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CLSA Wire

Partial Government Shutdown Affects Life Sciences Sector

By Jenny Nieto 
Jan. 25, 2019

As the partial federal government shutdown stretches beyond one month, California Life Sciences Association (CLSA) continues to monitor the situation, including the operations of agencies critical for life sciences innovation in California life sciences sector. CLSA remains hopeful that congressional leadership and President Trump can reach a mutually satisfactory agreement and re-open the government soon.

In early December, Congress passed, and the President signed into law three key spending bills to fund government departments and agencies in fiscal year 2019. However, President Donald Trump has threatened to veto any further spending bills that do not include additional border security measures, particularly a $5 billion to build a wall along the U.S. border with Mexico, and the federal government is currently in a partial shutdown while Congressional leaders and the President continue negotiations.

Below is a summary of how the partial shutdown is affecting the operations of agencies critical for life sciences innovation. If your organization is experiencing a particular challenge due to the shutdown, please contact Jenny Nieto, Vice President of Federal Government Relations and Alliance Development in our Washington, DC office (jnieto@califesciences.org or 202-743-7559).

  • National Institutes of Health (NIH) and Centers for Disease Control and Prevention (CDC): Because NIH and CDC are funded through the Labor, Health and Human Services, and Education Appropriations bill, which was included in a Consolidated Appropriations measure passed by Congress and signed into law late in 2018, both agencies are funded through fiscal year 2019 (which ends on Sept. 30, 2019) and operating fairly normally.
  • Food & Drug Administration (FDA):  Although FDA is part of the U.S. Department of Health & Human Services (HHS), its funding comes through the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations bill, which has not been passed for fiscal year 2019.  Since the shutdown began on Dec. 22, 2018, the FDA has furloughed (placed on leave without pay) 41% (7,053) of its employees.  FDA Commissioner Scott Gottlieb has indicated that FDA can still conduct: (1) Activities necessary to address imminent threats to the safety of human life, and (2) activities funded by carryover funds, notably but not exclusively, user fees.  Practically, this means FDA will continue work that’s critical to public health and safety, like responding to emergencies stemming from the flu and food borne illnesses, and can also continue recalls of any foods, drugs and medical devices that pose a high risk to human health. The majority of those people who remain working and paid during the shutdown are supported by funding the agency receives through user fees – monies paid to the FDA by industry to support critical regulatory review activities. FDA has said that “those companies that have filed and paid the product user fee at the time of a regulatory filing and prior to the shutdown, can expect FDA to continue the agency’s review.” However, FDA cannot accept any new user fees or product applications until a fiscal year 2019 spending bill is passed. Should the shutdown continue, additional employees are likely to be furloughed as user fee funds are exhausted and projects are completed. Additional information about the FDA’s contingency plan during the shutdown can be accessed here.
  • Securities & Exchange Commission (SEC): Approximately 94% of the SEC’s approximately 4,400 employees are furloughed. The SEC has discontinued approval of initial public offerings (IPOs), and has also suspended all non-emergency rulemaking and approvals of filings and registrations by registrants and registered entities during the shutdown. Additional information about the SEC’s contingency plan during the shutdown can be accessed here.
  • Department of Treasury: The majority of Treasury staff are also furloughed. The Committee on Foreign Investment in the U.S. (CFIUS), which is led by Treasury, is only working in a slimmed down capacity to address national security exigencies. Review of transactions submitted pursuant to the CFIUS Pilot Program has been suspended and no additional guidance is expected for the duration of the shutdown.  Further, while the review period will be extended by the length of the shutdown, the backlog of transactions awaiting the CFIUS staff review may cause additional delays and other headaches for transaction parties even after the shutdown ends. Additional information related to the Treasury Department’s contingency plan is available here.
  • Department of Commerce: Approximately 86% of the staff of the Commerce Department are furloughed.  During the shutdown, the Bureau of Industry and Security (BIS), which is responsible for drafting the definition of “emerging technologies” subject to export controls and higher CFIUS scrutiny, is operating only for essential duties related to the protection of human life and property. Consideration of public comments to the Administration’s Advanced Notice of Proposed Rulemaking on “emerging technologies” or issuance of any additional guidance will not proceed until appropriations are restored. Detailed information on the Commerce Department’s shutdown arrangements can be accessed here.
  • Internal Revenue Service (IRS): When the funding lapse began in December 2018, approximately 28,000 IRS employees or 88% of the agency’s staff were furloughed. According to the agency, at that time, “most IRS operations [were] closed.” Last week, approximately 46,052 employees were transitioned to “excepted” status (working without pay) to help with the start of the tax filing season and other key areas, but media reports indicate that about one half of those employees did not report to work. Additional information on the IRS’s shutdown contingency plan is available here.

As the trade association representing California’s life sciences community, CLSA continues to monitor the situation and communicate with our members. We remain hopeful that congressional leadership and President Trump can reach a mutually satisfactory agreement and re-open the government soon. Fully reopening the government is critically important for California’s ongoing life sciences leadership – a sector that employs over 311,000 and creates products that enhance and save millions of lives. Click here to follow us on Twitter. Questions? Please contact Jenny Nieto, Vice President of Federal Government Relations and Alliance Development in our Washington, DC Office (jnieto@califesciences.org or 202-743-7559).