May 9, 2017

Complicated Landscape Awaits New FDA Commissioner

Holland & Knight Alert
Ethan Jorgensen-Earp


  • Dr. Scott Gottlieb's confirmation as Commissioner of Food and Drugs marks an opportunity for Congress and the public to determine whether he will be able to break the status quo at the U.S. Food and Drug Administration (FDA) or merely uphold it.
  • Several near-term issues will affect FDA operations, staffing and other resources, potentially putting the agency chief in the position of having to educate – and sometimes buck – the White House if he is to pursue an agenda of change.
  • A principal question for those involved in drug and device development will be how Gottlieb and the leadership team at the FDA, under increasingly limited financial and workforce resources, will respond to the desire by lawmakers, the Trump Administration and the public for new and faster medical advancements while keeping costs low.

A poet from West London once wrote, "Meet the new boss, same as the old boss," a frustrated statement lamenting that the status quo in any system tends to prevail despite calls for revolution. If one judges the potential for change at the U.S. Food and Drug Administration (FDA) based on its highest leadership, Dr. Scott Gottlieb's confirmation on May 9, 2017, as Commissioner of Food and Drugs marks an opportunity for Congress and the public to determine whether he will be able to break the status quo or merely uphold it.

Gottlieb's Background the New Normal?

In terms of experience, Gottlieb would appear to be a status quo choice. Gottlieb is a board certified physician in internal medicine and has significant past experience in the federal government, most notably serving as FDA Deputy Commissioner for Medical and Scientific Affairs. His time working with the FDA, the Centers for Medicare & Medicaid Services (CMS), and other federal agencies has given him extensive experience with a diverse set of healthcare issues, including global health, health IT and biodefense. It was similar government service that made former President Barack Obama's first choice for the FDA lead, Dr. Margaret Hamburg – also an internal medicine physician – a natural one. She was confirmed unanimously by the U.S. Senate in 2009.

In addition, Gottlieb has spent several years consulting for numerous organizations in the biotech industry and has served on the boards of a handful of such companies, including Gradalis and Tolero Pharmaceuticals. He has also served as a partner at New Enterprise Associates, a venture capital firm that has advised or invested in dozens of healthcare entities and biotech companies, including GlaxoSmithKline and Vertex Pharmaceuticals. Although traditionally a source of concern among lawmakers, Gottlieb's involvement with industry may now be considered closer to the norm as Gottlieb's immediate predecessor, Duke University cardiologist Dr. Robert Califf was also involved with industry, gaining support from numerous entities to finance the clinical research center he founded at Duke. Both Hamburg and Califf have publicly endorsed Gottlieb for the post.

While Gottlieb's selection extends a nascent pattern of industry expertise in the agency's top office, what differentiates his confirmation are the political circumstances surrounding it. His confirmation hearing before the Senate Health, Education, Labor and Pensions (HELP) Committee and subsequent vote, which represent the first two hurdles to confirmation as FDA chief, were on the whole uneventful, especially given his self-imposed, year-long moratorium on personal involvement in agency decisions with respect to more than 20 companies to which he's had financial or advisory ties. However, it was plain to those watching, and those who have followed actions by the Trump Administration in recent months, that Gottlieb and his staff will have to be mindful of several issues in the near-term. Two of those – funding and politics – will affect operations, staffing and other resources at the agency, and potentially put the agency chief in the position of having to educate – and sometimes buck – the White House if he is to pursue an agenda of change at the FDA.

Funding a Key Challenge

To get a sense of how difficult it is to generate consistent non-defense discretionary funding for agencies like the FDA, one need look only at the National Institutes of Health (NIH). Over the past two decades, the NIH has garnered strong bipartisan support in Congress and throughout multiple presidential administrations, leading to calls for increased funding and resources for the agency to fulfill its research and public health agenda. Despite such popularity, following its doubling in funding from $13.6 billion to $27.1 billion in the early 2000s, the NIH has seen only modest increases in its overall budget, which now stands at approximately $34 billion. And, even with baseline funding increases, purchasing power at the NIH has dropped by more than 20 percent since 2003, as discretionary funding has been unable to keep pace with biomedical research inflation.

The game is even tougher for the FDA, as funding for the agency tends to take a backseat in Congress and, to a certain extent, with the public. This is because, in part, FDA funding is split between discretionary funding and user fees, which are carefully negotiated between industry and the agency to fund the review of new products and other activities. However, these fees, which made up 42 percent of FDA's overall funding in Fiscal Year (FY) 2016, are very limited in scope, leaving less than $3 billion of discretionary funding to run the remaining operations of an agency that has nearly 17,000 employees and whose regulated industries account for more than a quarter of total U.S. consumer spending.

The 21st Century Cures Act, which was signed into law at the end of last Congress, promised to deliver new provisions affecting or establishing policies and programs at the NIH, FDA, and the Health Resources and Services Administration (HRSA), among other agencies, as well as a much needed funding boost for these agencies to implement the law. Indeed, the legislation included $4.8 billion over 10 years for the NIH outside of the regular appropriations process for major projects, including the Precision Medicine Initiative and the BRAIN Initiative. However, while this funding increase served as a strong congressional endorsement of the NIH's mission, little can be made of the mere $500 million over 10 years granted by the bill to the FDA. This small sum must supplement numerous provisions in the law to accelerate and expand the FDA's review work, including advancing therapies for rare diseases, expanding the patient voice in drug development and accelerating approval pathways for regenerative medicine therapies, among many others. This same sentiment was echoed in the recently passed FY 2017 appropriations bill, in which the NIH saw an increase of $2 billion to the FDA's $39 million. In sum, Gottlieb and team must do more with less – and not in a political vacuum.

A Look Ahead

Many recent discussions have focused on both accelerating FDA drug and device reviews to get patients new therapies as quickly as possible and escalating drug prices, especially following recent investigations into the pricing practices of several pharmaceutical companies. As many remember, President Donald Trump was critical of the FDA's drug approval process in his February speech to a joint session of Congress, calling the process "slow and burdensome" and saying that it prevented therapies from getting to the patients who need them. While the speech, held on Rare Disease Day, did elevate an important message about the development of therapies for the rare disease population, median approval times for both new drug applications and biologics license applications have actually quickened over the past five years, from 10.8 months to 10.1, a vast improvement over the 26.9 months it took in 1993. This same trend also applies to medical devices, which now take about eight months for approval rather than more than a year in 2010. Compared with the European Medicines Agency (EMA), the FDA's review times are about two months faster despite approving 26 more products than the EMA during the same time period.

Regardless of those improvements, the Trump Administration has committed itself, and especially FDA leadership, to be even more efficient and effective by "doubling" the total amount of industry funding collected from the aforementioned user fees to more than $2 billion in the administration's FY 2018 budget blueprint, presumably to give more resources to FDA's review divisions. However, the FDA currently takes in just shy of $1.4 billion annualized in user fees in FY 2017 – assuming that "medical products" include prescriptions, generics, biosimilars and medical devices – and the FY 2018 user fee amounts have already been negotiated between the FDA and industry. Given that the FY 2018 base fee amounts already grant at least $430 million over FY 2017, excluding workload and inflation adjustments, the administration's proposal could strain industry relationships by calling for a renegotiation to the user fee amounts while yielding very little for the agency in terms of added financial resources. Thus, while a call for increased FDA funding could be a deeper signal of confidence in Gottlieb's ability to create a balance between the administration and industry, he will certainly be preoccupied with running an agency that currently has more than 1,000 job vacancies and is still subject to an administration-ordered hiring freeze that, unless completely lifted, will continue to affect the FDA's ability to hire senior-level experts.

As for drug prices, President Trump had made their reduction a notable campaign promise. Since taking office, he has found basic alignment on the issue with several unlikely individuals in Congress on the opposite end of the political spectrum, including Sen. Bernie Sanders (I-Vt.) and Rep. Elijah Cummings (D-Md.). Although there have been conversations between drug pricing hawks on both sides of the aisle, no precise agreements have been arranged. Gottlieb has already toed the line in his confirmation hearing by supporting unspecified mechanisms to increase competition in the pharmaceutical market to drive down costs. However, the FDA remains a public health agency that is statutorily limited to reviewing and approving new therapies, not negotiating and setting their prices. And although Gottlieb's views on the issue could create a new environment for conversations between the agency and industry concerning drug prices, any changes will most likely happen over the long term through larger changes in healthcare reimbursements.

A principal question for those involved in drug and device development will be how Gottlieb and the leadership team at the FDA, under increasingly limited financial and workforce resources, will respond to the desire by lawmakers, the administration and the public for new and faster medical advancements while keeping costs low. At this point, one can only begin to speculate at the progress of innovation during Gottlieb's tenure. However, it seems likely that change will be slower – and the status quo more persistent – than many predicted at the beginning of the 45th presidency.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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