Navigating a Potential U.S. Government Shutdown: Implications for the Life Sciences Sector

As legislators in Washington, DC, face a critical March 14th deadline to finalize federal spending, the possibility of a U.S. government shutdown has taken on renewed urgency. If lawmakers fail to reach an agreement on an appropriations package or pass a continuing resolution before midnight on March 14th, federal agencies will begin suspending “non-essential” operations. This looming deadline is especially concerning for the life sciences sector, which relies on federal funding and stable regulatory oversight to ensure continued availability of medicines and access to patient care.

Understanding how shutdowns occur, which policy debates drive them, how agencies classify “non-essential” operations and personnel, and the real-world effects on research and innovation is crucial. This article provides an overview of the legal framework behind shutdowns, explores the potential impact of the Department of Government Efficiency (DOGE) under President Trump, examines historical consequences for the life sciences, and highlights measures that have historically helped avert or resolve shutdowns.

 

I. Background: How Do Government Shutdowns Happen?

 

Key Legal and Constitutional Foundations

Government shutdowns arise from the U.S. Constitution’s stipulation that no funds may be drawn from the Treasury without an appropriation from Congress. [1] This principle is enforced by key legislation, including: 

• Congressional Budget and Impoundment Control Act of 1974: Established the House and Senate Budget Committees and the Congressional Budget Office. [2] Modernized the federal budget process and established timelines for congressional action. [2]
• Antideficiency Act: Prohibits agencies from incurring obligations beyond their appropriated amounts, requiring many operations to pause if no funds are available. [3]

When Congress and the President fail to agree on annual spending bills—or to pass a continuing resolution (CR) for temporary funding—agencies experiencing a funding lapse must discontinue “non-essential” services.

 

Overview: The Budget Process

1. Executive Proposal: Each fiscal year, the President submits a budget to Congress. [2,7]
2. Congressional Deliberation: Appropriations committees in the House and Senate draft the annual spending bills.
3. Final Approval or Temporary Funding: If no agreement is reached before the fiscal year ends, a continuing resolution (CR) may continue funding at current levels. Without either a new budget or a CR, a shutdown begins.

 

II. Essential vs. Non-Essential Operations and Personnel

 

During a government shutdown, federal agencies classify functions and employees as “excepted” (often called “essential”) or “non-excepted” (“non-essential”), based on guidance from the Office of Management and Budget (OMB) and the Antideficiency Act. [4,10,11]

• Essential (Excepted) Personnel: Those whose duties protect life or property or support other mandatory operations (eg, the military, certain law enforcement officials, air traffic controllers, and specific public health workers).
• Non-Essential (Non-Excepted) Personnel: Those not involved in urgent services, such as many administrative staff, researchers not engaged in direct patient care, and regulatory personnel whose tasks can be temporarily deferred.

For example, while certain high-priority Food and Drug Administration (FDA) activities (eg, emergency drug safety monitoring) may continue, many routine inspections and reviews would likely be suspended if they depend on appropriated funds.4 At the National Institutes of Health (NIH), personnel caring for in-hospital patients remain essential, but most research support staff could be furloughed. [5]

 

FDA User Fees and Shutdown Dynamics

Although the FDA receives funding from user fees paid by industry (eg, through the Prescription Drug User Fee Amendments), [4,8] these resources cannot always be accessed or spent without the presence of personnel necessary to process them. Consequently, when large numbers of “non-essential” staff are furloughed, even user-fee-funded programs can be delayed or halted if, for instance, the staff needed to manage these fees or conduct the reviews are not deemed essential. This leads to:

• Application Review Delays: With fewer reviewers available, the timeline for new drug and device applications may be extended.
• Inspection Backlogs: Facility and compliance inspections can slow, affecting both domestic and international manufacturing sites.
• Financial Strain on Smaller Firms: Biotech startups that depend heavily on timely approvals or clearances may face cash flow issues if reviews are paused.

In prolonged shutdown scenarios, user fee reserves can be depleted, leaving the FDA unable to compensate for appropriations shortfalls. Thus, although user fees provide a valuable funding stream, they do not guarantee uninterrupted operations when appropriated staff are unavailable.

 

III. The Department of Government Efficiency (DOGE)

 

Origins and Initiation

The Department of Government Efficiency (DOGE) is a government cost-saving initiative attributed to President Trump’s administration, championed by entrepreneur Elon Musk. [15] Although no executive order or public law acknowledges DOGE’s creation, some media outlets and unofficial sources claim it originated in late 2017 as part of broader efforts to streamline federal agencies. [15,16] In these accounts, DOGE was presented as an innovative “task force” designed to bring Silicon Valley–style efficiency and technological expertise to government operations.

 

Legal Status

Official records—including those from Congress.gov, the Federal Register, and presidential archives—contain no direct references to a Department of Government Efficiency. [2,9,17] Thus, DOGE lacks recognized statutory authority and operates outside conventional oversight mechanisms. There is no specific line item for DOGE in annual appropriations bills, and no congressional committee has publicly reviewed or approved it. [2,6] Observers describe it more as a “white paper entity” or an advisory concept rather than a formal department.

 

Activities Since Inception

Despite its unclear legal status, anecdotal reports attribute various cost-cutting or efficiency-driven measures to DOGE:

• Agency Audits and Overlap Reduction: DOGE teams have performed “efficiency audits” across federal agencies, aiming to identify redundant programs. Agencies such as the National Institutes of Health (NIH) and the Food and Drug Administration (FDA) have undergone reviews recommending consolidation of back-office support services. [15,16]
• Spending Freeze Proposals: DOGE has proposed measures that would freeze discretionary budgets at certain agencies. FDA hiring and travel budgets were singled out for reduction to lower operational overhead. [16]
• Technology Modernization: DOGE champions data integration and analytics to eliminate bureaucratic bottlenecks, particularly in contract management and grant administration. [15]

Because these reported activities do not appear in official legislation or agency statements, it is difficult to verify their scope or impact. [2,9]

 

Potential Impact on the Pending Government Shutdown

With the March 14th budget deadline looming, various commentators speculate on DOGE’s role in the negotiations:

• Encouragement of Tighter Funding: If DOGE-backed proposals influence White House budget positions, negotiators may push for stricter funding caps or deeper cuts to non-defense agencies. [15] This approach could harden partisan divisions, increasing the risk of a stalemate on budget negotiations.
• Delayed Approvals and Reduced Staff: Should DOGE’s proposed spending freezes at the FDA or other health agencies gain traction, fewer resources might be available for critical functions. In tandem with an appropriations lapse, such cuts could exacerbate disruptions in drug approvals and inspections. [4,15]
• Negotiating Leverage: In some scenarios, DOGE’s proposed efficiencies could become bargaining chips. Lawmakers opposed to broad budget cuts might grant concessions in other areas to avert or mitigate DOGE-driven reductions.

Because DOGE lacks the legal status to directly impose modifications to federal spending, its effect on current budget negotiations is speculative. However, if even a fraction of the proposed cost-saving measures makes it into the final package, the life sciences sector could face added financial uncertainty—especially if a government shutdown halts operations at agencies like the NIH and FDA. [4,5]

 

IV. Potential Impact on International Life Sciences: Collaboration, Market Confidence, and Tariff Policies

 

FDA’s Global Footprint

The FDA wields substantial influence in international pharmaceutical markets, conducting thousands of foreign inspections each year to ensure compliance with current good manufacturing practices (cGMP). [12] In 2019, for instance, the agency performed over 3,100 foreign drug inspections across more than 60 countries. [12] It also issues Certificates of Pharmaceutical Product (CPP) or Certificates to Foreign Government (CFG), which foreign regulators frequently require when U.S.-approved products are exported. [13] During a shutdown, non-essential FDA inspectional activities often pause, resulting in:

• Overseas Inspection Delays: Fewer scheduled foreign facility inspections.
• Export Documentation Backlogs: Slower processing of export certificates.
• Regulatory Coordination Slowdowns: Reduced cooperation or alignment with foreign health authorities.

 

Market Confidence and Tariff Policies

Market and investor confidence often rely on predictability in the U.S. regulatory environment. Under the Trump administration, new tariff policies have created additional uncertainty for manufacturers dependent on imported active pharmaceutical ingredients (APIs) and raw materials. [14] These tariffs could potentially lead to:

• Higher Manufacturing Costs: Import fees raising expenses for drugmakers and device producers.
• Supply Chain Shifts: Companies exploring alternative suppliers or relocating production to mitigate tariffs.
• Collaboration Strains: Multinational endeavors facing new hurdles in budgeting and logistics, compounding the risk of a disruptive government shutdown.

Taken together, these issues underscore that any U.S. funding lapse reverberates well beyond American borders, potentially affecting global supply chains and partnership agreements.

 

V. Historical Ramifications of Government Shutdowns for Life Sciences

 

Past Shutdowns and Their Effects

Government shutdowns have real-world consequences. During the 2013 and 2018–2019 shutdowns, many non-essential employees were furloughed, causing backlogs and stalled services. In the life sciences industries, key disruptions included:

• Interrupted Research: NIH grants and on-site programs faced review delays, directly affecting scientists reliant on steady funding. [5,6]
• Regulatory Approvals Paused: With non-essential FDA employees furloughed, new drug and device approvals slowed. [4]
• Economic Pressures: Smaller biotechnology firms dependent on timely federal grants or approvals experienced financial distress.

 

Measures to Avoid or End a Shutdown

Although shutdowns occur periodically, several historical strategies have resolved or prevented them:

• Policy-Linked Continuing Resolutions (2013)
  • Congress ended a 16-day shutdown via a continuing resolution (H.R. 2775), which also raised the debt limit and addressed health-care-related funding concerns. [6]
• Short-Term Stopgap Funding (2018–2019)
  • Interim funding measures reopened agencies during protracted negotiations, mitigating service interruptions. [6]
• Bipartisan Budget Negotiations
  • Large-scale spending packages, such as omnibus bills or multi-year frameworks (e.g., the Balanced Budget Act of 1997), have defused tension by consolidating debates into a single legislative act. [6]
• Industry Advocacy
  • Organizations like PhRMA, BIO, and patient advocacy groups warn lawmakers of shutdown-induced harm to research, public health, and the broader economy, pressuring them to find compromises. [9,11]

In the event that a budget agreement cannot be reached on March 14th, it is likely that one or more of the above strategies may be employed to resolve or mitigate impact of a government shutdown. Industry will need to monitor the situation closely in order to adequately assess and prepare for potential challenges.

 

VI. Conclusion

A U.S. government shutdown—whether prompted by disagreements over immigration, spending priorities, or cost-saving measures proposed by DOGE—carries considerable risks for the life sciences sector. Agencies such as the FDA and NIH depend on congressional appropriations, supplemented by user fees that cannot always be accessed without essential personnel. Historically, bipartisan deals, short-term funding patches, and lobbying by industry and advocacy groups have helped avert or conclude shutdowns. In today’s interconnected marketplace, the pending U.S. government shutdown adds to the economic uncertainty for multinational research and manufacturing. For pharmaceutical and biotech leaders, developing robust contingency plans remains vital, given that even brief shutdowns or trade disruptions can significantly affect innovation, regulatory oversight, and patient access to promising treatments.

 

参考

1. S. Const art I, §9, cl 7. Constitution Annotated. Accessed March 9, 2025. https://constitution.congress.gov/
2. Congressional Budget and Impoundment Control Act of 1974, Pub L No. 93-344, 88 Stat 297 (1974). Congress.gov. Accessed March 9, 2025. https://www.congress.gov/
3. 31 USC §§ 1341, 1342, 1349-1351, 1353-1354 (Antideficiency Act). Government Accountability Office. Accessed March 9, 2025. https://www.gao.gov/legal/appropriations-law-decisions/resources
4. US Department of Health and Human Services. Food and Drug Administration. HHS.gov. Accessed March 9, 2025. https://www.hhs.gov/
5. National Institutes of Health. Grants and Funding. NIH.gov. Accessed March 9, 2025. https://www.nih.gov/
6. Congressional Research Service. Shutdown of the Federal Government: Causes, Processes, and Effects (RL34680). CRS Reports. Accessed March 9, 2025. https://crsreports.congress.gov/
7. Office of Management and Budget. Budget of the United States Government. GovInfo.gov. Accessed March 9, 2025. https://www.govinfo.gov
8. US Food and Drug Administration. Prescription Drug User Fee Amendments. FDA.gov. Accessed March 9, 2025. https://www.fda.gov/industry/fda-user-fee-programs/prescription-drug-user-fee-amendments
9. Trump White House Archives. Budget & Spending. TrumpWhiteHouse.archives.gov. Accessed March 9, 2025. https://trumpwhitehouse.archives.gov/
10. Office of Personnel Management. Guidance for Shutdown Furloughs. OPM.gov. Accessed March 9, 2025. https://www.opm.gov/policy-data-oversight/pay-leave/furlough-guidance/
11. Government Accountability Office. Reports & Testimonies: FY 2019 Government Shutdown. GAO.gov. Accessed March 9, 2025. https://www.gao.gov/
12. US Food and Drug Administration. FDA Compliance Dashboards: Inspections. FDA.gov. Accessed March 9, 2025. https://datadashboard.fda.gov/
13. US Food and Drug Administration. Electronic Certificates of Pharmaceutical Product. FDA.gov. Accessed March 9, 2025. https://www.fda.gov/
14. Office of the United States Trade Representative. Section 301-Tariff Actions and Exclusion Process. USTR.gov. Accessed March 9, 2025. https://ustr.gov/
15. BNN Bloomberg. What Can Musk’s Department of Government Efficiency Actually Do? BNNBloomberg.ca. Accessed March 9, 2025. https://www.bnnbloomberg.ca/
16. Business Insider. Elon Musk’s DOGE Has Worked Quickly to Cut Federal Agencies. Here’s a List of What’s Been Targeted So Far. com. Accessed March 9, 2025. https://www.businessinsider.com/
17. Federal Register. Official Executive Orders Archive (2017–2020). FederalRegister.gov. Accessed March 9, 2025. https://www.federalregister.gov/