How medtech could be affected by a U.S. government shutdown
27 Feb 2024
Congressional leaders over the weekend did not come to an agreement on legislation to fund several government agencies, including the FDA.
Funding for a handful of government agencies is extended through March 1, including the Departments of Food and Drug, Veteran Affairs, Transportation, Energy, and Housing and Urban Affairs, as well as military construction. Other agencies have funding extended through March 8, including the Departments of Health and Human Service, Justice, Commerce, Defense, Homeland Security, State, Education, Interior and the Environmental Protection Agency, and the legislative branch.
This is the fourth time in recent months that lawmakers have waited until the last minute to agree on funding – the last three times ended with short-term deals. While Senate Republicans remain frustrated over the stalemate, each agency has a set of contingency plans in case of a government shutdown.
“As March 1 approaches, it is critical that Congress understand how a government shutdown could affect so many patients across the country who rely on access to life-saving diagnostic tests and treatments. Failing to adequately fund FDA or CMS could have direct consequences to our health care system, especially if the shutdown lasts long enough to force these agencies to use their reserves,” AdvaMed President and CEO Scott Whitaker said. “A shutdown would have a cascading effect on the patients our companies serve. Many medtech companies are already awaiting FDA and CMS decisions and could face even lengthier review times, which in turn could force small medtech innovators to close their doors before patients ever even have the opportunity to take advantage of their life-improving or lifesaving technologies.”
The FDA is expected to continue much of its operations if the U.S. government shuts down this weekend, while CMS and the NIH face some government shutdown uncertainties.
The critical deadline for lawmakers in the U.S. to extend federal funding is rapidly approaching, and House Republicans have yet to reach an agreement over passing a bipartisan deal that would prevent a government shutdown. The shutdown would affect Americans’ lives in many ways, including the closure of national parks, museum closures, airport delays, federally-funded infrastructure work and more. However, essential services would continue, and that includes most operations at the FDA.
Presently, the FDA has carryover user fee funding that allows for the agency to continue operations of certain activities, including the regulation of human and animal drugs, biosimilar biological products and medical devices.
Medical device user fees support the review and approval of new medical products, reviews of important clinical research requests, the issuance of guidance and other necessary activities that still allow patients to access new therapies, according to the FDA.
“All vital FDA activities related to imminent threats to the safety of human life will also continue,” the FDA said in a statement. Those activities include detecting and responding to public health emergencies, addressing critical public health challenges and managing recalls. The agency is also expected to continue managing and responding to drug shortages and outbreaks related to food-borne illness and infectious diseases.
FDA will continue its surveillance of adverse event reports for issues that could cause harm and managing recalls, as well as reviewing import entries to determine risks to health, determining and conducting systems for cause and certain surveillance inspections of regulated facilities.
“A shutdown of any length could seriously impact patients, as FDA, CMS, and other federal agencies related to our healthcare system will have to stop their work on the life-improving and live-saving medical technologies that so many patients across the country depend on,” AdvaMed President and CEO Scott Whitaker said in a news release in September. “This will have a cascading effect on medtech innovators who are already struggling as they await FDA and CMS decisions on their medical technologies, treatments, and diagnostics. We urge Congress and the President to come together and fund the federal government and prevent a shutdown that could impact millions of patients nationwide.”
AdvaMed also said in a statement that FDA’s processing of new device applications could face delays once carry-over user fee balances exhausted, and following the end of the shutdown, FDA’s Center for Devices and Radiological Health (CDRH) could face a backlog of hundreds of PMAs, 510(k)s and de novo applications.
How can the FDA continue to operate during a government shutdown?
Medical device companies pay fees to FDA when they register their businesses and list their devices with the agency, whenever they submit an application or a notification to market a new medical device in the U.S., and for certain other types of submissions. These actions fall under the Medical Device User Fee Amendments.
The U.S. government, in September 2022, enacted a stopgap funding bill that included the reauthorization of FDA user fees programs through 2027. The reauthorization maintained the existing fee structure but included a new mechanism that allowed the FDA to increase fees in later years if it met goals related to timely review of submissions.
Congress’s user fees provision increased the amount of money it can collect from medtech companies between 2023 and 2027. The maximum it could collect in that timeframe could increase if it meets the underlying performance goals.
For example, for FY 2023, the goal for the average total time to decision for FDA 510(k) submissions is 128 calendar days. The agency set a goal of 290 days to reach a decision for premarket approval submissions in 2023 and 2024.
FDA’s contingency plan for staffing during a shutdown
If the U.S. government were to shut down and there was a lapse of appropriation, 14,585 (74%) of FDA staff would be retained. Of that group, 12,953 (66%) are exempt, and 1,632 (8%) are excepted. An additional 280 employees would continue working directly on COVID-19 response activities.
Exempt staff members include HHS officers appointed by the President and other staff who support activities with available funding, including carryover user feeds, Working Capital Fund and COVID-19 supplemental funding.
The FDA said that carryover user fee funding can be used for certain FDA activities involving products that are typically covered by user fee programs. That includes the approval of new devices, review requests for important clinical research, issue guidance and other activities that give patients access to new therapies.
Excepted staff can legally continue activities during the shutdown and will not be furloughed. The subset includes staff members whose work addresses imminent threats to safety, work necessary for the protection of property and work that is “necessarily implied” from the authorized continuation of other activities.
Vital tasks performed by expected staff will include detecting and responding to emergencies, managing recalls, pursuing criminal enforcement work and certain civil investigations, reviewing import entries to determine risks, surveillance inspections of regulated facilities, surveillance of adverse event reports and other critical public health issues.
For comparison, during the last U.S. government shutdown in 2018, the FDA furloughed 41% of its staff members. User fee-funded programs, including those for medical, devices, were able to continue. User fee work then supported the approval of new medical products, requests for important clinical research, guidance issuance and other necessary activities. It also continues to respond to emergencies and manage high-risk recalls, among other things.
CMS operations to continue, but staffing sees deeper cuts
The Centers for Medicare and Medicaid Services (CMS) has enough money to keep paying for services under Medicaid and the Children’s Health Insurance Program (CHIP) for at least three months. Other activities, including Health Care Fraud and Abuse Control and the Center for Medicare & Medicaid Innovation, will continue to operate as normal. CMS will also continue Federal Exchange activities, such as eligibility verification, using Federal Exchange user fee carryover.
CMS said in a statement that it has sufficient funding to fund into the first quarter of fiscal 2024.
The agency is expected to retain 49% of its staff. Of those staff, 3,012 (46%) are exempt and 205 (3%) are excepted.
Exempt staff includes one HHS Officer, appointed by the President, and employees whose activities are supported by non-discretional funding sources. They are exempt from furlough. Their activities include the Health Care Fraud and Abuse Control Program, Quality Improvement Organizations and user fees.
Excepted staff can legally continue activities in the absence of appropriations, according to CMS. They will mostly be working to ensure that funded activities like Medicare will continue operations.
Federal NIH research could take a hit
The National Institutes of Health (NIH) is slated to retain 4,516 (nearly 23%) of its staff. Less than 1% of the remaining staff are exempt, and 23% are excepted.
Essentially, the only work the NIH will continue is activities at its biomedical research hospital to maintain the safety of its patients, according to a statement from the NIH.
Exempt staff will be supported by unobligated balances from no-year to multi-year accounts. The carryover funds will support priority research projects, grants research oversight and contracting activities that avoid negative impacts that would occur from interruption.
Excepted staff will perform vital tasks at the NIH Clinical Center with patients in important investigational procedures.
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