Washington’s NIH story ‘Just ain’t so’
“It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” The maxim is usually pinned on Mark Twain, who never said it — which makes it doubly apt for the current fight over federal support for biomedical research
Torch bearers among both progressives and conservatives are certain that public and private research dollars are interchangeable, meaning that a grant from the National Institutes of Health and an investment by a drug company buy roughly the same thing. They then arrive at different, incorrect conclusions spawned by the same flawed premise.
Progressives conclude that taxpayers have already paid for the medicines they later buy at the pharmacy counter, and that prices should therefore be aggressively regulated. Conservatives run the identical premise in reverse and conclude that private capital can fund necessary biomedical research, making NIH spending largely redundant
Far from interchangeability, NIH research complements private-sector biomedical research. The more NIH spends, the more private industry invests. Thus, NIH spending does not offer a “free ride” to industry. Rather, it focuses and accelerates private sector investment.
Proponents of cutting the NIH budget, led by the Trump White House, misunderstand what the NIH actually produces. Industry does fund roughly two-thirds of American biomedical R&D. But that share measures dollars, not function. Private money concentrates in development, where returns are more easily captured, while the basic science that makes development worth attempting comes primarily from public funding
NIH-funded research reveals new scientific knowledge about how diseases start and worsen, presenting targets for private-sector investment. Scientific knowledge is hard to patent and therefore not attractive to investors. This is what economists call a “public goods problem,” meaning that private industry left to its own devices will underprovide public goods like basic scientific knowledge
Advancing basic science therefore falls within the purview of government, a fact which undermines the argument against NIH funding on the right. At the same time, NIH research does not “save money” for the private sector. On the contrary, NIH findings serve as the stimulus for more private research and development investment, undermining the argument on the left for stricter price controls or even nationalized drug development.
In effect, the NIH draws the map, but it typically takes private industry to build vehicles that can navigate the terrain. Two examples illustrate the point.
Beginning in 1979, the NIH fundedan immunologist named James Allison to study how T cells switch on and off — not to build a cancer drug, but to reveal the underlying machinery of the immune system. Allison’s lab discovered that a protein called CTLA-4 acts as a brake to the immune system, and that tumors survive by leaning on it. Nobody can patent that fact, but it led researchers to other related protein targets and launched an industry of “immunotherapy” drugs that now treat more than 20 types of cancer.
Or consider hepatitis C, long an incurable disease. For years nobody could grow the virus in a laboratory, hampering efforts to test drugs against it — until publicly funded virologists, one of whom later shared a Nobel Prize, engineered a version that replicates in cultured cells. It became a screening platformused across the industry, not the exclusive property of a single private developer. Every regimen now recommended for hepatitis C contains a drug that owes itself to this tool, which helped American biomedical innovators cure a deadly disease.
These are not isolated examples. Research published in theProceedings of the National Academy of Sciencesshows that every drug approved in the US between 2010 and 2016 benefited from NIH funding, and more than 90% of that funding generated basic science knowledge about biological targets, not about the drugs themselves
Inevitably, foreign firms benefit too. The “public goods” produced by NIH funding cannot be fenced at the border. But American patients see the fruits of basic scientific research most often: 74% of new drugs launched between 2018 and 2022 reached the U.S. market, against 52% in Germany, the next highest
America has led the world in biomedical advances for decades, and NIH research has drawn the map for a robust ecosystem of venture capital, small and large life sciences companies, and risk-taking entrepreneurs. Yet, at a time when China has begun to pose a formidable challenge to America’s leadership, neither “privatizing” basic science nor “nationalizing” drug discovery makes sense
True, government agencies do not routinely run at peak efficiency. However, cutting the NIH budget over criticism of specific funding allocation decisions misses the bigger picture: America’s scientific preeminence and its role in our biomedical advances are at stake
Similarly, ample evidence suggests the need to reform the way drugs are priced in America. However, blunt cuts to drug reimbursement threaten to kill America’s golden goose of biomedical innovation. Instead, policymakers need to embark on two hard conversations — the first about anchoring the prices of drugs to the value they bring to American patients and their families, and the second about how to put the science back into setting scientific priorities
Darius Lakdawalla is Chief Scientific Officer at the USC Schaeffer Institute for Public Policy & Government Service and University Professor of Pharmaceutical Economics and Public Policy at USC
