US Sequestration Cuts Set to Threaten the Future of Medical Research

In efforts to manage the US national debt, President Obama has been faced with hard decisions, and impending funding cuts will have a key political impact in the United States, as well as reverberating effects on the country’s medical research industry, according to recent market research.

According to international market research company, GlobalData (London, UK), the Budget Control Act (BCA) was signed into law by President Obama in August 2011, with the goal of capping discretionary spending programs to reduce the budget deficit by USD 1 trillion by the fiscal year (FY) 2021. Begun on March 1, 2013, the BCA’s across-the-board spending cuts of approximately USD 85.3 billion in FY2013 alone will affect nearly all government programs. Because most public health funding at the federal level is discretionary, the BCA cuts would have especially disconcerting effects on public health and medical research.

Programs funded at the US National Institutes of Health (NIH; Bethesda, MD, USA) and the Centers for Disease Control and Prevention (CDC; Atlanta, GA, USA) will be subject to the 8%–10% budget cut once the BCA comes into play, and a slash in the number of scientific discoveries and technologic developments is predicted as an outcome.

The NIH is the world’s leading medical research agency, whose external grant funding funds a large amount of research at laboratories and universities across the United States, providing financial support for virtually every major medical breakthrough in the United States since the 1940s, including the mapping of the human genome.

Adam Dion, GlobalData’s analyst encompassing healthcare industry dynamics, clarified the agency’s significance, “Private companies typically won’t invest in research endeavors where profit motives are not present, so the NIH plays an essential role. At current funding levels, the NIH supports roughly 432,000 jobs across the US and fuels about USD 60 billion in economic output each year. The indirect financial benefits of their research are profound—it’s been estimated that every USD 1 of NIH funding generates about USD 2.21 in local economic growth. Moreover, funds dedicated to government-sponsored research have remained either flat or have declined when adjusted for inflation. In fact, it has been nearly 10 years since the NIH budget has been doubled.”

The BCA sequester will slash about USD 2.4 billion from the NIH’s budget in FY2013 alone, the effect of which will be felt across all 27 of the agency’s institutes and centers.

The NIH’s largest institute, the National Cancer Institute (NCI), would lose nearly USD 400 million. FY2012 saw the NCI provide more than USD 115 million in seed funding to support nearly 400 early-stage projects centered on cancer technology development, with over 40% of those projects developing targeted therapeutic agents or devices for cancer therapy.

Reduced funding would also be allocated to NCI initiatives Small Business Innovation Research (SBIR), and Small Business Technology Transfer (STTR) Programs, limiting their ability to provide external grant funding to small biotechnology companies and research-intensive start-ups in need of access to capital to fund the commercialization of their technologies. “These programs fuel job creation across the country and foster the next generation of researchers,” emphasized Mr. Dion.

This trend could be reflected in medical research more widely, as the Office of Management and Budget (OMB) estimates sequestration would lead to the NIH issuing about 2,300 fewer grants to medical researchers in FY2013, representing almost a 25% decreased in the NIH’s competitive grant allocation. The BCA sequester would also disrupt the regulatory processes required within the healthcare industry. The cutbacks would see the US Food and Drug Administration (FDA) suffer a USD 318 million cutback in its FY2013 budget, which is virtually the same amount that they spent in FY2011 to review and approve biologics, a new complex class of drugs that could transform the treatment of cancers and immunologic disorders. Moreover, this budget reduction is more than the FDA’s total budget for pre-market review of medical devices.

Mr. Dion has apprehensions as to whether the cuts will in fact have a positive economic outcome. “The BCA sequester would slash funding with no agency or department control on how the cuts are applied among individual programs, and these indiscriminate cuts would threaten a wide range of national priorities, while causing a loss of approximately one million jobs. The Congressional Budget Office [CBO] estimates that the impact of sequestration means that the US economy will see an estimated decline of 0.7% in the nation’s gross domestic product in 2013, due to the ripple effect of cuts on small businesses and government personnel. As the economy already suffers from chronic unemployment and a very slow expansion, the BCA sequester could push the nation into sub-2% GDP [gross domestic product] growth for 2013 and 2014.”

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