Swingeing cuts ‘Eye-watering’ budget cuts aimed at reducing government debt threaten to halt important medical research projects
W
hile the political landscape in the US has been overrun by electioneering in recent months, the vast budget
deficit hasn’t gone away. The country came close to insolvency in August 2011, when it almost reached its permitted debt ceiling, and the Republican opposition did not want it to be increased. A last-ditch deal between the two parties – the Budget Control Act – enabled the debt ceiling to be raised to $2.1 trillion, and a cross-party supercommittee formed to try and work out a deficit reduction package. It failed to achieve its goal by the November 2011 deadline, triggering the sequester – or cuts package – demanded by the Act. This sequester demands an eye-watering collection of cuts, estimated to run to a total of $1.2 trillion, split evenly across the period 2013 to 2021.
In September 2012, the White House
finally released the details of how the projected total cuts of $109bn for 2013 will be implemented. The planned swingeing reductions across defence and discretionary domestic spending have caused widespread alarm. While war-related spending and much of Medicaid and social security expenditure will be exempt, many other areas won’t be. The idea is that, exemptions aside, the cuts will be spread fairly evenly across the board, and will range from 7.6% to 9.6%, plus 2% cuts to the providers of Medicare, the healthcare insurance programme for the elderly. The National Institutes of Health (NIH), for example, is facing a potential 8.2% cut to its $30bn budget in 2013 – $2.5bn – if the sequester is implemented. An additional $150m earmarked for
FDA from pharma and medical device companies, rather than government. These fees are paid by companies to accelerate the product approval process, and a percentage sliced off and sent towards the black hole of the overall budget deficit, rather than used for what it was intended, would likely lead to legal challenges from industry. Even the much lower percentage cut
‘This
sequester demands an eye-watering collection of cuts, estimated to run to a total of $1.2 trillion’
diabetes research would have a 7.6% cut. According to the White House Office of Management and Budget, the NIH would have to ‘halt or curtail scientific research, including needed research into cancer and childhood diseases’. United for Medical Research, a coalition of research institutions and other interested parties, claims the cuts could exceed this amount, perhaps topping 9%. ‘Projections suggest that the total number of NIH awards would drop by 1849,’ they say. ‘Total employment supported by NIH awards would fall by 33,704. It is paramount that Congress preserve NIH funding and prevent an automatic, across-the-board spending cut.’
An alarming impact for pharma is that not only is there a predicted $318m cut in the Food and Drug Administration’s budget, but more than a third of the income that’s being top-sliced actually comes from the user fees collected by
to Medicare is causing great concern. Research carried out by Tripp Umbach, on behalf of the American Hospital Association, estimates that during the first year alone of the sequester, almost half a million jobs would be lost as a result of the $10.7bn cut to Medicare – both people directly employed by the healthcare sector, and those in roles in related industries. It won’t affect the benefits elderly patients receive, rather being achieved by cutting the amount paid for healthcare services. The draconian cuts demanded by the sequester can still be avoided – but only if Congress manages to come up with an alternative plan to achieve the same $1.2 trillion cuts. Unsurprisingly, both parties have their own ideas – with the Democrats not wanting to make big cuts in entitlement programmes such as social security, Medicare and Medicaid, and the Republicans loth to increase taxes. As Congress settles down to work again after the election, and with a variety of other financial measures and tax breaks due to expire at the end of December, watch out for financial fireworks – or at the very least a temporary budget to avoid the worst effects of the sequester.
Sarah Houlton is a chemicals writer based in Boston, US