Abby Burns (00:18):
From Advisory Board, we are bringing you a radio advisory, your weekly download on how to untangle health care's most pressing challenges. I'm Abby Burns. Over the past several months, the Trump administration has frozen, canceled, or rescinded millions of dollars worth of federal grant funding for scientific and clinical research. This is funding that facilitates everything from basic science research, to translational research, to public health initiatives and more. It's a critical revenue source for universities, school of medicine, and academic medical centers among other grant recipients. These are cuts that a lot of organizations frankly didn't see coming, certainly not on this scale. And the impacts go beyond individual research projects or programs themselves, especially since the NIH is the largest public funder of biomedical research in the world.

(01:05):
It seems like things have quieted down in recent weeks, but that doesn't mean that the dust has settled on these funding cuts or on the ripple effects that they'll have on the rest of the healthcare industry. Today, the goal is to help provide clarity on where things stand and to shed light on what these cuts mean for research institutions, their partners, and the rest of the industry. To do that, I've invited advisory board experts, Emily Heuser and Gaby Marmolejos.

Gaby Marmolejos (01:33):
Hello.

Emily Heuser (01:33):
Thanks for having us.

Abby Burns (01:38):
So guys, I know that your team has been tracking what's going on with research funding cuts for the past several months. I think a lot of people have headline fatigue when it comes to some of the changes that we're seeing. So I would love to start our conversation today by having you catch us up. As of right now, we are recording this conversation August 26th in the afternoon. What is going on with research funding cuts right now, where are we?

Gaby Marmolejos (02:06):
Well, generally speaking, there's been a range from $800 million to $2 billion in NIH grant funding cuts that we've been tracking. And I give a range because there's been some debate to the exact amount of funding being cut. And then there's also just been cuts to other types of grant funding like CDC and the National Science Foundation, NSF. And just there's a lot of different funding cuts, but we've specifically been tracking the National Institutes of Health funding cuts.

Abby Burns (02:39):
My understanding that a lot of these cuts are focused specifically on weakening efforts to strengthen diversity, equity, and inclusion. Just like a lot of the moves that we see coming out of the administration and this HHS administration. In fact, there was an executive order released earlier this month requiring that all federal agencies, including the NIH, including HHS, have political appointees review federal funding opportunities and grants. But when your team looked deeper into the NIH cuts in particular, you found that this focus on DEI, diversity, equity and inclusion is really only part of the story. Is that right?

Gaby Marmolejos (03:18):
They're obviously intentionally looking at DEI and gender ideology. They consider those to be low value and off mission studies, but they're also looking at reducing any vaccine related studies. And then the way in which they're trying to target and find these sort of studies is using keywords. And so by doing that, they sort of unintentionally are reducing funding for other topics like behavioral health research funding, and HIV AIDS, and Alzheimer's disease, and cancer care. And so there's a lot of other topics that have been captured just by focusing on those first areas.

Abby Burns (03:57):
You're alluding to the review that federal bodies did of different grants based on keywords that were included in the abstracts, for example. I think there was a list released by the New York Times at some point of what some of those keywords were, and they included some things you might expect like equity, like race, like gender. They also included words that you might not expect, like women, like trauma. So you can see how the net gets cast quite widely.

Emily Heuser (04:23):
One of the areas, whether intentionally or unintentionally that is impacted by some of these spending cuts is chronic diseases. And that's both in terms of direct cuts to chronic diseases, to cancer, to Alzheimer's. It's contradictory to what the White House is talking about, the drafts of the strategy reports that the White House is putting out, say that they are interested in advancing treatment of chronic disease. And then when you look at where the hits to research have happened so far, we see a lot of cuts to grants that we're supporting research around chronic disease. So indirect contradiction to that legacy that the Trump administration claims that it wants to write.

Abby Burns (05:06):
Yeah, I think one thing that's really helpful to remember is we're talking about NIH cuts, the National Institutes of Health. The word institutes is plural there. It includes the National Cancer Institute, it includes the National Institute on Aging, which looks at some of those age-related diseases like Alzheimer's that you were talking about. I want to talk about what impact these cuts are having. What else do we need to know about the ways that these cuts are being orchestrated in order to have that conversation?

Gaby Marmolejos (05:34):
We just released an article. We talked about the four different ways in which grant cuts are happening. Not all of them are necessarily being implemented right now. But the first one we talked about is the indirect cost cap. That hasn't happened at this point because it's held up in courts, but that one is one way where they would cut facilities and administration costs related to NIH grants that often cover infrastructure, and lab, and things like that. The topic specific cancellations of grants is the one that we've just been talking about. So you're canceling grants that focus on specific topics or have specific keywords.

(06:08):
Another area that we just recently talked about was they started doing lump sum funding for multi-year grants. And what that means is that you would get all of the money for the grant in one year as opposed to over the course of five years for a five-year grant. And we can talk about the impacts of that. And then the last type of funding cut is just frozen or suspended funding for individual universities. And so, I'm sure you've seen the headlines about Columbia University, and Harvard University, and things like that. So for those, it's not specific to NIH, but NIH grants are included in those suspensions of funding to specific universities.

Abby Burns (06:47):
Why is it important that these cuts are happening not just through one mechanism but through four?

Emily Heuser (06:54):
I think it's an example of how the current administration is trying to exhaust all of the different mechanisms available to it to try to control some of the science that's being done, the narrative that's being written. And there's so much legal challenge to each of these different mechanisms that Gaby was talking about. If one of them doesn't end up going through, then there's still other channels that will help reduce the funding.

Abby Burns (07:20):
Right. They're almost covering their bases, right? They're limiting the number of loopholes that can ultimately result in the funding in fact being provided.

Emily Heuser (07:27):
Exactly.

Abby Burns (07:28):
Gaby, you talked about one of the changes being awarding multi-year contracts in a lump sum upfront. To me, that sounds like a win for the grant recipient. Why are we categorizing that as a funding cut?

Gaby Marmolejos (07:43):
The NIH has a certain budget every year. And so, if you have the same budget but now each grant, you're providing all the funding in one year, that means that you can provide less grants each year because you can't distribute that funding across five years now. And so, 1 in 25 National Cancer Institute grant applications now receive funding, which is a big decrease from 1 in 10 grant applications that used to receive funding. And so you can see how your chances of receiving a grant are lower now that they're doing this lump sum funding.

Abby Burns (08:18):
It basically increases the competition for the same number of dollars. Right?

Gaby Marmolejos (08:22):
Well, yes, the Trump administration, they release their NIH budget and they want to reduce NIH funding. I don't know if Congress has approved that at this point, but that is something that they have proposed.

Emily Heuser (08:34):
And that proposal's for 40%, so it's going to be even more significant if that goes through next year.

Abby Burns (08:41):
Let's talk about the impacts that these freezes, these cuts are having. And I also want to get into how organizations are responding to them. I think we have to start the conversation in the logical place, which is to talk about health systems and specifically with academic medical centers. What are the range of impacts that research funding cuts have on AMCs?

Gaby Marmolejos (09:04):
There's the most obvious impact of just margin pressure in terms of now you're no longer receiving funding both for staff but also for certain services, and especially if you have any kind of laboratory at a system. A lot of the staff is often grant funded, so there's margin pressure in that sense, reduce revenue. And then also if you combine these cuts with all the other things happening in the healthcare landscape, Medicaid cuts, reductions in Medicare reimbursement, and other policy things, it's just an additional margin pressure to what they're already facing.

Abby Burns (09:37):
Emily, what would you add?

Emily Heuser (09:39):
I was going to say that cost management pressures are not new. They're exacerbated now, but it means that what we're seeing in response from health systems is generally a continuation of some of the cost management tactics that they've already been deploying, particularly during the pandemic, but since then too. So things like layoffs and hiring freezes, but then also things like closing research facilities, or delaying expansion of facilities, or opening of new facilities. We are seeing some people who are trying to also get creative with exploring alternative revenue sources, certainly with emphasizing philanthropy to offset some of those losses as well. But generally, it's a similar playbook to what health systems have had to deal with before just amplified.

Abby Burns (10:26):
Yep. Just to underscore the budget pressure, academic medical centers make up the majority of funding for universities that are affiliated with AMCs as well as schools of medicine. I think it's around 60% to 70%. So taking another revenue source away from the research function that is an integral part of the tripartite mission of an academic institution just puts that much more pressure on the health system side of the equation. What are some of the other impacts that the funding cuts are having on AMCs?

Gaby Marmolejos (11:00):
There's also just the impact on recruiting talent. Something that a lot of organizations can offer new talent is access to the latest technologies, and innovations, and trials, and things like that. And so now if those aren't funded anymore, it may make it harder to be as competitive, especially because these funding cuts are not necessarily across the board. And so it could very well be that your competitor didn't face as many funding cuts as you have, and so you have a disadvantage in that respect.

Emily Heuser (11:32):
Other countries are also trying to recruit some of the talent that American AMCs may not be able to keep anymore. So you can see ads on the likes of Instagram from countries like Denmark, others in the EU, Australia that are trying to attract US scientists to come and continue the research abroad.

Abby Burns (11:51):
I think that's such an important point, this idea of brain drain, right? If there is less research happening, if there are fewer opportunities to publish, which we know is really important in academia, it is that much harder then to recruit talent to your organization, to keep talent at your organization. As a result, I think we see workforce reductions. Part of that is the budget pressure, but part of it is if you aren't funding the same amount of clinical research as you were in the past, that is a meaningful impact to keeping and growing talent in the US. It's also important from a health system perspective because academic institutions in particular, they aren't clearly divided necessarily between the research side of the house, the teaching side, the care delivery side. So faculty that maybe are working with an institution because they're able to practice medicine as well as do research. Well, if the research opportunity isn't there, maybe those folks are more at risk of leaving to find institutions where they can perform both.

Gaby Marmolejos (12:49):
For sure.

Emily Heuser (12:49):
Yeah, exactly. There's one other impact too, I think, is worth noting. It's not directly in response to margin pressure, but because AMCs want to avoid any extra margin pressures, it's kind of that sense of nobody wants to be the next Harvard. So some of them are retrenching some of their DEI initiatives or rebranding them and spending time and resources on figuring out what their strategy around health, equity, and DEI should be.

Abby Burns (13:17):
Yeah. I can also imagine that that is difficult almost from an identity perspective where we saw just five years ago, all of a sudden equity showed up in the mission statements, a preponderance of provider organizations in the US. And then retrenching on that five years later can lead to confusion within the community, within the workforce of, "Hey, what are the priorities here?" These cuts though don't just affect AMCs, right? How do they affect other types of health systems?

Gaby Marmolejos (13:45):
So the way that NIH grants are often set up, there's primary and sub-recipients of awards. And so the AMC, because they have more of the resources to apply to grants, they often will serve as the primary recipient and then there'll be sub-award or sub-recipients at smaller hospitals, or nonprofits, or different groups in the organization. And so cuts to the AMC means that you're reducing funding to these smaller entities as well. And I think it's important to realize that often they're leading innovative efforts. So it could very well be, there's a lot of maternal health equity programs that are looking to improve access to telehealth in rural communities. And so, it may be that the AMC spearheaded that effort and partnered with local hospitals. And if they lose funding because maternal health is now seen as DEI, then the partners lose funding as well. And you lose funding for a new approach to reduce maternity care deserts.

Emily Heuser (14:43):
And some of these other health systems and health organizations are also subject to that fear we were talking about, that fear of attracting administrative attention. They know that they can't afford to go into a legal battle if their nonprofit status is threatened because they're not aligning with the administration's DEI directives, for example. So again, some of them are spending resources, marketing dollars to try to figure out how to rebrand some of their efforts. Some are engaging in anticipatory obedience to avoid some of that attention. And then there's another fear that I've heard anecdotally, which is that it's going to be harder and harder for these smaller health systems for nonprofits in the healthcare space to compete for private philanthropy. Those AMCs are aggressively looking for alternative funding sources to continue their research. So it means that smaller health systems, hospitals may not be able to rely on some of the same donors or even types of donors that they did previously.

Abby Burns (15:46):
And from Advisory Board research, we know the importance of having a strong philanthropy function within a system to ultimately attracting philanthropy dollars and donors. And a lot of smaller organizations, to your point, maybe don't have the same strength of a philanthropy function, which makes it that much harder to compete for those dollars.

Emily Heuser (16:06):
Yep.

Abby Burns (17:05):
I want to look beyond health systems and start to unpack the effect that a cut in the number of grants being given every year, terminated clinical trials, the effects that these different things will have on the rest of the healthcare industry beyond health systems. And thinking in particular about pharmaceutical manufacturers, med tech companies. What are your thoughts there?

Gaby Marmolejos (17:29):
NIH research contributed to over 99% of all drugs approved between 2010 and 2019, and I think the importance there really needs to be overstated, I guess. Because when you think of these big pharmaceutical companies, you think, "Oh my gosh, they have plenty of resources to cover all this." But what you need to realize is that these companies often invest in studies that have proved promising that were NIH funded originally. So if you look at, NIH often will fund the lab studies, the smaller studies. And based on that, the bigger pharmaceutical companies will determine whether they're going to invest in making a global trial or investigating a different therapy. And so there is going to be a trickle effect on what is the impact of if you reduce NIH funding, now the pharmaceutical companies may have to figure out are they going to step in or are they going to have less studies to be able to pull from to investigate new therapies. And so there definitely is going to be an impact on innovation in the pharmaceutical and potentially the medical technology space.

Abby Burns (18:34):
Gaby, I think that is such an important point. I think the type of ROI that an industry funder might be looking for out of a research initiative, maybe very different from a publicly-funded research initiative, like a lot of the basic science research that happens, that number is so jarring. Just to repeat the number you said, 99% of all drugs approved between 2010 and 2019 use NIH funding. That's massive.

Emily Heuser (19:02):
There's an opportunity here for Arma, for MEDevice to step in and help sponsor some of those trials, but they cannot fill the gap that will be left from federal funding. It's a smaller pool. The math doesn't math even if from another step in to support some of that funding. But it also, it raises the question down the road of the potential for more bias if a pharmaceutical company is sponsoring a trial that introduces question marks, particularly for payers who may be skeptical of the results and hesitant about their coverage decisions.

Abby Burns (19:38):
Yeah, that's a group that we haven't really talked about yet. What about payers?

Gaby Marmolejos (19:44):
A lot of times, payers rely on external studies to build the evidence base for new innovative interventions to improve care delivery or to reduce costs. And so now if you're reducing the number of organizations that are piloting or testing out new innovative payment models or approaches to treatments, that means that they have less of an evidence base to go off of when they're experimenting or looking to find a new way to deliver care. Like CMMI, one of their models, the transforming maternal health model, that one relies on years, and years, and years of evidence showing different structures to improve reimbursement of payment for maternal health.

Abby Burns (20:24):
That's a really good point. We know that one of the biggest challenges for health plans right now is the growth in spend related to mental or behavioral health in particular. And one of the conditions that you named or one of the categories of conditions that you named earlier as being especially affected by cuts in research funding is mental health. That's a huge impact to our collective ability to provide and pay for mental health interventions.

Gaby Marmolejos (20:50):
Yeah, for sure. And years ago, everyone was saying there's a behavioral health crisis and trying to find different ways to address the rising challenges of behavioral health. And so this limits innovations in ways to address and improve treatments for those conditions.

Emily Heuser (21:07):
It limits innovation and it can also limit access, whether that is reducing access to clinical trial sites or the loss of researchers who are also specialists. If you're talking about reducing access to care that's detrimental both to patients and to the health plans that some of the patients may be covered by.

Abby Burns (21:27):
I want to talk about patients here. And Emily, you started to bring the conversation here already. Obviously a reduction in the number of clinical trials, let's say, that we conduct potentially means fewer lifesaving, fewer health preserving treatments, ultimately. What other patient impacts should we be clocking that might be flying under the radar here?

Emily Heuser (21:48):
Many of the things we've talked about already are going to have negative impacts on patients. So when we're thinking about the reduced access to services, to specialists, to trials, yes, that will particularly be felt in areas that are already underserved or traditionally underserved, most likely. So a rural cancer patient, for example, may need to travel further for care if a closer trial site is closed down, for example. There's also inevitably going to be grant that's lost on improving equitable outcomes as programs roll back equity efforts. But longer term, the step that I keep thinking about is this gets thrown around sometimes, but you hear that the amount of clinical information generated doubles every 73 days.

(22:36):
And so, if you are putting a chokehold on health care's rate of knowledge generation for the next four years or more, that is going to hurt the industry's speed of innovation on things like mRNA vaccines and other technologies on patients' perceptions of different health interventions. A lot of, again, this imprecise targeting of trials or of grant titles has led to a whole array of different things that are targeted, including patient perceptions of behavioral interventions. And yes, the lifesaving treatments and interventions down the road.

(23:13):
I saw one analysis that said that if the proposed cuts go through next year, it will be the lowest amount that the federal government has spent on science research in the last century. That's going to have repercussions directly in the healthcare space, that's going to have repercussions for AI, which has downstream impacts for patients. It's going to be far reaching, and we can't begin to predict what all of those different avenues of impact will be quite yet.

Abby Burns (23:43):
Emily, Gaby, I want to end our conversation on where you think we go from here, and I'm using the royal we there. I will say Advisory Board has research and recommendations on ways that especially health systems, but players across the industry can prepare for policy shifts more broadly. And we'll put those in the show notes. When it comes to research funding cuts in particular, what is your team watching for in the months ahead, and what advice do you have for listeners who are grappling with these funding cuts?

Emily Heuser (24:15):
There are so many legal challenges that are happening right now to all of those four different buckets of types of funding cuts that Gaby was talking about earlier. For instance, the indirect cost cap. So we have to wait and see what happens there. Another thing we're keeping our eyes on is what's happening in the world of advocacy. So AMCs we talked about being some of the first and most directly hit by the funding cuts. They're powerful entities. They have the potential to change the course of some of the outcomes that happen here by getting the impact of the funding cuts to local and to state leaders.

Abby Burns (24:50):
Yeah, essentially creating champions that can go to them [inaudible 00:24:53] on their behalf alongside them, et cetera.

Emily Heuser (24:56):
Yes. And then we've seen some wins. So there was public pushback against HHS's move to defund the Women's health Initiative that led to a reversal. So some of these legal challenges may play out in favor of AMCs and those conducting the research. But a lot to watch for, a lot to keep tabs on because it's changing so quickly. And that's something that Gaby and I will be tracking.

Gaby Marmolejos (25:21):
Yeah. And I just can't express enough how important it is to, the collective action perspective. The Trump administration on a number of occasions have reversed course like the Women's Health Initiative, but I've also seen in other examples in terms of cancer funding cuts, or funding cuts for reproductive health clinics, and things like that. And so the collective action, it's more impactful than you realize, and especially if you have clinicians on the ground that can clearly articulate the impacts of funding cuts to your local representative or the national representative, that can make a huge difference.

Abby Burns (25:57):
Well, Gaby, Emily, thank you for coming on Radio Advisory.

Gaby Marmolejos (26:01):
Thanks for having us.

Abby Burns (26:06):
Since we recorded this episode, a few things have happened that I want to make note of. First, a House Appropriations subcommittee released a budget proposal that does not include the administration's proposed 40% reduction to the fiscal year 26 NIH budget that we referenced in this conversation. At this point, both the House and Senate have put forward budgets that do not include such drastic cuts. And a federal judge ruled that the research funding freeze targeting Harvard University was unconstitutional, and that's just what's happened in the last few days. So much is unfolding so quickly. And as Gaby and Emily said, a lot of decisions about recent funding cuts are currently being out in the courts.

(26:45):
But regardless, I want to elevate one of the points that Emily was getting at toward the end of our conversation. Any meaningful reduction in biomedical research will have an impact on health system stability, patient access to care, and the broader healthcare ecosystem today. It may also have an impact on medical and scientific discovery in the US for years to come. We'll be continuing to track these cuts and their ripple effects over time because remember, as always, we're here to help.

(27:30):
New episodes drop every Tuesday. If you like Radio Advisory, please share it with your networks, subscribe wherever you get your podcasts, and leave a rating in a review. Radio Advisory is a production of Advised Report. This episode was produced by me, Abby Burns, as well as Rae Woods, Chloe Bakst, and Atticus Raasch. The episode was edited by Katy Anderson with technical support provided by Dan Tayag, Chris Phelps, and Joe Shrum. Additional support was provided by Leanne Elston and Erin Collins. Special thanks to Lindsey Paul, Madeline Vogel, and Shay Pratt. We'll see you next week.