe and effective vaccines, and addressing pandemic-related impacts on the animal and food sectors that FDA regulates.
• Critical Path - FDA proposes funding for its Critical Path Initiative to accelerate the field of personalized medicine and to translate discoveries in medical science into safe and effective new medical treatments.  The Critical Path Initiative will focus on bottlenecks in the medical product development pipeline that impede the ability to transform investments in basic medical research into products that improve patient health.
• Food Defense - We will expand the network of laboratories that analyze samples in the event of a terrorist attack on our nation's food supply.  This is a cooperative effort involving States and other federal agencies, where FDA will enhance the capacity of our laboratory surveillance network to rapidly detect and respond to threats to the food supply.  FDA will also protect our nation from the threat of bioterrorism by proposing a program of targeted food defense research.    
• Medical Product Safety - To improve patient safety, FDA proposes significant new investments in our human drug and transplantable human tissue safety programs.  To increase our capacity to recognize and act on emerging drug safety issues, FDA will modernize its adverse drug event information systems and broaden the sources of data that we analyze for drug safety signals.  To manage the risks of human tissue transplants, which have grown to over a million procedures a year, FDA is implementing new risk-based program to detect, analyze, and respond to actual or potential disease transmission involving human tissues.

As we explain in detail below, FDA conducted a deliberate, strategically focused process to formulate our FY 2007 budget request, in consultation with the Department of Health and Human Services (DHHS) and the Office of Management and Budget (OMB).  We set priorities that align with the Secretary's 500-Day Plan, DHHS goals, the President's Management Agenda, and FDA's vision for how we need to perform our public health mission in the 21^st Century.  We are seeking ways to leverage our resources responsibly through collaboration with other public health agencies and stakeholders.  For the tax dollars that we spend, we are targeting high-yield investments that will significantly reduce health risks or improve the ability of the product innovators to translate medical discoveries into important new products.  We view these strategies as essential to maintaining our position as the world's premier regulatory agency, and protecting the FDA "brand" that has served as a symbol of trust for the American public during the past hundred years.

In the remaining sections of this Performance Budget Overview, we present the statement of FDA's mission, a discussion of FDA's strategic plan, a summary of FDA's performance, and an overview of FDA's FY 2007 budget request, including justifications for proposed initiatives.

Statement of FDA Mission

As a scientific regulatory agency and an operating division of the DHHS that is responsible for protecting and advancing the public health in the United States, FDA's responsibilities cover a wide range of regulatory activities.  FDA decisions affect every American on a daily basis.  Annually, consumers spent nearly $1.5 trillion, or more than 20 percent of all consumer expenditures, on FDA-regulated products.

FDA's mission derives from a variety of statutes, beginning with the Pure Food and Drugs Act of 1906, which prohibited interstate commerce in misbranded and adulterated foods, drinks, and drugs.  The Food, Drug, and Cosmetics Act (FD&CA) of 1938 extended FDA's responsibilities to cover cosmetics and therapeutic devices, and granted FDA important new authorities, including the requirement that manufacturers demonstrate the safety of drugs before they can be marketed.  Over the years, amendments to the FD&CA have expanded or clarified FDA responsibilities.  They are the basis for our current programs for foods, human drugs, biologics, medical devices and radiological health, animal drugs and feeds, supporting toxicological research, and crosscutting programs such as combination products, international programs, pediatrics, and women's health.  More recently, FDA's mission expanded in the area of counter-terrorism and homeland security, under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, the Project BioShield Act of 2004, and Homeland Security Presidential Directives.

FDA Strategic Plan

FDA advances its broad public health mission by managing efforts to achieve a comprehensive set of long-term strategic goals and linking budget resources to program performance.

2003 Strategic Action Plan

In 2003, FDA developed a Strategic Action Plan that identified five broad strategic goals:

• Efficient risk management.
• Improving health through better information.
• Improving patient and consumer safety.
• Protecting America from terrorism.
• More effective regulation through a stronger workforce.

Within each strategic goal area, FDA identified high-level objectives and specific action items that the Agency could accomplish within approximately two years.  We internally track progress on these action items.  In 2004, FDA reported on its accomplishments toward achieving the objectives and action items in the document, FDA Progress and Priorities 2004:  Protecting and Advancing America's Health.  By the end of FY 2005, FDA had accomplished nearly all of the action items that the agency established for itself.

2005 Review of FDA's Operating Strategy

In early 2005, FDA recognized that some emerging external trends, coupled with changes in the federal budget environment, called for a reexamination of FDA's operating strategy.  During a series of strategic planning meetings, agency leadership developed a draft vision for FDA operations in the 21^st Century that reflects many of the principles embodied in the President's Management Agenda and the e-Government initiative.  FDA leaders also recognized that to achieve this vision in an era of budget austerity, we would need to achieve break-through improvements in productivity.  This led us to adopt a theme of transforming FDA operations. 

One of the first steps FDA is taking to achieve this transformation is to revise FDA's strategic goal framework.  Our intention is to better align the strategic goals with FDA's business process model, while simultaneously streamlining FDA's performance management system so that there is a single, coherent hierarchy of strategic goals, long-term goals and objectives, annual performance goals and measures, and short-term action items.  Figure 1 represents the elements of the strategic goal framework, through the concept of a pyramid.  Table 1 (see below) shows how the revised strategic goals align with FDA's three core business processes.  This alignment and streamlining will help make the performance management system easier to understand across all of FDA's operating units.  As the alignment of the framework matures, the annual performance measures will cover a greater portion of FDA's day-to-day activities.  This will increase the relevance and usefulness of the performance information to FDA managers.  With the realignment of lower-level goals to strategic goals, FDA can more effectively show how its activities and outputs contribute to accomplishing Departmental initiatives and strategic goals, which ultimately support seven Presidential Initiatives (healthcare reform, health information technology, healthier living, protecting the homeland, Project Bio-Shield, the President's Emergency Plan for HIV/AIDS relief, and President's Management Agenda).  FDA is currently engaged in a long-term planning effort to complete this revised strategic goal framework and improve our performance management system so that we will more fully satisfy the intent of OMB Circular A-11 and the PART evaluation process. 

The transition to the new strategic goal framework and performance management system will ensure that we develop well-formulated goals and measures, establish appropriate baseline data and targets, and complete existing goal tracking and reporting commitments.  FDA is developing a transition plan that we will synchronize with the PART review cycle, so that the PART review process remains a valuable catalyst and feedback mechanism for performance improvement at FDA.  This will help ensure that we effectively allocate resources through priority setting in our budget formulation process.  FDA is developing a revised strategic plan in FY 2006, which will include the revised goal framework. 

Developing FY 2007 Budget Priorities

Agency leadership made a deliberate choice about the criteria it used to evaluate the FY 2007 budget priorities.  These criteria focused on supporting high-yield returns, advancing the Secretary's 500-Day priorities and DHHS strategic goals, and meeting agency-wide public health priorities.  FDA developed the following table to illustrate how these various priorities were aligned and support our priority setting for FY 2007. 

Overview of FDA Performance

Over the past year, FDA has worked hard to address key challenges in fulfilling our public health mission. Our goal is to maximize the benefits and minimize the risks from the products we regulate by providing high quality and consistent oversight in an environment of changing public health risks, new technologies, and changing market dynamics. We do this by continuously applying the best science and most effective management to get the greatest public health gains for taxpayer dollars. We take our charge as guardians of the public health very seriously. FDA met or exceeded performance targets for all but one FY 2005 performance goal in cases where final results have been reported.

The public health environment is continually evolving due to the rapid growth in scientific advances. At the same time, we are called upon to carry out our public health responsibilities in an atmosphere of budget austerity. To do this well, we have persistently examined our strategic direction and performance measures. In the past year, FDA's senior leadership has refined the agency's long-term goals and objectives, resulting in four strategic goals and 12 long-term goals, all designed to fulfill our commitment to public health, contribute to the success of Secretary Leavitt's 500-day plan, and contribute toward achievement of key Presidential Initiatives to advance public health and homeland security. We continued the process of aligning our annual performance goals to these strategic and long-term goals. Over the next year, we plan to continue to develop better risk-based, outcome-oriented goals and measures.

In 2003, OMB conducted its FY 2005 Program Assessment Rating Tool (PART) review of FDA and issued the following findings:

• FDA has a clear mission and unique Federal role in protecting public health.
• FDA is well managed, and has a strong and comprehensive strategic planning process.
• FDA annual performance goals allow for measurement of performance results. FDA generally meets most annual performance goals.
• Financial management at FDA is sound; FDA has received a clean audit free of internal material control weaknesses for five consecutive years [started in FY 2003].
• FDA is improving collaborative efforts with stakeholders and other Federal agencies.

FDA's PART Summary Table (see next page) summarizes the latest progress with PART.  FDA will continue to improve our performance management system by reviewing and revising our annual performance goals and long-term outcome goals so that they align well with our revised strategic goal framework.  Moreover, FDA will continue to improve how we used performance information to support resource allocation and other management decisions. 

Program Assessment Rating Tool (PART) Summary

Food and Drug Administration
FY 2005 - 2007
(Dollars in Millions)

Program	FY 2006 Enacted	FY 2007 Request	FY 2006 +/- FY 2007	Narrative Rating
FY 2005 PART
Food and Drug Administration	$1,876	$1,947	$71	Moderately Effective
FY 2006 PART
No PART was performed in FDA during the FY 2006 budget cycle.
FY 2007 PART
No PART was performed in FDA during the FY 2007 budget cycle.
Narrative FDA's funding request for FY 2007 supports the Department's strategic goals and Secretary's priorities, and will enable continued progress toward Long-Term Outcome Goals that FDA developed after the FY 2004 PART.   During FY 2005 and continuing into FY 2006, FDA has engaged in a reinvigorated strategic planning process that is designed to ensure that annual performance goals align with a coherent framework of strategic and long-term outcome goals, as envisioned in the PART process and OMB Circular A-11.  Of its eight outcome goals, FDA has completed the efficiency goal and is achieving significant progress toward the other seven goals, as reported annually to OMB.  FDA has developed a new efficiency measure related to human drug safety surveillance for the FY 2007 performance budget.   Further information on FDA's PART summary may be found at www.expectmore.gov.

¹ Includes the 1 percent rescission in the FY 2006 column.

Overview of FDA's Budget Request

The Food and Drug Administration (FDA) performance budget request for FY 2007 is $1,947,282,000, which is $70,798,000 higher than the President's FY 2006 enacted level.  This request is funded through new budget authority, a strategic redeployment of base program resources, and current law and proposed new user fees.  It supports the President's public health and bioterrorism initiatives and Secretary Leavitt's 500-Day priorities. 

Recognizing competing national priorities - from deficit-reduction to the war on terror - FDA leadership conducted a deliberate, comprehensive review of programs needs, performance commitments, and agency, departmental, and administration public health goals and priorities.  Our Agency leadership established criteria to evaluate FY 2007 budget priorities based on whether they generated high-yield returns and advanced these priorities.  After conducting this exercise and identifying priority initiatives, FDA leaders employed marginal cost principles to determine appropriate funding levels. 

The FY 2007 program level increase of $70,798,000 will enable the agency to fund six critical initiatives:  pandemic preparedness, food defense, drug safety, critical path to personalized medicine, human tissues, and additional budget authority to meet statutory obligations under the animal drug and medical devices user fee programs.  To fund these priorities and other important activities, FDA is proposing a strategic redeployment of resources from base programs to achieve program reductions and redirection.  Under this budget, FDA would reduce or eliminate lower priority work while redirecting staff and resources to higher priority activities. 

FY 2007 Summary of Budget Changes

Table 3 shows the FY 2007 summary of budget changes at the program level and demonstrates the willingness of Agency leadership to make difficult programmatic choices.  FDA will use program offsets to fund initiatives that advance these priorities.

The FY 2007 budget submission is reflects the Administration's strong support for meeting our human capital and infrastructure needs while allowing us to advance targeted initiatives that will yield high public health impact.  Ever conscious of the need for budget restraint, FDA is proposing a pragmatic approach based on program offsets to achieve the funding necessary to advance our specific public health initiatives. 

Table 3 - Summary of Change - Program Level

Program Resource Change*	Total
Budget Authority
Pandemic Preparedness	+$30,490,000**
Food Defense	+$19,873,000
Critical Path to Personalized Medicine	+$5,940,000
Drug Safety	+$3,960,000
Tissues	+$2,475,000
Statutory Trigger Needs for ADUFA and MDUFMA	+$7,425,000
Cost of Living	+$20,267,000
Unified Financial Management System (UFMS)	+$1,180,000
Infrastructure	+$14,265,000
Buildings and Facilities	(2,970,000)
Budget Authority Offsets	($52,277,000)
User Fees
Prescription Drug User Fee Act	+$15,268,000
Medical Device User Fee and Modernization Act	+$3,426,000
Animal Drug User Fee Act	+$286,000
Indefinite User Fees	+$1,190,000
Total Program Level	+$70,798,000
Proposed User Fees (Non-Add Reclassified as Mandatory)
Reinspection User Fee	$22,000,000
Food and Animal Fee Export Certification User Fee	$3,536,000

* This table uses the same order as the FY 2007 Crosswalk to Summary of Change - Program Level.
  ** This level is compared to the FY 2006 enacted and includes supplemental appropriation from PL 109 - 148.

Alignment with Administration Priorities

FDA's public health initiatives directly contribute to the Secretary's 500-Day priorities.  Moreover, our FY 2007 budget request will enable FDA to advance important Presidential priorities.  FDA initiatives support Presidential proposals for healthcare reform, health information technology, healthier living, protecting the homeland, Project Bio-Shield and the President's Emergency Plan for HIV/AIDS relief.  We also believe FDA's success in meeting the Secretary's 500-Day Priorities will measurably contribute to the success of Presidential initiatives, and thereby improve the health and security of the American public.  Table 4 shows budget items arrayed by Secretarial priorities and the infrastructure support that also contributes to core public health initiatives. 

Table 4 - Budget Summary Supporting Secretary Leavitt's 500-Day Priorities And Core Public Health Activities

Secretary's 500 Day Priority and FDA Responsibilities	FDA Budget Item	Dollar Amount
	Specific FY 2007 Initiatives
Transforming Healthcare  -- Adverse Drug Incident Reporting  -- Drug Safety Board	1. Drug Safety		+$3,960,000
	2. Human Tissues		+$2,475,000
	3. Trigger Needs for ADUFA and MDUFMA		+$7,425,000
Advancing Medical Research  -- Enhance medication safety based on patient's personal characteristics  -- Improving clinical research and product development	4. Critical Path to Personalized Medicine		+$5,940,000
Securing the Homeland  -- Prepare for potential H5N1 Flu pandemic  -- Support efforts to improve the size & readiness of the Strategic National Stockpile --Improve awareness of, and effective response to, a potential terrorist attack on the food supply.	5. Pandemic Preparedness		+$30,490,000
	6.  Food Defense		+$19,873,000
	Infrastructure Support for Core Public Health Activities
[Infrastructure for core activities directly supports FDA responsibilities under the Secretary's-500 day priorities.]	Cost of Living/Pay		+$20,267,000
	UFMS		+$1,180,000
	Infrastructure		+$14,265,000
	Current Law User Fees		+$20,170,000
	Proposed New User Fees - Reclassified		$25,536,000

The six FDA public health initiatives for FY 2007 identified above directly support three of the Secretary's 500-Day Priorities:  Transforming Healthcare, Advancing Medical Research and Securing the Homeland.^[1] 

FY 2007 Initiatives and Offsets

We present an overview of the FY 2007 Initiatives and Offsets in Table 5.  Following Table 5, we present business case papers that justify the fund for the FY 2007 initiatives.  These business case papers describe our initiatives and explain the public health benefits we will achieve with the funds we request.  We have also included papers presenting our justification for recurring infrastructure items.   

^[1] In the case of the Secretarial fourth priority "Advancing the human condition around world", the six FDA initiatives as well as activities funded by FDA's base programs advance this initiative.

FY 2007 Table of Contents

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