Examination of Federal Research Funding in Life Sciences: Historical Context and Current Policies

Ram May-Ron, Managing Partner, FreeMind

March 2, 2025

Federal research funding has long been a cornerstone of innovation in the life sciences, shaping advancements across biotechnology, medicine, and public health. The policies that direct this funding can significantly impact both academic institutions and the private sector, influencing research priorities and economic growth. As we evaluate the return of the Trump administration, understanding the historical context and anticipated changes in research funding illuminates future directions for the industry.

Part 1: Historical Comparison

To understand the current funding landscape and anticipate potential shifts, it’s essential to examine the approaches to NIH and federal research funding under the Obama, Trump, and Biden administrations. Each administration’s strategy highlights different priorities and outcomes that have shaped the life sciences industry and research environments.

Obama Administration (2009–2017)
The Obama administration emphasized foundational scientific discovery and global health initiatives, achieving a modest total growth in NIH funding of around 3.2% over its eight-year term.

NIH Budget Trends: NIH budgets increased from approximately 40.5 billion in FY2009 (adjusted for inflation) to 41.79 billion in FY 2017. This growth facilitated programs like the Cancer Moonshot and Precision Medicine Initiative, focusing heavily on basic research frameworks and global disease programs.

Research Focus: Investments were heavily directed towards basic research and global disease threats such as HIV, Zika, and Ebola, predominantly benefiting academic institutions focused on early-stage research.

Trump Administration (2018–2021)
Under the Trump administration, the NIH budget experienced substantial total growth of about 7% (adjusted for inflation) over four years, with a notable shift in focus toward industry-related research.

NIH Budget Trends: The budget increased from roughly 42.22 billion in FY2018 to 45.24 billion in FY 2021, reflecting a rapid expansion compared to the previous administration.

Shift in Research Focus:

Emphasis on Translational and Clinical Research: The administration directed more funding towards translational research and clinical applications, reducing the share devoted to pure basic research. This strategic reallocation aimed to support research initiatives with direct and immediate real-world applications, boosting projects in drug development, pandemic readiness, and other industry-relevant fields.

Industry Collaboration: Major initiatives such as the HEAL Initiative targeted the opioid crisis, and Operation Warp Speed facilitated unprecedented public-private partnerships to expedite COVID-19 vaccine development. These efforts underscored a move towards enhancing the role of NIH in supporting industry-driven research.

Biden Administration (2022–2024)

The Biden administration maintained consistent NIH funding growth with a positive but constrained increase of approximately 3% in real terms over its term and reached a total of $48BN in FY 2024.

NIH Budget Trends: This period saw the NIH budget grow in a balanced manner with continued support for both basic and translational research. The focus shifted towards allocating around 40–45% of the total budget to basic research and 25–30% to translational and clinical applications.

Key Initiatives: The administration emphasized health equity, pandemic readiness, and substantial infrastructure investments through projects like ARPA-H, while addressing substantial public health challenges.
Comparative Analysis
Across these administrations, the focus of NIH funding has evolved significantly:

Impact of the Trump Administration:

The Trump administration was generally beneficial for federal life science research funding overall, with substantially larger budget increases compared to the previous administrations. This expansion was particularly favorable to industry-driven research, fostering collaborations and innovation through increased funding resources and public-private partnerships.

Academic Adjustments: The shifting priorities necessitated adjustments from academic institutions to align with industry-driven research priorities and capture federal funding opportunities.
Understanding these historical contexts underlines the potential strategies and outcomes of the new proposals under the returning Trump administration.

Part 2: Current Steps and Their Effects

In a move marking a strategic pivot from its overall approach to federal budget cuts, the Trump administration has introduced a series of targeted reductions within the Department of Health and Human Services (HHS). This approach diverges sharply from the more extensive cuts enacted in other federal departments, reflecting a calculated effort to manage sensitive political dynamics and preserve key health functions.
Continuing Budget: Currently, the U.S. federal government is operating in fiscal year 2025 on a continuing budget, as no new budget has been approved. The deadline for approving a new budget is March 14, 2025. If no new budget is approved by then, the government may continue with a continuing budget for the full year or face a shutdown. Discussions are ongoing in the Senate about an agreed budget outline. Once passed, this will provide clarity on the NIH budget, expected within the next several weeks.
Technical Freeze in the National Registry: A technical freeze in the national registry currently prevents the NIH from registering new review panels to review applications. This is a standard procedure that has occurred during past government lockdown situations like the current one. Practically, this has two aspects:

A) Study sections that have been scheduled and registered will proceed as planned. Importantly, 85% of the January cycle SBIR study sections have indeed been scheduled and will allocate funds.

B) NIH and other agencies continue to accept applications. Once the registry is unfrozen, all study sections will convene quickly to award funds. Anyone not submitting now may miss out substantially, as they will not be in the queue.

C) This situation emphasizes the importance of submitting applications now, as many fear submission, and expected success rates for study sections meeting post-unfreeze tend to be better than average. This has historically always been the case.
Applications Are Accepted and Awarded: Since the new administration took power, we have not observed any change in the acceptance of applications, and all deadlines have been maintained. However, there has been a noticeable slowdown in final funding decisions. A comparative analysis shows that in January and February of 2025, a total of 1.5 billion has been awarded by the NIH compared to about 2.5 billion during the same period last year, representing a decrease of 35%. This indicates that applications are submitted, reviewed, and awards are made, although at a somewhat slower pace.

Applications are being submitted and accepted for review, and reviews are occurring, albeit at a somewhat slower pace. Final funding decisions are also being reached more slowly. This trend can be attributed to two main factors: a standard re-adjustment of funding policies typical with any new administration taking power, and the fact that Congress has not yet confirmed the 2025 budget. As a result, like all government entities, the NIH is operating on a continuing budget until a full budget is approved. The deadline for Congress to approve the budget is March 14.
If the budget is not approved by this date, a resolution for a continued budget for the entire year could be passed, or the government might face a shutdown. Should a continuing budget be approved, effectively matching the 2024 budget, no budget cuts would be implemented. Conversely, if a government shutdown occurs, applications would form a “queue” to be funded once the budget becomes available. Based on our past experiences with similar situations involving continuing budgets and shutdowns, applicants who submitted during these periods were in an advantageous position when funding was eventually authorized. Success rates for these submissions tended to be somewhat higher than average, as fewer applications were considered, resulting in less competition for funding.

These strategic maneuvers reflect the administration’s intent to cautiously yet fiscally manage HHS operations, optimizing budgets while ensuring vital research and public health environments remain robust and effective.

Part 3: Potential Future Moves by the Trump Administration

Expected Policy Directions
1. Diversity, Equity, and Inclusion (DEI) Cuts:

It is anticipated that additional cuts may target DEI initiatives. Although these reductions may not directly impact research funding, they could set a tone favoring industry support over academic endeavors. This shift aligns with the administration’s previous stance, as observed in its initial actions and rhetoric.

2. Support for Industry Over Academia:

Consistent with past strategies, the Trump administration appears focused on enhancing support for industry over academia. This is evidenced by targeted reductions in indirect costs linked to academic research settings. Comments from Trump officials, as highlighted in The Washington Post article, suggest a critique of federal health agencies as excessively slow and academic. Such perspectives may influence policy directions that continue prioritizing research mechanisms and frameworks aligned with industry needs and agility.

3. Potential NIH Budget Adjustments:
Senate Budget Blueprint Approval:

•On February 25, 2025, the Senate passed the 2025 budget blueprint resolution, colloquially known as the “Big Beautiful Bill.” This blueprint outlines changes in the proposed federal budget, including specific cuts across various sectors, such as health.

Impact on Health Budgets:

While the blueprint does not detail specific budget cuts within the broad category of health, it is anticipated that some of the reductions may include medical research funds, with the NIH budget potentially experiencing adjustments. However, the NIH is not expected to be the primary focus or bear the brunt of these cuts within the health sector.

Comparative Budget Analysis for Fiscal Year 2025:

•An examination of the proposed budgets for the 2025 fiscal year reveals key differences among various proposals: the original budget suggested by President Biden, which included a slight NIH budget increase of $265 million; the Democrat-controlled Senate’s approved version; and the Republican-controlled House’s proposed budget. Given the current Republican control of the White House, House, and Senate, the House’s proposal provides a likely indication of forthcoming NIH budget adjustments.

Republican Proposal and Its Implications:

• The Republican-controlled House had proposed an 8% reduction in the NIH budget, equating to a $3.8 billion cut from the 2024 budge to $48 billion. Notably, this reduction focused primarily on the NIH’s administrative and operational budget, sparing the extramural budget, which supports grants and awards for universities and companies.

Alignment with Administration Policies:
• Although the confirmation of these NIH budget adjustments remains uncertain, they appear to align closely with the new administration’s objectives and policy strategies.

Potential Effects on Grants:

•Assuming the NIH budget adjustment is ratified, we anticipate minimal impact on grants awarded to companies. In fact, there may even be an increase in available funds, as the cuts focus on internal NIH operations rather than external funding.
By acknowledging these developments, stakeholders in the life sciences sector can better prepare for and potentially benefit from the evolving funding landscape, ensuring they remain competitive and well-supported in their research initiatives.

Part 4: FreeMind’s Role as a Market Leader in Life Sciences Nondilutive Funding

With over 25 years of experience navigating the complexities of nondilutive funding, FreeMind stands as a market leader in the life sciences sector. Through various administrations, diverse programs, and significant shifts in the funding landscape, FreeMind has consistently supported companies in securing vital funding to advance their research and development goals.

Experience and Industry Leadership:
• FreeMind’s extensive history has equipped us with the expertise to adapt to dramatic changes in funding mechanisms and policies. Our deep understanding of the nuances involved in securing nondilutive funding, gained through experience with dozens of programs and evolving governmental agendas, positions us to effectively guide companies through uncertain times.

Demand During Crises
• Historical Context: During periods of crisis, such as the 2020 COVID-19 pandemic and the 2008 financial downturn, the demand for expert guidance in nondilutive funding has historically surged. These crises highlighted the necessity for companies to seek professional assistance to leverage available funds while navigating economic uncertainties.

Current Outlook:

• In light of potential funding shifts under the Trump administration, companies are poised to rely more heavily on market leaders like FreeMind. As organizations aim to maximize their funding potential amidst unclear definitions and changing rules, FreeMind’s role as a trusted advisor becomes increasingly crucial.

Increased Client Engagement:

• In the first two months of 2025, FreeMind experienced an 18% increase in the number of submissions per client. This heightened level of engagement also reflects a substantial rise in the average budget submitted, from 1.7 million to 2.03 million. This rise in submissions and increased budget per application indicates that Federal agencies are actively accepting submissions, reviewing applications, and awarding funds, demonstrating robust activity even amidst ongoing budget discussions and registry freezes. These circumstances present a unique opportunity for applicants, with potentially better-than-average success rates.

Industry Focus Over Academia:

With emerging trends suggesting a potential shift in funding dynamics, including budget cuts targeting academic institutions, the need for expert guidance within the industry sector is expected to grow. FreeMind’s focus on supporting industry-driven research further cements our role as a key player in the nondilutive funding landscape.

With an unwavering commitment to supporting life sciences innovation, FreeMind remains dedicated to helping our clients navigate the complexities of funding landscapes, ensuring that they continue to thrive and succeed in achieving their research objectives.