GAO Reports on FDA User-Fee Spending

Agency has spent more than $500 million on public campaigns, only $25 million on SE applications

Thomas A. Briant, NATO Executive Director

Government Accountability Office

MINNEAPOLIS -- The Government Accountability Office (GAO) has released a second report on how the U.S. Food and Drug Administration’s (FDA) Center for Tobacco Products has spent tobacco manufacturer user fees collected to administer the agency’s federal tobacco regulations. The GAO has the responsibility of reviewing how federal government agencies spend funds. 

As of March 31, 2014, the FDA had collected $1.88 billion in manufacturer user fees since 2009 and has spent $1.48 billion of that amount over the past five years. Of the $1.48 billion spent so far, $508 million, or just over half a billion dollars, has been spent on public education, which has included a TV commercial project called “The Real Cost Campaign” to educate youth on the health consequences of cigarette smoking; the “Break the Chain” campaign to reduce tobacco use; and the communication of information to the public about the activities of the Center for Tobacco Products. 

Also, $449 million has been spent on scientific research projects that will form the foundation for additional FDA regulations on tobacco products. Some of the projects funded include research to establish a baseline analysis of harmful constituents in tobacco products and tobacco smoke; to predict emerging tobacco product use among young people; to determine if there is a public health impact of raising the legal age to purchase tobacco to 21 or to 25; and to determine the influence of advertising and product type on e-cigarette demand among smokers. There are numerous other long-term research projects that the FDA is funding with the manufacturer user fees.

Besides the funds spent on the health-related campaigns and scientific research, the FDA has spent $123 million on retail inspection programs. Overall, retailers have passed the FDA inspections about 94% of the time. 

Next, the FDA has spent $25 million to process substantial equivalency (SE) applications. An SE application is a request by a manufacturer to the FDA to have a tobacco product that was introduced in the marketplace after Feb. 15, 2007, be approved for continued sale if it is very similar to a tobacco product that was already on the market prior to Feb. 15, 2007. The GAO report found that the agency has approved 17 and denied 17 SE applications, leaving 4,177 SE applications still pending.

To date, the FDA has spent $4 million to issue tobacco regulation guidance documents and $19 million on issuing regulations, funding the Tobacco Product Scientific Advisory Committee meetings, holding public workshops, and issuing advanced notices of proposed regulations.

Under the Tobacco Control Act, the federal law that authorizes the FDA to regulate tobacco products, the agency is scheduled to collect the following amount of user fees:

Fiscal year 2015: $566 million
Fiscal year 2016: $599 million
Fiscal year 2017: $635 million
Fiscal year 2018: $672 million
Fiscal year 2019 and each year after: $712 million

The GAO report concluded that the FDA’s Center for Tobacco Products continues to face challenges, specifically setting and monitoring review time frames for SE applications. The report indicates that while the FDA has announced performance measures for some of its SE review processes, which will take effect in October 2014, the agency has not developed performance measures for reviewing the bulk of the 4,177 SE applications still pending.