The biotechnology sector relies heavily on basic scientific research conducted in academic labs, which often leads to discoveries that fuel new drug startups. However, there are concerns that this system is at risk in the U.S. due to actions by the Trump administration. These actions include disrupting funding from the National Institutes of Health (NIH) and implementing significant layoffs at health agencies.
A major change includes an NIH policy proposal to cap “indirect” funding costs at 15% for new grants, down from the current average of 27% to 28%. Indirect costs cover essential infrastructure expenses like utilities and administration. This cap could slow research progress and affect the biotech industry’s ability to create new startups, as universities may struggle to fund projects with reduced support.
Biotech investors and leaders worry this could impact the U.S. biotech sector’s global competitiveness, especially as countries like China advance. Some firms, like Lux Capital, are already seeing universities request additional funding to cover overhead costs. Meanwhile, organizations like Altitude Lab have initiated funds to support researchers and startups affected by these cuts.
The biotech industry is calling for alternative funding sources, such as large nonprofit groups, to step up. Without adequate support for academic research, the development of future therapies could be at risk. The situation highlights the critical role of both government funding and venture capital in sustaining the biotech ecosystem.