No, not bugged, at least as far as I'm aware. Losing to the boss in normal mode but not "giving in" results you eventually ending up back at the start.
When I tried it, it would take me outside of that final area, but I couldn’t enter back into the building. It was as if I was stuck with no progression besides resetting. I can do some more investigation later and report it here. I have a save I can reliably recreate the problem I think.
