The Trump administration’s back-and-forth messaging over the status of federal funding, which could also impact grant money used by biotechs and pharma companies, has sown confusion and uncertainty.
The White House’s Monday memo from the Office of Management and Budget initially paused federal financial assistance with broad language that put tens of thousands of programs at risk and left many unanswered questions. At first, it was unclear which grants were halted as a result of the two-page order, which sought to review federal spending for future cuts.
Just before the order was set to go into effect Tuesday evening, a federal judge halted the freeze. The next day, the White House sought to clarify which programs were intended to be affected, while the OMB rescinded the order.
Now, while federal assistance and grant recipients wade through the aftermath, the biopharma industry may face uncertainty with regard to grant funding for clinical trials and drug development.
An ‘unusual’ move
With any administration turnover, some turbulence can be expected, according to Jennifer Hawks Bland, CEO of NewYorkBio, a bioscience advocacy nonprofit. However, Trump’s order to broadly and indiscriminately halt federal funds was abrupt by comparison.
“It is unusual to have such sweeping right orders that cover large swaths of programs like this,” said Bland, who has more than a decade of experience in pharma-government relations.
Pharmas and biotechs are deeply connected with federal funds, leveraging grants from the National Institutes of Health alongside industry and private investments to develop new drugs. In the immediate aftermath of the OMB order, it wasn’t clear whether it would apply to NIH grants for clinical trials. Confusing matters even more, the NIH is currently barred from making public statements due to an executive order last week from President Trump pausing all external communications by health agencies.
NIH funds tend to go toward objectives that aren’t commercially motivated, according to the agency, while pharma companies will usually sponsor their own studies. However, NIH funds have a huge impact on drug development. With a budget of nearly $46 billion last year, the agency is the largest public health funder of biomedical research in the world.
NIH funding totaled $187 billion and contributed to 99.4% of drugs approved from 2010 to 2019, the department found in a 2023 study. The amount puts the agency on par with investments made by the pharma industry in newly approved drugs. Another study from 2023 found that government grants and public funding are the third most sought-after finance options for biotechs, behind Big Pharma partners and venture capital.
Finding alternatives
The oscillating directives may give grant recipients pause to continue relying on government money to pay for studies. Leveraging other funding sources from the private sector, either through investments or philanthropic dollars, could become more critical as the Trump administration works through the kinks of a long-term goal to slash federal spending.
“Our current structure has all of those things right now – It has federal funding, it has philanthropic dollars and it has investment dollars,” Bland said. “And all of those things are very well balanced and dependent on the type of research. If one of those three legs of the stool goes away, we have to find a way to keep the stool balanced so patients don't suffer. And I do think it behooves us to think about ways that we would continue to fund innovative research in the absence of any one of those three legs.”
Unfortunately for biotechs and pharmas, the investment space outside of federal grants has been tight and “volatile” for the past few years, according to Bland.
As the dust settles on the week’s sudden changes, the biopharma industry will need to continue bracing for the unexpected.
“Is it always a good idea to make sure you understand the landscape and you understand where things could go awry or funding could dry up? Yes,” Bland said.
