Pharma, Diagnostics and Biotech Caught in Legislative Crossfire with Release of White House Budget Blueprint

Pharma, Diagnostics and Biotech Caught in Legislative Crossfire with Release of White House Budget Blueprint

Life Sciences Industry, Cancer Research Expected to Be Impacted

The 21st Century Cures Act was broadly supported in the U.S. Congress for its various provisions, including increased funding for cancer research and the revision of U.S. Food and Drug Administration (FDA) standards for review. The Act authorized $4.8 billion over the next 10 years for cancer research under the Moonshot Initiative, the Precision Medicine Initiative (PMI) and FDA regulatory reform. Appropriation of those funds may prove newly problematic in light of the White House administration’s disclosed budget priorities. The initial budget proposal from the Trump administration includes a roughly 20% cut for the National Institutes of Health (NIH) budget, or $5.8 billion less. Overall, the U.S. Department of Health and Human Services (HHS) budget would be cut by approximately 18%. The brunt of the proposed cuts has yet to be assigned among NIH’s various programs and institutes, but the impact of reduced public sector funding on life science and medical research would be unambiguously negative for several industries, including pharmaceuticals, diagnostics and biotechnology.

Cuts in federal discretionary spending on medical and life science research are felt widely in the client base for major life science vendors such as Thermo Fisher Scientific. Around 25% of Thermo Fisher’s over $18 billion in revenue comes from academic and government clients. Capital equipment purchasing is the most sensitive to budget cuts as research labs forego upgrades and capacity expansion. Incremental reductions in consumables and services can also be expected with reduced project activity.

Next-generation sequencing (NGS) has powered basic and applied research that has in turn fed major advances in biopharmaceuticals and in vitro diagnostics (IVD).  Sequencing capacity at government labs and among government-funded researchers is critical to the national life science industry. Kalorama Information estimates that 50% of all NGS end users are academic and government facilities. If substantial cuts are made to NIH grants, government-funded labs would be less inclined to invest in third-generation sequencers. Significant cuts to the NIH budget would slow national biomedical research and undermine concurrent White House efforts to expedite biopharmaceutical and medical device development and market introduction. While the FDA review period may be shortened, drug and device candidates could remain stalled or take long to progress through research and validation.

Previous legislative efforts such as the 21st Century Cures Act are in danger of remaining unfunded under the White House’s budget proposal. The Act’s only appropriated funds are $300 million for NIH-administered cancer research and $40 million for PMI activities in fiscal year 2017. The Act also approves $500 million for FDA reform and restructuring aimed at improving the review process. The appropriation of additional FDA funds could be aided by White House proposals to double user fees collected from device and drug companies for the review of their products.  Full appropriation of the 21st Century Cures Act’s funding is doubtful and even partial funding remains endangered by proposed organizational cuts to NIH. Without recurring support, research progress made under the Cancer Moonshot Initiative would largely rely upon low-cost, private-public collaborative projects such as under the Blood Profiling Atlas pilot for sharing of genomic data.