(In paragraph three, removes reference to Saudi Arabia, which
incorrectly said deaths there were caused by the new strain of
bird flu virus found in China)
* CDC chief worries as potential flu pandemic looms
* FDA sees long-term consequences in recruitment, future
leadership
* Tenet takes a $50 million hit, while M&A; deals are delayed
By David Morgan
NEW YORK, May 7 (Reuters) – America’s budget cuts may be
beginning to take a toll on the U.S. public health system, from
efforts to track global flu outbreaks to policing a surge in
food and drug imports.
Participants at the Reuters Health Summit in New York this
week spoke to the immediate impact of $85 billion in automatic
government-wide budget cuts that began on March 1. This
so-called sequestration was set in motion when Congress failed
to reach a deal to reduce the nation’s budget deficit.
The budget of the U.S. Centers for Disease Control and
Prevention has been cut by $300 million as it monitors a deadly
new strain of bird flu in Asia.
CDC Director Thomas Frieden expressed concern that the loss
of the funding will hamper the agency’s ability to track
outbreaks worldwide that could lead to a new pandemic. It would
also affect the help that the CDC provides local authorities to
identify and contain sickness at home.
“It would limit our ability to track flu in countries around
China,” Frieden said.
U.S. state and local health departments have cut 45,000 job
cuts in recent years, making the system more vulnerable than it
was in the 2009 swine flu pandemic, Frieden said.
“That’ll be thousands fewer staff to detect and respond to
threats,” he said. “We often provide a significant portion of
their budget for things like tracking,” he added. “Any weak spot
is potentially a weak spot everywhere.”
The new strain of bird flu, known as H7N9, has so far
sickened at least 127 people and killed 27 since it surfaced in
February. According to the latest CDC estimates, the flu kills
about 20 percent of the people it infects.
The current strain cannot cause a pandemic because it is not
spread from person to person, but the concern remains that it
could mutate into something far more contagious.
‘EVEN MORE WITH LESS’
Budget cuts are also inhibiting the Food and Drug
Administration’s ability to hire the staff it needs to enforce
new safety regulations and police surging imports of regulated
products from U.S. trading partners including China.
“The pressures we’re under are enormous,” said FDA
Commissioner Margaret Hamburg, another Summit speaker. “What it
boils down to is that we’re in a situation where an agency that
has already been stretched pretty thin is now having to find
ways to do even more with less in the context of a lot of added
responsibilities.”
As a result, agency staff are doing multiple jobs at once:
“The experts who are doing our guidance and developing our regs
are often the same experts that are doing the product reviews
and committing to more engagement and more frequent meetings and
organizing and running and analyzing the findings from advisory
committees.”
Hamburg says FDA has been hit by a funding loss of nearly
$300 million in funding, not only from the federal budget but
also from reduced user fees that private sector companies pay to
cover the costs of reviewing new medicines. It comes as FDA is
charged with new food safety responsibilities and seeks
additional oversight powers over compounding pharmacies in
response to a deadly drug-related meningitis outbreak.
Hamburg said the FDA is trying to avoid reductions in food
inspections and staff furloughs by cutting budgets for travel
and conferences, postponing new hiring and limiting contracts
for information technology and scientific research.
A longer term problem may be a diminished FDA ability to
attract talented staff, she said.
“Among the many things that are making jobs in public
service less attractive, is the current budget environment,” she
said.
MEDICARE CUT HITS HOSPITALS
The sequester includes a 2 percent across-the-board funding
cut to the Medicare health plan for the elderly, costing
hospitals and doctors billions of dollars in revenue.
Tenet Healthcare Corp, a Dallas-based hospital
chain, says it will absorb $50 million in Medicare cuts this
year due to sequestration rather than cut back on programs or
turn away patients.
“Basically, we’ll just end up this year having $50 million
less of income than we otherwise would have had,” Tenet Chief
Executive Trevor Fetter said.
The sequester is due to cut $85 billion in federal spending
through Sept. 30 and a total of $1.2 trillion over 10 years
unless halted. Congress is being besieged by requests for
targeted relief for government agencies and private
organizations, including cancer clinics, and has already made an
exception for air traffic controllers to prevent flight
delays.
But the U.S. Department of Health and Human Services, which
oversees everything from flu shots to school nutrition, has
shown no sign so far of asking Congress to allow it to shift
funds within its budget to better manage the cutbacks.
“Program managers are working with grantees and partners to
manage the impact of the sequester, and trying to minimize the
impact wherever feasible. These conversations and reviews are
ongoing and will continue through the fiscal year and into next
year,” said an HHS official who spoke on condition of anonymity.
On Wall Street, the sequester has had little direct impact
so far on the investment market for healthcare companies. But as
the latest uncertainty to hang over healthcare since the
beginning of debate on President Barack Obama’s Affordable Care
Act in 2009, it has caused second thoughts among some dealmakers
on Wall Street.
“If you have very big picture strategy discussions with big
companies, (drugmaker) CEOs, overall there’s still uncertainty
in CEOs’ mindsets; there’s still uncertainty in the boardroom,”
said Henry Gosebruch, managing director of healthcare M&A; at
JPMorgan Chase.
“It’s just creating an environment where historically it’s
been fine to wait if you want to do that big M&A; deal. You just
wait it out,” he said. “Uncertainty is the enemy of deals.”
Follow Reuters Summits on Twitter @Reuters_Summits
(Reporting by David Morgan; Editing by Michele Gershberg and
Steve Orlofsky)
