It’s always the small, emerging companies that seem to suffer the most in stressed economic times. Some startups and research scientists shared their anxieties on Reddit in response to a request for scientists to post how the government shutdown affects them. But throw in a government shutdown with no end in sight, and the ramifications for the healthcare, life science industries and other sectors spiral and expand considerably.
New clinical trial candidates turned away National Institutes of Health’s clinical center has turned away new patients including cancer patients. Although about 1,500 clinical trials in various stages are underway, it won’t begin any new trials until the shutdown is over and will turn away roughly 200 patients for each week it continues. The issue came to a head at a press conference led by U.S. Sen. Harry Reid following an attempt by Representatives to allow continued funding for individual programs, such as clinical trials for children.
IPO resurgence could wilt How do you like the initial public offering market? It’s been on fire in the past couple of quarters for biotechnology companies with drugs and therapeutics in mid to late stage development. Health IT companies have also benefited. But if the government shutdown continues (for all but essential staff) the Securities and Exchange Commission has indicated that processing and approvals of these and other filings and registrations would be discontinued.
Product development delays The partial government shutdown is also posing challenges for drug developers and medical device companies trying to bring products to market. Fox Rothschild Counsel Jason Sapsin, a former associate chief counsel for the US Food and Drug Administration told MedCity News, “If you are a life science company and trying to get product to market and you need to communicate with people to get that issue resolved, it makes it impossible if staff are not there and this is critical.”
It could spur scientists to rethink careers Sapsin added that the effects of a prolonged shutdown, such as delays in research grant funding, would have a ripple effect on product development and job security. The delays caused by the shutdown could lead to budget allocations for projects getting bumped to the next cycle, potentially leaving, for example doctorate and postdoctoral researchers dependent on NIH grants out-of-pocket. “The longer funding is constricted, young scientists will look at other fields. They will wonder how they’ll feed themselves, pay for their education and living expenses. They will think about new career paths…where they can have greater control over our destinies. That can last for a long time.”
Impact on physician training Teaching hospitals are also affected by the shutdown. Dr. Darrell Kirch, CEO of the American Association for Medical Colleges said funding for doctor training and research would be slowed. As it is, the association is projecting a significant shortage of physicians as the Affordable Care Act leads to additional people added to health systems who previously didn’t have insurance.
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In fiscal year 2013 (just ended), the SBIR program at NIH has been materially reduced in terms of the numbers of grants (about 700 fewer than prior FY year) due to the sequester. The same impact might occur this year via a different federal government debacle. The companies dependent on these grants to get to the angel & VC funding stage may be forced to close. This would have significant impact on both new product innovation and on the economy with respect to new small company formation and growth (employment).