Research that spans therapeutic areas from cancer to mental health is currently in jeopardy following the Trump administration’s efforts to cut government spending in healthcare — and the cuts have the potential to impact the pharma industry in the long run.

Since he took office, President Donald Trump ordered public health agencies to freeze federal grants and lay off thousands of employees. Most recently, the National Institutes of Health (NIH) was directed to slash funding for vaccine hesitancy research.

Amid the personnel and funding shake-ups, major drugmakers have largely remained silent. But experts noted that the industry has concerns about the negative impact of the funding cuts, even if they’re outwardly remaining quiet on political changes.

Federal funding cuts, experts said, could lead to a slowdown in R&D as well as regulatory uncertainty.

“We’re not going to have as many shots on goal when it comes to discovering new drug targets, biomarkers or therapeutic approaches,” said Katie McCarthy, senior vice president at Lumanity. “This could slow down and stifle early-stage innovation, which would lead to fewer breakthroughs in the long-term — ultimately impacting human health across the U.S. and around the world.”

NIH cuts and their impact

The Trump administration froze some 16,000 grant applications for NIH funding — accounting for about $1.5 billion — and fired 1,200 of the agency’s 20,000 employees in February. Among those fired was Renee Wegrzyn, head of the Advanced Research Projects Agency for Health (ARPA-H), the new federal agency launched by the Biden administration to fund high-impact, high-risk biomedical research.

Trump’s nominee for NIH director, Jay Bhattacharya, noted during his confirmation hearing he didn’t have plans to cut more staff. But he vaguely hinted that he might take a cost-cutting approach if confirmed — leaving the industry with a sense of uncertainty.

“Every dollar wasted on a frivolous study, every dollar wasted on administrative costs that are not needed, is a dollar not spent on research,” Bhattacharya said during his hearing at the Senate Health, Education, Labor and Pensions (HELP) committee last week.

Bhattacharya also beat the drum on Health and Human Services (HHS) Secretary Robert F. Kennedy’s “Make America Healthy Again” priorities, emphasizing that he would promote research projects that would tackle chronic diseases like cancer, diabetes and obesity. But he didn’t clarify what exactly that would look like, or when or how NIH grants would be resumed.

With a budget of $47 billion, the NIH is the largest funder of biomedical research in the world, according to Nature, with much of that money going towards U.S. universities, researchers and smaller biotech companies.

A significant chunk of biotechs rely on NIH funding to conduct preclinical research, because early-stage R&D is often considered higher-risk among alternative investment vehicles, according to Arda Ural, a pharma consultant and life sciences sector leader at EY-Parthenon.

“You cannot run a business today [as an emerging biotech] unless you get a state or federal grant — it is the lifeblood of innovation,” Ural said.

Moderna’s mRNA vaccines, for example, can be traced back to NIH-funded academic research conducted by Katalin Kariko and Drew Weissman at UPenn. Both Pfizer/BioNTech and Moderna commercialized that initial research into their leading COVID-19 vaccines.

“[COVID-19 vaccines] are another example of the impacts of academic research translating into and supporting a massive tailwind for industry,” noted Chandana Haque, executive director of Altitude Lab, a life science incubator funded by Recursion Pharmaceuticals.

Freezing those NIH funds now could have ripple effects much later down the road, halting early-stage research that could be responsible for later breakthroughs.

“The products we have today that we are using in the market were conceived of 10 years earlier,” Ural said. “If you shut down the NIH today, the impact will be somewhat muted in the next couple months — but it will be material and significant in five or 10 years.”

FDA reduces its staff

The Food and Drug Administration (FDA), meanwhile, has also been targeted for budget and staffing cuts, with the agency laying off some 1,000 employees in February — then later rehiring some who worked on medical devices and food in a chaotic back-and-forth.

Any uncertainty or abrupt changes to the regulatory process could have downstream effects on new drugs coming to market, potentially leading to development and approval delays. A lack of predictability could also further deter investors, according to McCarthy.

“There’s so much interaction and collaboration, both formally and informally, between FDA and drug developers — and it’s critical for moving the needle in a significant way to positively impact human health,” McCarthy said.

One of the most important aspects of the FDA are the technically-skilled medical experts — biostatisticians, physicians, toxicologists — who help move the PDUFA process along to ensure drugs are safe and effective and ultimately get approved.

“Once that talent leaves the door, it’s going to be very difficult to backfill that — and that will have systemic shock to the PDUFA process, which all these companies rely on to get their innovation to patients,” Ural explained. “You have to keep the FDA machine working, because the world is watching the FDA as a beacon for standards of quality and scientific evidence.”

Systemic changes at the FDA could also shake the confidence between patients and regulatory authorities, exacerbating adherence to medication problems among consumers, he added.

USAID programs halted

Perhaps one of the more controversial cost-cutting measures undertaken by the Trump administration was its directive to slash more than 80% of the U.S. Agency for International Development (USAID)’s foreign aid contracts. That amounted to pulling $60 billion in U.S. aid from programs that battle diseases like Ebola, HIV/AIDS and malaria abroad.

The direct effects of USAID funding cuts on the pharma industry may not be as obvious as NIH cuts. But many pharma companies that manufacture products for diseases like malaria or tuberculosis rely on USAID funding in order to make those medications available in low-income countries.

It’s also unlikely that private industry would step in to make up for the absence of federal funding, according to Mariana Socal, associate professor in health policy and management at Johns Hopkins Bloomberg School of Public Health. Federal aid programs were created for the purpose of assisting countries that have historically been unable to self-finance the healthcare and medications they need.

“These countries have historically lacked the resources to meet the demand in their local market,” Socal said. “It would be unlikely that [private purchases] would start to happen, because that’s the underlying problem that generated the need for foreign aid in the first place.”

Next steps for the pharma industry

Big Pharma companies have stayed quiet throughout the political upheaval. Industry lobbying group PhRMA, as well as several other large drugmakers, declined an interview for the story.

But smaller biotech players, investors, patient advocates and other stakeholders outside of Big Pharma have been more vocal about their concerns. In an open letter to Trump, hundreds of stakeholders emphasized the need for “efficient and effective U.S.-led biomedical innovation,” and called on the administration to avoid excessive FDA staffing cuts.

Perhaps more importantly, the letter also expressed industry players’ desire to be involved in the restructuring of public health agencies and to be able to include their input.

“There was a small section of that letter that talked about the desire for executives from across the industry to be part of the solutioning,” Lumanity’s McCarthy noted, acknowledging that there could be more work to be done to make federal agencies more efficient. “But to make all of these blind cuts without a longer-term strategy in place to solve some of those challenges — that doesn’t seem like the best path forward.”

McCarthy believes there’s a possibility for pharma companies to increase their own spending to fill in the gap left by NIH cuts, and to strike more partnerships between academic institutions and Big Pharma. Larger pharma companies also have corporate social responsibility and philanthropic efforts that could potentially play a larger role in funding efforts either in the U.S. or abroad. But she acknowledged this might not be financially sustainable in the long run.

“I don’t think they can step in and replace the way the federal government has played that role in the past,” she noted.

In the meantime, one biotech company is attempting to fill at least some of the funding gap. Recursion’s Altitude Lab has created a small fund of $1 million to invest in startup biotechs that rely on the NIH for R&D. The money will fund some 10-15 startups in a similar way that an SBIR would have been granted.

“We had the idea of like, ‘Hey, this is urgent and really important, and if we don’t do something about it, we’re going to see thousands of potential therapeutics stalled or abandoned,’” Haque said. “The idea is to pay it forward, but also to support our industry because we’re all losing out if we don’t see these innovations translating out.”

Haque said she hopes to see more life science and pharma executives step up to find ways to contribute, either by providing cash or taking on higher-risk collaborations to pull research out of academia.

“I hope to see that, but none of us are a replacement for publicly-funded research,” she said. “There’s a reason why governments invest in this. I’m hopeful this is an evaluation period, and that we come out of this with strong support for research and a more efficient structure for how we fund innovation.”

For Ural, consulting his pharma clients means monitoring the rapid political changes on a daily basis, and to avoid making knee-jerk reactions to any more signs of upheaval. He’s advising them to focus on planning for changes until the end state is clearer. But he also emphasized the need for a “healthy FDA and NIH.”

“Yes, we can make [agencies] more efficient and rule out some potential inefficiencies — that’s everyone’s hope,” Ural said. “But innovation cannot stop because diseases do not stop. We need to keep that big picture in mind.”