Shutdown Lowdown: What Does a Government Shutdown Mean for Pharma?

Gerald Clarke
Posted: 10/01/2013

A joke doing the rounds at the moment goes “the US government has gone from not doing anything, to …umm…” The government shutdown though due to arguments over a budget and the Affordable Care Act commonly referred to as ‘Obamacare’ will have real effects. The shutdown of non-essential services will affect the pharma industry as 6,600 (45%) of the FDA staff are furloughed and IPOs are potentially delayed.

To read what the shutdown is or why it happened, the excellent Guardian US shutdown: a guide for non-Americansis straightforward, but here we will leave aside the background and the blame game to explain what will happen in the pharma industry.

FDA Shutdown

The FDA, as a government agency, is required to stop spending money in a shutdown but they can maintain essential services and their funding isn’t as straightforward as other agencies. Many of the FDA’s activities are paid for by fees, and these services will continue as they do not require a budget to be passed to remain funded. These fees, under law, are only allowed to be spent on the processes they were collected for. As the DHHS said in it’s published guidance “FDA would continue limited activities related to its user fee funded programs including the activities in the Center for Tobacco Products. FDA would also continue select vital activities including maintaining critical consumer protection to handle emergencies, high-risk recalls, civil and criminal investigations, import entry review, and other critical public health issues.”

  • No new regulatory submissions will be received during the shutdown. Early reports suggested that drugs already submitted for approval would not face any delays as their submissions were paid for by fees, however further inquiries have failed to clarify this situation. It is speculated that the longer the shutdown runs, the larger the chance that delays will be incurred
  • Those being prosecuted by the FDA will receive no respite during the shutdown as prosecutions will continue as normal
  • Routine site inspections will be suspended
  • Many points of contact for the FDA will be unavailable, with even the FDA’s twitter account tweeting “We're sorry, but we will not be tweeting or responding to @ replies during the government shutdown. We'll be back as soon as possible!” Although some communication such as the FDA’s daily digest emails continue to be sent
  • Recalls will continue as normal
  • Monitoring imports will not be supported

IPO Delay

 One very unwelcome piece of news related to the shutdown, but unrelated to the FDA is that the SEC’s funding will eventually cease during a shutdown and so filings and registrations for IPOs could face delays. With the pharma and biotech IPO market booming in recent months, this would be particularly bad news.

One final effect is that the NIH will stop recruiting people to clinical trials. Many of these points will mean that in the short term, effects could be bad, but in the long term they could be disastrous. The longest ever government shutdown was the most recent government shutdown which lasted 21 days. If it lasts that long we may need to worry, until then we can always check out one of the nations excellent national parks…

Gerald Clarke
Posted: 10/01/2013

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