Sequestration Threatens Life Sciences, Drug Development

Mar 01, 2013

Barring a last-minute deal by the US Congress to delay or end the threat of sequestration, a total of $85 billion in across-the-board U.S. government spending cuts will be triggered on March 1, threatening to slow scientific research, the development of innovative drugs and medical devices, and the ability of patients to get access to new therapies, reports Burrill & Company in a press statement.

How big an impact sequestration has on the life sciences will depend on whether action is eventually taken that spares the U.S. Food and Drug Administration and the National Institutes of Health from the cuts, and if not, how these agencies take steps to implement the cuts to their individual budgets, the statement reports.

The FDA is expected to lose $318 million in funding and cut hundreds of jobs to adjust to the lower funding level. For the NIH, sequestration would mean the loss of more than $1.6 billion in funding and reduce the number of grants it issues by more than 2,000, Burrill reports.

“While the political parties remain divided over issues of what mix of spending cuts and taxes are needed to address the country’s budget problems, it appears no one wants to take responsibility for unpopular choices and so we end up with an ax, rather than a scalpel,” says G. Steven Burrill, CEO of Burrill & Company. “The unwillingness to make difficult decisions and reach compromise will harm innovation, weaken our economic strength, and delay patients’ access to new medicines.”

The evolving situation in Washington comes against a backdrop of weakened financing activity for the life sciences sector in February, a month in which activity fell dramatically from levels a year ago. Global venture financings for life sciences companies totaled $582 million in February, a 47% decline from the same period a year ago and the lowest monthly activity in two years. On the public financing side, total global financing transactions for life sciences companies in February reached an anemic $865 million, a 78% drop from the $3.9 billion for the same period a year ago.

In addition to the sequestration drama, the threat of a government shut down looms, unless action is taken to address the current spending bill that is set to expire March 27.