President Barack H. Obama’s recently released Fiscal Year (FY) 2010 budget for the U.S. Food and Drug Administration (FDA) proposes historic spending for the agency of more than $3 billion, an increase of more than $500 million over FY 2009 spending. One of the two major initiatives proposed by the FY 2010 budget is “Protecting America’s Food Supply.” To help fund the budget increases, the president’s proposal would impose four new user fees to generate more than $200 million. The president’s FY 2010 budget for the United States Department of Agriculture (USDA) also proposes new user fees, but would require new legislation to allow the USDA to collect the fees.
Protecting America’s Food Supply
Under the food safety initiative, funding for food-industry regulatory activities would exceed $1 billion, a $259 million increase over FY 2009 spending levels. Notably for the food industry, the budget proposes to collect nearly $95 million in new user fees. The proposed user fees would be allocated to register food facilities, increase food inspections, issue food and feed export certificates, and reinspect food facilities that fail to meet the FDA’s safety standards.
The goal of the Protecting America’s Food Supply initiative is to prevent intentional and unintentional food contamination. The initiative will emphasize the principle of risk-based prevention with verification under a system where the agency will hold all segments of the food industry accountable for ensuring that their products meet U.S. food safety standards. In addition, the initiative will focus on both foreign and domestic sources of ingredients, components, and finished food products at all points within the supply chain. Specifically, the initiative will allocate funding towards activities such as an integrated system with states for food inspection and enforcement activities, import review and analysis, and surveillance for intentional and unintentional food contamination.
The president’s FY 2010 budget for USDA also proposes increased spending on food safety initiatives and the assessment of new user fees for the food industry. In particular, the proposal includes a $1 billion funding level for the Food Safety and Inspection Service (FSIS), which is responsible for ensuring the safety of food products regulated by the USDA. The funding will be allocated to cover the costs of federal meat and poultry inspection programs as well as federal support for state inspection programs. The budget also proposes new performance user fees that will allow for the collection of fees from plants that have sample failure or require additional inspection activities stemming from a pattern of regulatory noncompliance. However, before the new performance user fees can be imposed, the USDA must be given the authority to collect the fees. It is anticipated that food safety legislation likely to be introduced later this year will provide the USDA with this authority.
Unlike the drug and device industries, and USDA-regulated meat and poultry industries that have paid user fees for years, the segment of the food industry regulated solely by the FDA is unaccustomed to user fees. While the food industry might be critical of the FY 2010 budget’s new user fees, the increased emphasis on food safety makes it politically difficult for the industry to oppose these new fees. Nevertheless, for an industry with slim profit margins, the cost of paying user fees while also complying with the new safety regulations anticipated to be enacted later this year could pose significant hurdles.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our food industry clients and colleagues. If you have any questions about this alert or would like to discuss this topic further, please contact your Foley attorney or any of the following individuals:
Michael D. Flanagan
Sarah A. Key
David L. Rosen