Government Shutdown to Have Repercussions for Months to Come

January 31, 2019

FDA restarted full operations on January 28 following Congressional agreement on a continuing resolution to fund government operations for three weeks. However, the situation will get much worse if Congress and the White House fail to negotiate a longer-term budget for 2019 by February 15.

The longest government closure in history created havoc in Washington and beyond, creating months of work for agencies to regain efficient operations. Despite extensive user fee funding for FDA regulatory programs for drugs, biologics and medical devices, many agency programs were halted or put on hold during the 35-day closure.

FDA restarted full operations on January 28 following Congressional agreement on a continuing resolution to fund government operations for three weeks. However, the situation will get much worse if Congress and the White House fail to negotiate a longer-term budget for 2019 by February 15, when President Trump has threatened another closure unless the parties reach a deal on border security.

FDA Centers for Drug Evaluation and Research (CDER) and for Biologics Evaluation and Research (CBER) were able to tap already-collected user fee accounts to support continued review of submitted applications for new drugs and supplements. User fees also could pay for field inspections and oversight related to active medical product applications and products. But the agency could not accept any new user fee payments and thus could not file new submissions. And review activities were halted for products not funded by user fees, such as blood and allergenic therapies and over-the-counter medicines. Already completed guidance documents and policy statements were issued, but others were put on hold.

The end of the shutdown has brought a wave of new submissions to the agency, which staffers will be hard-pressed to process and review to meet pre-established timeframes for action. Medical device makers usually file some 300 submissions per month with the agency, and more than 35 new drug applications already face review deadlines in the first quarter of this year. Observers expect it to take months to process the large number of abbreviated applications for generic drugs that could not be filed during the shutdown.

FDA also faces a backlog in inspections, regulatory decisions, meetings, and communications activities. During the shutdown, FDA commissioner Scott Gottlieb announced shifts in inspection staffs to cover high-risk medical devices, pharmaceutical, biologics and foods, and that the agency would continue to oversee certain drug compounding operations, even though fees had run out to cover those products. The agency basically halted inspections of most low-risk products, such as certain processed foods and producers of over-the-counter drugs and pet foods to be able to monitor situations that raised public health issues.

FDA now is moving quickly to collect additional user fees for 2019 and to bolster funds available to support the agency through another possible shutdown. A top priority for Gottlieb has been to provide back pay for staff, including many who worked without pay during the shutdown.

Hit for IPOs and recruitment

On a broader economic level, the government shutdown is expected to cost some $3 billion in lost productivity and revenue, and further disruption in government operations would compound the losses.

The uncertainty, moreover, has created havoc in financial markets, where delays in initial public offerings by companies were put on hold due to the halt in Securities and Exchange Commission operations. Many technology and biotech start-ups were anticipating IPOs this year, and SEC vetting of such deals is important to establishing confidence in the financing plan. Gossamer Bio attracted attention in January by considering an IPO with language that would set the share price 20 days before trading, a strategy that is considered risky but avoids SEC review.

A long-term impact on FDA and other federal agencies may be seen in difficulties in building and maintaining a capable  government workforce. FDA has been struggling in recent years to compete with the private sector in attracting skilled experts to support its highly technical and specialized regulatory and review operations. The agency has had hundreds of open positions for such specialists, but efforts to fill those slots were put on hold during the closure. Observers expect that the shutdown could have a lasting effect by undermining FDA efforts to retain and recruit scientists and technicians needed to deal with cutting edge therapies and new research methods.

Even if there is a budget deal that keeps the government operating this year, there remains uncertainty about the level of funding Congress will provide for FDA. There are differences between earlier appropriations measures approved by the House and Senate, and it’s not clear how much of an increase will be in a final budget bill.