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Chris Contag (left), Chairman of Michigan State University’s Department of Biomedical Engineering and Peter Jones, Chief scientific officer at Van Andel Institute. Chris Contag (left), Chairman of Michigan State University’s Department of Biomedical Engineering and Peter Jones, Chief scientific officer at Van Andel Institute. Courtesy Photos

‘DISCOURAGING’: Proposed NIH funding cuts could hamper West Michigan’s nascent biomed research sector

BY Sunday, April 16, 2017 12:28pm

GRAND RAPIDS — In the three years since Peter Jones moved from Los Angeles to Grand Rapids, he’s helped to more than double the amount of federal research funding that Van Andel Institute receives.

That momentum could come to an abrupt halt under President Donald Trump’s budget blueprint for the 2018 fiscal year that proposes to cut funding for the National Institutes of Health by nearly 20 percent.

After he moved from the University of Southern California in February 2014 to serve as VAI’s chief scientific officer, Jones placed an emphasis on attracting greater NIH funding for the organization’s researchers. He worries Trump’s proposed cut will have long-term implications for biomedical research in the U.S.

“This is a very, very profound knock to research productivity,” said Jones, whose own work in cancer research has been backed by NIH funding for 40 years.

The proposed funding cut to what Jones considers the “premiere funding organization in the entire world” comes as researchers in the era of genetic medicine are on the cusp of identifying new treatments and possibly cures for diseases. He points to the declining death rate from cancer as just one result of the new treatments emanating from ongoing research.

“This is very discouraging, particularly as we see many breakthroughs in cancer medicine, for example, and neurobiology, and we begin to understand the causes of human diseases,” Jones said. “And all of those have been funded by the NIH.”

An NIH database shows VAI researchers received 20 federal grants in the 2016 fiscal year totaling $8.41 million. That compares with 18 grants for $7.0 million in the 2015 fiscal year and 12 grants for $4.3 million in 2014, Jones’ first year at VAI. The institute received 10 NIH grants in the 2013 fiscal year for $3.2 million.

VAI researchers have received nine grants for $3.9 million so far in the current 2017 fiscal year. 

While the NIH recently committed to another $18 million to support VAI research over the next seven years, that funding is now in question, according to Jones.

“We don’t know what’s going to happen to that money,” he said.

Across Michigan, the NIH in the 2016 fiscal year awarded 1,530 research grants totaling $669.5 million. The money went to biomedical institutes such as VAI, academic researchers at 11 universities, and startup companies like Tetra Discovery Partners Inc. in Grand Rapids. 

Tetra Discovery Partners is developing a new drug to treat Alzheimer’s disease and has received several grants, including three awards for $3 million last fiscal year, according to the NIH database.


The president’s budget proposal for the 2018 fiscal year would cut $5.8 billion from the NIH’s $31.8 billion budget, a reduction of 18.2 percent. Another $1.2 billion could go away this year under a proposal to trim spending.

The reduction in NIH funding, if it goes through, “would be devastating for biomedical research in this country,” said Chris Contag, chairman of Michigan State University’s Department of Biomedical Engineering.

Because the NIH commits funding to research projects for multi-year periods, the proposed budget cut could eliminate 90 percent of new grants beginning next fiscal year, Contag said. NIH funding already had been flat for a decade prior to the passage of the bipartisan 21st Century Cures Act in late 2016 that earmarked an additional $4.8 billion for research, he said.

“We’ll be setting biomedical research back generations,” said Contag, who also serves as director of MSU’s Institute for Quantitative Health Science and Engineering.

MSU is one of the top recipients in Michigan of NIH research grants. The agency awarded university researchers $44.7 million through 147 grants last year. So far in the current fiscal year that started Oct. 1, 2016, MSU has received 51 grants for $18.7 million.

The proposed NIH funding cut has been met with strong opposition from researchers across the country and objections from some members of Congress.

Stephen Rapundalo, CEO of the Ann Arbor-based life sciences trade association MichBio, said the budget proposal has been a major topic of conversation within the industry. He’s cautiously optimistic Congress will reject cuts for the NIH.

“I think the administration is going to have a challenge on its hands to get anywhere close to what it wants, or anything at all,” Rapundalo said. “There’s obviously a divide in what the White House requests and what Congress will do.”

U.S. Health and Human Services Secretary Tom Price, in a March 29 presentation to the House appropriations subcommittee, explained the budget proposal as targeting indirect expenses in NIH-backed research projects.

The NIH last year spent $6.4 billion in indirect expenses for items such as lab equipment and utilities that were built into grants. That equates to 30 percent of NIH funding that “isn’t for the specific research itself,” Price said.

“We ought to be looking at that. That’s an amount that actually would cover much more than the reduction that’s being proposed,” he said. “If in fact there are greater efficiencies that can be had to save money, you can actually provide more grants for individuals to be able to study an array of diseases and challenges that we have.”


One congressman on the appropriations subcommittee, Rep. Andy Harris, R-Maryland, noted that many private funding sources limit indirect costs to 10 percent of their grants. The American Lung Association does not pay at all for indirect costs, he said.

“It’s very interesting that the private sector doesn’t hold these indirect costs to be so valuable as to pay them, but when the taxpayers’ dollars are involved, somehow we do,”  Harris said.

Tetra Discovery Partners CEO Mark Gurney questions that notion. Funds for indirect costs for facilities and equipment “hardly cover what it costs to rent space.”

“I don’t see where cutting indirect costs is going to get more money for research,” he said. “Who’s going to pay for those costs?”

Since 2012, Gurney’s company has received NIH awards totaling $21 million, $8 million of which went to in-kind payments for research support services. Combined with another $7 million in private capital — much of it from angel investors — the NIH funding has led Tetra Discovery Partners to human clinical trials, where its compound has shown promise in improving memory loss.

NIH awards were “absolutely critical” in Tetra’s research and development and in advancing the company to the point where it’s now appealing to venture capital investors. If the company successfully commercializes the drug and records an exit, Gurney will gladly write a check to the federal government for taxes due.

“Hopefully, we’ll be in a position to pay back the government, with interest,” Gurney said. “That will mean we have an exit and we have sales — we have a new drug.”


Beyond the potential for less funding to support research, Jones and Contag said separately that they worry about the long-term ramifications for developing the next generation of research talent in the U.S. if the cuts go through.

The budget proposal creates uncertainty for doctoral and graduate students who want to pursue biomedical research as a career, Jones said. 

“What’s particularly worrisome to an old guy who’s been doing this for a while is the very, very discouraging impact this has on young people,” Jones said. “Let’s say you’re a grad student here at the institute and you’re thinking of your future. How can you select a career trying to develop a scientific agenda and improve the health of our people if you don’t know what’s going to happen next year to the amount of money to support the research?

“It has a huge impact in the future development of American scientists.”

One potential consequence is that those students either opt to pursue another career, or they may pursue research work elsewhere in the world, according to Contag.

“There will be a brain drain,” he said.

Ultimately, reduced NIH research funding may lead to fewer innovations and breakthroughs in the U.S. In turn, that could lead to reduced investment opportunities for angel and venture capital investors down the line when researchers seek to commercialize innovations.

“If NIH funding gets slashed, it will almost certainly have a ripple effect, and not in a positive way,” Dale Grogan, co-managing director of Michigan Accelerator Fund I in Grand Rapids, wrote in an email to MiBiz. “Agencies like the NIH create downstream opportunities for investors because they fund the basic research, which often becomes the foundation of innovation.”

Grogan, whose venture capital fund invests in life sciences, noted that investors like to invest in startups built around an innovation that comes out of NIH-backed research. The rigorous process a researcher needs to go through to secure NIH funding provides a vetting process of sorts to their work, he said.

“Winning grants demonstrates third-party validation of a technology at some level,” Grogan said. 

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