Cuts in the NIH Budget: A radical Proposal

March 10, 2013

It is no secret that sequestration process will impact some components of government spending more than others. One area of great concern is the NIH budget, currently around $30 B, and set to suffer severe cuts. If nothing is done to reverse the sequestration law, NIH will lose 8% of its funding, on top of a flat or declining budget (adjusted for inflation) over the last four years, following the spike due to the stimulus in 2009.

It might surprise some biotechnology aficionados to know that one area of the federal budget that actually has grown is the FDA, whose budget request for fiscal year 2012 totaled $4.36 B, increasing to $4.49 B billion in 2013. About $2 billion of this budget is generated by user fees. This practice was adopted due to frustration within the drug industry over the glacial pace of the drug approval process. The institution of user fees paid by the pharma industry enabled the agency to hire additional staff and speed the process along.

With the current legislative road block in Congress and its unwillingness to consider tax increases as a means of generating revenue, it appears unlikely that the substantial increases required to put the NIH on a meaningful path to support of the American scientific enterprise will be forthcoming.

Perhaps it is time to search for a radical solution.

Drug companies have vast R&D budgets, dwarfing the NIH outlays. These are figures reported the other day by Fierce Biotech for the 15 largest drug companies for 2006-2007:

1. Roche - $8.7B
  2. Pfizer - $7.4B
  3. Novartis - $7.06B
  4. Johnson & Johnson   - $6.66B
  5. Sanofi-Aventis   - $6.25B
  6. GlaxoSmithKline   - $5.59B
  7. Merck - $5.58B
  8. Takeda Pharmaceuticals   - $4.64B

9. AstraZeneca   - $4.23B
  10. Eli Lilly   - $4.13B
  11. Bristol-Myers   Squibb - $3.48B
  12. Boehringer   Ingelheim - $3.03B
  13. Abbott   Laboratories - $2.61B
  14. Daiichi   Sankyo - $1.89B
  15. Astellas   Pharma - $1.63B

Worldwide, pharma R&D budgets are around $70B. Much of this money goes for industry funded drug trials; the New England Journal of Medicine reported that physicians are increasingly skeptical of results of such trials. Pharma profit margins are among the highest for any industry, around 17%, more than double the average for all other industries. The industry is constantly criticized for wasteful R&D spending and a declining rate of productivity, in term of new FDA approvals.

I would propose that user fees be instituted which would fund the NIH programs at double their current level. If the drug companies were to contribute substantially to the NIH budget, the RO1 peer reviewed research grants to individual investigators could be vastly expanded. Given that this means of driving scientific investigation had been incredibly successful, the drug companies would get a much better return on their investment, notwithstanding the fact that much of the funding would support basic science.

The $30 B in user fees would revitalize our research community, and would represent a relatively modest contribution by an industry which has reached trillion dollar proportions on a worldwide basis. The funds could be inserted into the overall NIH budget, so the pharma companies would not have control of them; this would greatly increase the level of confidence that the public holds for these activities.

If such a radical solution is not exercised, I believe that the scientific discovery process on which our society depends will suffer irremediable damage in the coming years.




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