FDA Layoffs, Funding Cuts Cast Shadow Over Biopharma Industry

Amid a raft of federal changes cutting funding and capacities at the Food and Drug Administration, investors are soon expected to pull back from the biotech industry, representing a blow to a primary engine of the Boston area’s economic growth.

Local biotech firms, which were already seeing a downturn after a Covid-era peak in investment and funding, may now face stiffer competition from firms abroad.

“There’s extra pressure like I’ve never seen, probably in 25 years, in terms of the pressure on executive teams and boards to really survive through this period,” said Dan Gold, president of life sciences consulting firm Fairway Consulting.

The Crimson spoke with a range of experts including industry representatives, consultants, and biotech executives to understand a major shake-up of the regulatory and funding landscape for the biopharma industry. All of them said they expected the industry’s growth to slow in the coming months as companies race to adjust to a diminished FDA — which oversees the industry — and a new Secretary of Health and Human Services who is hostile to the pharmaceutical industry.

Most experts cited mass layoffs at the FDA as the most concerning change out of many over the last two months.

“The FDA as we’ve known it is finished, with most of the leaders with institutional knowledge and a deep understanding of product development and safety no longer employed,” wrote ex-FDA Commissioner Robert M. Califf in a LinkedIn post on Tuesday.

Califf’s post followed an announcement that 10,000 employees would be fired from the Department of Health and Human Services by Secretary Robert F. Kennedy Jr. on Thursday, with a third of the firings occurring in the FDA.

In a statement on Tuesday, MassBio CEO Kendalle Burlin O’Connell decried the layoffs.

“I am deeply troubled by the significant and arbitrary dismissal of HHS and FDA employees. Equally disturbing is the departure of key leaders at the FDA like Peter Marks and Peter Stein,” O’Connell wrote.

“We strongly encourage the Administration to reconsider cuts to the government agencies that ensure the continued development of novel medicines,” she added.

Catherine Gregor, chief clinical trial officer at Florence Healthcare, said that the layoffs could jeopardize the United States’ leading position in biopharma on the global stage.

“Our timelines for approval are compared globally, and we don’t want to slip behind,” she said, calling the FDA a “shining point” compared to the European Medicines Agency and the Medicines and Healthcare products Regulatory Agency.

Being “first-to-market” with a new drug can provide a significant capital advantage by allowing companies to reap maximum returns after the extensive and costly drug development process, Gregor pointed out.

“For the U.S., it’s bad if other reviewers are outpacing us. That means trials move out of the US into those regions,” Gregor added, citing losses to Asia and Australia.

Industry veteran and former Head of Clinical Innovation at Pfizer Craig Lipset said that the uncertain regulatory environment will make future planning, and ultimately new drug development, more of a challenge.

“I'm afraid we’ve lost that predictability in terms of how regulators will react to those more innovative methods. Those regulators were also very engaged internationally in helping to define harmonization and norms across the globe,” Lipset said.

“I don’t know that a pharma biotech company can even see around the corner on what the government is doing next right now, and be strategic about it,” Gold said.

Lipset also said companies will be more reluctant to pioneer new approaches in drug development.

“Those that are launching clinical trials for investigational new medicines will be more reluctant to take advantage of innovative approaches that could accelerate their clinical trials,” he said.

Kennedy has expressed concerns about vaccine safety, which could also affect companies’ drug selection decisions under his leadership.

“If I were a diversified pharmaceutical company with portfolios in oncology and rare and vaccine, I will probably be shifting my attention away from vaccines right now, suspecting that it will be either unpredictable or maybe even hostile, in terms of what reception will be at HHS for new vaccine development,” Lipset said.

“This is just going to further prompt an exodus to do trials in those countries versus the U.S. if the timelines start to go long,” Gregor said.

Together, unpredictable regulations along with a decline in investment and federal funding, are causing concern for the local biopharma sector. Massachusetts is the country’s leading biotech hub and home to the largest density of life sciences-related institutions, which are a major source of wealth for the state.

Ben Bradford, Head of External Affairs at the Massachusetts Biotechnology Council, said that the FDA layoffs will have a tangible impact on the Cambridge biotech industry, but was uncertain how far-reaching they could be.

“We’re all still trying to digest the news to figure out what exactly that means,” he said.

Some long-time academics are considering a move to the private sector, according to Gold. But there may not be space to accommodate everyone, since the industry was already seeing shrinkage after an influx of Covid-era funding began to recede.

“There’s already been macro headwinds in the pharma industry for the last two years, as we’ve seen a number of layoffs across pharma,” Gregor said.

The layoffs raise questions about where researchers and biopharma professionals will go during a time when many U.S. companies have been slimming their workforce.

“So the job market was already flooded, and now we have a whole other bolus of people coming in looking for jobs, and there’s just not enough jobs to go around,” she added.

Adding to the industry’s woes was the Trump’s administration’s announcement of reciprocal tariffs on Wednesday — notably 20 percent on the European Union — which are estimated to fully go into effect by April 9.

Many U.S. pharmaceutical companies currently rely on the manufacture of active ingredients from Europe, especially countries like Ireland, Germany and Switzerland.

Spokespeople for Pfizer, Sanofi, Biogen, and Amgen — all of which have locations in Cambridge — did not immediately respond to requests for comment on the pharmaceutical tariffs or the current state of biotech funding. Takeda and Novartis also declined to say how they would be impacted by the moves.

Although the move to introduce tariffs might, in theory, help bring manufacturing back to the U.S, Lipset warned that other policies at the FDA may still discourage domestic drug development.

“We’ve lost predictability with regulators, and we’ve incentivized talent to perhaps take their research efforts elsewhere,” he added.

—Staff writer Stephanie Dragoi can be reached at stephanie.dragoi@thecrimson.com.

—Staff writer Thamini Vijeyasingam can be reached at thamini.vijeyasingam@thecrimson.com. Follow her on X @vijeyasingam.