H.R. 5651, Food and Drug Administration Reform Act of 2012

Cost Estimate
May 24, 2012

As ordered reported by the House Committee on Energy and Commerce on May 10, 2012

H.R. 5651 would authorize the collection and spending of fees by the Food and Drug Administration (FDA) for certain activities to expedite the marketing approval of prescription drugs and medical devices and to regulate drugs after they enter the market. The bill would provide the FDA with additional regulatory authority to improve the safety of the drug supply chain and establish an early warning notification system to mitigate or prevent critical drug shortages. It also would create a new approval procedure for breakthrough drug therapies and offer financial incentives to drug sponsors to produce certain antimicrobial drugs. The legislation would require FDA to publish the scientific or regulatory rationale for significant decisions issued by the agency regarding a device and establish an expedited process to appeal such decisions. In addition, the bill would permanently reauthorize FDA’s programs that evaluate the use of drugs by children.

CBO expects that enacting the bill would affect the average price of prescription drugs available in the market. Some provisions in the bill would result in higher average prices for certain drugs; other provisions would accelerate the entry of generic versions of some drugs, which would lead to lower average prices. CBO estimates that the net effect of enacting H.R. 5651 would be to reduce the average price of prescription drugs slightly through 2017 and to increase prices in subsequent years.

CBO estimates that enacting H.R. 5651 would:

  • Reduce direct spending, on net, by $72 million over the 2013-2017 period but increase direct spending by $244 million over the 2013-2022 period.
  • Increase federal revenues by less than $500,000 over the 2013-2017 period but lower revenues, on net, by about $3 million over the 2013-2022 period.

Considering both the direct spending and revenue effects, we estimate that enacting H.R. 5651 would reduce budget deficits by approximately $72 million over the 2013-2017 period and increase them by $247 million over the 2013-2022 period. Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues.

Pursuant to section 504 of H. Con. Res. 112, the Concurrent Resolution on the Budget—Fiscal Year 2013, CBO estimates H.R. 5651 would increase direct spending by more than $5 billion in at least one of the four consecutive 10-year periods starting in 2023.

Implementing H.R. 5651 would also have several effects on spending subject to appropriation. The bill would authorize increased funding for a variety of FDA activities, but CBO estimates that the majority of the gross increase in FDA spending would be offset by increased collections of fees that would be credited against discretionary spending. On balance, CBO estimates that net discretionary spending (primarily by FDA) would rise by $337 million over the 2013–2017 period, assuming appropriation actions consistent with the bill.

H.R. 5651 contains both intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). Extending the requirement to pay fees for medical devices and expanding the registration standards applied to drug manufacturers would be intergovernmental mandates as defined in UMRA for state, local, or tribal governments that manufacture medical devices for commercial purposes. However, CBO estimates that the costs of complying with those mandates would be minimal and well below the threshold established in UMRA for intergovernmental mandates ($73 million in 2012, adjusted annually for inflation).

The legislation contains several mandates on the private sector as defined in UMRA. The most costly of those mandates would require that manufacturers of different types of drug and medical device products pay fees to the FDA. CBO estimates that the direct cost of all private-sector mandates in the bill would greatly exceed the annual threshold specified in UMRA ($146 million in 2012, adjusted annually for inflation) in each of the first five years that the mandates would be effective.