The 2019 U.S. Federal Government Shutdown and its Potential Impact on Biologics

Patterson Belknap Webb & Tyler LLP
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On December 22, 2018, the United States federal government entered a partial shutdown, which now enters its 19th day.  If the shutdown continues through the weekend, it will be the longest federal government shutdown in U.S. history.  While many federal offices and services are completely closed, agencies that impact biologics—including the FDA, the USPTO, and the Federal Judiciary—remain open in various capacities, at least for now.  Nevertheless, if the shutdown continues, the biotech/pharmaceutical industry could begin to feel its effects.

The shutdown has already affected the FDA.  The regulatory agency responsible for reviewing new drug applications (NDAs) and biologic license applications (BLAs) furloughed 40% of its work force at the outset of the shutdown.  According to the Department of Health and Human Services (HHS), however, FDA “will continue core functions to handle and respond to emergencies” and, as relevant here, will “continue specific activities within the scope of its user fee funded programs, including those for prescription drugs, generic drugs, biosimilars, medical devices, animal drugs, and tobacco products.”  Thus, even in the event of a protracted shutdown, applications for new biologic medicines and for biosimilars under the BPCIA will continue to proceed through their review cycles.  That said, the review timeline may slow and target dates may slip, potentially delaying approval of both new biologic medicines and biosimilars. 

The USPTO has so far avoided impacts.  The agency that handles new patent applications as well as administrative patent proceedings (e.g., IPRs and PGRs) announced that prior year user fees can fund its operations at full capacity for the next several weeks.  But if these funds dry up before an appropriations bill is passed, the USPTO will shut down nearly completely, retaining only a small staff to process filings and maintain outward-facing computer systems.  As such, substantive work by examiners and administrative patent judges would be expected to cease, potentially delaying action in ongoing PTAB proceedings.  Indeed, a USPTO shutdown may constitute good cause to delay final decision beyond the one-year statutory deadline of 35 U.S.C. § 316(a)(11).

Similarly, the Federal Judiciary has been able to operate without interruption, for now.  The United States court system announced this week that the judiciary will continue to operate using “court fee balances and other ‘no-year’ funds.”  As of January 7, 2019, the funds were predicted to sustain full court operations through January 18.  According to the announcement, the judiciary will continue to operate even after existing funds run out “under the terms of the Anti-Deficiency Act, which allows ‘essential work’ to continue during a lapse in appropriations.”  That “essential work” includes fulfilling the judiciary’s constitutional duty to resolve cases.  However, some civil cases involving the federal government have been delayed or stayed while government lawyers are furloughed.  Litigation between private parties may also be affected.  Chief Judge Castillo in Chicago stated that, when the court’s funds are exhausted, he expects to postpone civil trials. 

While the shutdown has for now only minimally impacted the FDA’s, USPTO’s and Federal Judiciary’s interaction with the biotech/pharmaceutical industry, if it continues for a prolonged period, concrete effects will be felt. 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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