Trade groups urge the administration to maintain basic research funding

Tom Temin And with respect to federal funding for basic medical research, I guess we’re talking about health sciences research. What is going on now, if anything? They seem to slash everything in sight.

Sandra Babosu So the Trump administration’s efforts to reduce the size of the federal government have already resulted in decreased funding for biomedical research. One significant cut involves capping indirect costs at 15%, down from an average of 27 to 28%, and indirect costs are vital to keeping the lights on because they cover expenses that are associated with lab facility maintenance, equipment and insurance.

Tom Temin In other words, when people get a grant, they’re allowed until now to allocate 27% of that to these indirect costs. And now it’s 15%.

Sandra Babosu So this was the average. So on average they were about 27-28%. And now they’ve been capped at 15%. These costs tend to vary across different universities because they reflect differences in operational costs across locations. And while some private foundations also offer lower indirect rates than federal agencies do, their grants are complementary to federal funding. So universities are able to accept these lower rates because federal grants provide this baseline research support.

Tom Temin So if the indirect costs are capped at this 15%, will the effect of that be, do you think on research done by grantees?

Sandra Babosu So the problem is that if you cap those indirect costs of 15%, it can reduce the ability of the, for example, the lab facilities to function. So you cannot maintain the labs at the same rate, the equipment, you cannot maybe pay the utilities. And so it can affect a large number of different projects.

Tom Temin And these are mostly academic situations or does this also apply to say if there’s any corporate research grants or contracts or other non-profits outside of university settings.

Sandra Babosu So this primarily applies to universities. But I suppose also other grants that might be given as well.

Tom Temin Okay. And by the way, tell us more about the center for Life Sciences Innovation. That’s something I didn’t realize was a part of ITIF.

Sandra Babosu Sure. So ITIF is a nonprofit, nonpartisan think tank for science and technology policy. We produce research that informs policy discussions and ITIF center for Life Sciences Innovation advocates for accelerating biopharma innovation by recognizing that both the public and private sectors play a key role in innovation. And so our mission is to study and advance the different technology, economic and policy factors that sustain successful life sciences innovation, everything from how new technologies like AI are powering the next generation of biomedical innovation to the optimal set of public policies, both domestically and abroad, that can spur greater levels of innovation.

Tom Temin In the essay that you have published for the center, you cite some privately done nonprofit research showing just the extent of federal financing on the creation of innovation drugs or new drugs. Highlight some of that for us.

Sandra Babosu So there’s some studies done by the National Bureau of Economic Research, a private, nonprofit organization that conducts economic research that shows that, for example, a $1 increase in federal life sciences R&D funding is associated with a roughly 29 cent increase in private funding. So basically what that means is that for every additional dollar of government investment in public research, private companies increase their own research funding by approximately 29 cents. So public funding does not replace private investment. It actually encourages it because when the government funds this early stage research, it reduces the risk for private companies, making them more likely to invest later on in applied research and drug development. So the federal government plays a major role in funding biomedical research.

Tom Temin We’re speaking with Doctor Sandra Babosu. She is associate director for the Center for Life Sciences Innovation, part of the Information Technology and Innovation Foundation. We said at the outset, quite a number of medicines have been developed through this mechanism. Give us a sense of just how extensive that is.

Sandra Babosu This review study that I mentioned from the NBR shows that about 21 transformative drugs that were developed between 1965 and 1992 were funded by the public sector. So the public sector provided foundational insights for over three quarters of these innovations, laying the groundwork for major therapeutic advances.

Tom Temin All right. And so what is the center advocating? Because it sounds like the level of funding necessarily hasn’t dropped, but just the way in which institutions are going to use it. If they cut their overhead to 15%, can they find a way to live with that? If the same dollars are coming in, maybe they can do more research.

Sandra Babosu It’s actually not that simple, because these indirect cost overhead are what keeps the entire research, the entire research facilities going. And so if less and less funding is given to that, the project may not be able to start in the first place. And so that’s why this kind of funding is really important. Because as I mentioned, private foundations don’t tend to support a lot of overhead. They prefer to support only research projects that align with their priorities. And so this overhead is mostly paid for by federal sources, which is why this is such a key play. And so our center basically advocates for a very robust public funding of life sciences research. And I just wanted to also mention that this is the first step that’s been made so far, the cap on the indirect costs. But also if, for example, more and more federal workers from the NIH get let go and the size of the NIH reduces, then that means that it won’t be possible for the NIH to make decisions on grants as quickly, which would reduce the number of grants that are taking place at any one time. And we also are not sure yet about what will happen with the overall NIH budget.

Tom Temin Right. That’s really maybe the most determinant factor is what happens with NIH staffing levels. We don’t know what the grant authority they’ll have will be. It’s a big number right now, hundreds of billions a year. But we don’t know what is going to happen yet, because that’s a congressional budget line item. And at the moment, there’s no budget for 2025 or 2026 for that matter.

Sandra Babosu So the NIH budget in 2024, I believe, was around $47 billion. And so now we’re going to wait to see what will come next. But already the reducing the NIH workforce can impact their ability to make grants.

Tom Temin Sure. And getting back to that issue of the other organizations that might or might not pick up, say, that differential, is that mostly corporate that you’re talking about? Where else does funding come from besides federal for this type of leading edge, if you will, medical research.

Sandra Babosu So there are other private or private foundations that supports this type of research. One example is the Robert Wood Johnson Foundation. And so they can also complement this kind of federal funding, in addition to pharmaceutical companies and pharma companies especially tend to invest in later stage research. So whereas federal funding supports basic research that might not have immediate commercial applications, pharma companies tend to support research further down the line.

Tom Temin Well, places like Robert Wood Johnson throw a lot of money around. Do you think there’s any chance that an organization like that would say, all right, we’ll increase our support for overhead by 5% or 2.5% to help make up that, because there might be some grantees that can live with 15%, maybe some of them can live with 20% overhead. And so maybe Robert Wood Johnson or one of those types of foundations maybe give a little less to public radio and more to their grantees.

Sandra Babosu It’s possible for for that to happen. But in general, the foundations like to support specific research projects, not broad overhead. And the reason they do that is because they have particular funding priorities and they want their projects to align with that. And so it might be that they give a little bit more to overhead. But in general, that has been the role of the federal government. And so it’s kind of all of these funding sources are complementary. You have the federal government that provides broad based support and also support for very early, very uncertain, very basic research. And then you have private foundations that complement that for more specific research projects. And then further down the line, you have the pharma companies that invest in later stage research when some promising scientific discoveries have been made, and then they take that and develop new drugs.

Tom Temin In other words, the DOGE has kind of rolled a boulder downhill, and it’s gathering momentum, which could have a big crash at the bottom. Sounds like.

Sandra Babosu Right. So there’s this synergy between public and private funding. And so if one of them gets affected, then further down the line, medical innovation in general can be affected negatively.

Tom Temin And by the way, is it only NIH or do other federal entities also fund medical and biomedical research?

Sandra Babosu So another entity that funds medical research is ARPA-H, which is which is modeled after DARPA, and was founded in 2022. And it’s basically, so the NIH tends to support more foundational research, early stage research that builds a knowledge base of biomedical science to enhance health. Whereas ARPA-H aims to address very large scale, high risk, urgent health challenges. And so they’re very complementary in that sense. And so both of them are funders of medical research.

Tom Temin And this 15% cap covers all of it regardless of the source.

Sandra Babosu I believe it does. I know that NIH is capped at 15%. ARPA-H is independent.