Almost half of the FDA's proposed $4.5 billion budget would come from inspections and fees paid by companies that make pharmaceutical and medical devices like Pfizer Inc and Medtronic Inc.

Federal spending for the FDA would increase by 0.5 percent to $2.5 billion for fiscal year 2013, which starts October 1.

The FDA regulates products that make up about a quarter of the U.S. economy and deals with food and drug safety issues and drug side effects.

"There is a common good here, and I think it's not inappropriate that industry help and support these critical services that matter so much to the health of the nation and the health of the economy," FDA Commissioner Margaret Hamburg said at a press conference.

About a third of the FDA's funding in the past five years has come from company fees. Under Obama's proposal, the amount would increase to 45 percent, supported in part by new fee agreements with manufacturers of generic drugs and versions of complex biotechnology medicines, and fees from food facilities.

"In this year of austerity, we appreciate that the President has proposed the same funding for FDA, even while many other agencies have been cut," said Diane Dorman, vice president of the Alliance for a Stronger FDA, a coalition of consumer, patient and industry groups that support increased FDA funding.

"However, this is not enough when the FDA mission is expanding and the agency is providing services and protections that Americans value," said Dorman, who is also a vice president of policy at the National Organization for Rare Disorders.

Some $10 million of the FDA budget would go to hiring 19 inspectors to focus on China. Sixteen of them would work in China on food and drug safety and standards.

To reduce costs for consumers by opening the market earlier to generic drugmakers, Obama asked to cut to seven from 12 the number of years drugmakers could exclusively market brand-name biotech drugs.

Obama's plan must be approved by Congress, where it could it could be stalled by wrangling over spending cuts and tax hikes.

(Reporting by Anna Yukhananov)

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