Federal cuts to the NIH could adversely affect drug development across the public and private spectrum because the government agency provides the bulk of funding for basic science research that goes into creating new pharmaceuticals.
“The NIH work is really the critical groundwork for everything that happens in drug discovery,” said Dr. Fred Ledley, a professor in the Department of Management at Bentley University and director of the Center for Integration of Science and Industry.
Cuts are part of a government crackdown on research funding
As part of a government reorganization, refocus and budget reduction, President Donald Trump’s administration has canceled HHS grants, including hundreds of NIH grants, totaling billions of dollars since January. Some of the cuts focus on the infrastructure costs of research, others include studies that focus on diversity, equity and inclusion, and some also target antisemitism. Lawsuits are challenging some of the government’s actions.
NIH research funding affects bulk of pharmaceutical drug development
In March, Trump signed into law H.R. 1968, which funded the NIH at $48.5 billion for fiscal 2025. A United for Medical Research report found that in fiscal 2024, the $36.94 billion provided by NIH to researchers supported 407,782 jobs and $94.58 billion in new economic activity nationwide.
The NIH, made up of 27 institutes and centers, is the biggest single funder of biomedical research in the world, according to Dr. Bhaven Sampat, a professor at Arizona State University’s School for the Future of Innovation in Society and School of Public Affairs and a research associate at the National Bureau of Economic Research. He said that about 80% of the NIH budget is spent on research outside of the NIH, going to universities and medical schools throughout the US.
“But to the extent that we can trace it, and there’s now five or six different kinds of studies with different methodologies that get at this, it looks like the vast majority of important drugs have some linkages back to the NIH,” Sampat said.
Ledley said NIH historically allocates about half its budget to basic science. “All that basic science is really what industry primarily starts with when they start to develop drugs, and our work has shown that if you don’t have that mature basis of basic science, it’s virtually impossible to develop targeted therapeutics,” Ledley said.
Companies that begin their research at very early stages often take longer to finish, with more years of clinical trials and greater costs, so the NIH hands off the basic science to them so they can focus on the later steps in developing therapeutics. Cuts to NIH funding could jeopardize that.
“So we think that there’s a direct relationship to how much basic science one has and the likelihood that a drug can be approved successfully and that anything that reduces the amount of basic science is going to have a significant negative effect on that,” Ledley said.
The NIH also has a role in facilitating clinical trials, Ledley noted, but it doesn’t pay for many of them. Only about 2% to 3% of NIH’s budget goes toward clinical trials. Industry does the development work but US cancer centers provide key support services, such as data collection. Lepley said it is important for the industry to be responsible for the clinical development process because that data is sent to regulatory authorities.
Research cuts may have a broad impact
Private philanthropy will not be able to fill the gap created by less NIH funding, Ledley said. Hospitals may have endowments, but their mission is mainly providing health care to patients, not research, so they are not a likely source for gap funding.
He said NIH cuts will lead to cuts within the industry overall, especially in areas that have clusters of life science and health care companies. “I think it’s starting already. I don’t think it’s when. I think it’s how much,” he added.
Sampat said it also is important to consider the impact of any cuts on what types of research get funded: Is funding reallocated from one area of research to another that may have a bigger societal impact, or are the cuts just eliminating research projects?
“Are they going back into medical research but just different kinds of medical research, in which case the discussion is about the relative rates of return of different medical research investments, or are they going towards something else that may not have as high rates of return on average?” Sampat said.
Cuts also can be looked at in terms of potential secondary impacts. Sampat said studies show about 40% of medical research yields outcomes in disease areas that were not anticipated.
Ledley said the basic science research funded by the NIH affects almost all drugs being used. “So without this, there’s very little seed corn for the pharmaceutical industry to use to grow and produce drugs.”