Industry Voices Concern as Funding Cuts and Policy Changes Threaten U.S. Biotech Ecosystem

The U.S. biotechnology sector faces unprecedented challenges as federal funding cuts, policy changes, and leadership shakeups create an increasingly uncertain environment for innovation and investment. Industry leaders are sounding the alarm about the potential long-term consequences for American competitiveness in life sciences.

Funding Drought and Policy Pressures Strain Industry Resources

Nearly five years of investment scarcity have left many biotech companies struggling to maintain critical operations and advance their pipelines. Ali Pashazadeh, founder of Treehill Partners, highlighted the severity of the situation: "When you're on a starvation diet for five years, you start cutting down in terms of management, in terms of the IP coverage."

This extended period of resource constraints has created what Pashazadeh terms "unfundable gaps" in company capabilities. He estimates that about 70% of companies now lack the management expertise to run late-stage clinical trials, further complicating efforts to secure funding or partnerships.

Adding to these pressures, the industry faces the prospect of significant revenue cuts through policies such as the Most Favored Nation Drug Pricing initiative. Paul Hastings, former BIO chairman and current CEO of Nkarta Inc., warned that "Industry is under attack with Most Favored Nation Drug Pricing that could represent the most significant revenue cuts ever imposed on medical innovators by our government."

Federal Leadership Changes and Mixed Messages Raise Concerns

Recent personnel changes at key regulatory agencies have heightened industry anxiety. The departure of Peter Marks earlier this year, followed by the placement of Nicole Verdun and Rachael Anatol on administrative leave, has resulted in a loss of experienced leadership at the FDA's cell and gene therapy divisions.

These moves appear to contradict public statements from FDA Commissioner Marty Makary, who emphasized collaboration and support for the industry during BIO 2025. "I want to see American drug developers thrive," Makary stated. "I want to see companies that do business in the United States thrive, and our job at the FDA is to be able to provide an expeditious review of data submitted to make determinations about what's safe and effective when it comes to medical products."

However, Makary's criticism of previous administrations for "tremendous infighting" and suggestions of past morale issues have raised eyebrows among industry veterans.

States and Industry Leaders Call for Collaboration to Address Funding Gaps

As federal support wanes, state governments and industry leaders are exploring ways to maintain the sector's competitiveness. Massachusetts Governor Maura Healey emphasized the need for stakeholders to work together: "States, venture capital, private industry and academic and research institutions need to collaborate or work in partnership."

Healey pointed to initiatives like the reauthorization of the Life Sciences Act as examples of how states can support innovation in the absence of federal funding. However, industry leaders caution that these efforts may not be sufficient to fill the gap left by cuts to NIH grants and other federal programs.

Paul Hastings stressed the urgency of the situation: "Specialty biotech investors cannot shoulder the burden of replacing billions in lost NIH grants. States and universities have also lost these grants and millions in federal funding, so they cannot make up these shortfalls either."

As the biotechnology sector grapples with these challenges, many are calling for a unified approach to policy advocacy. "We need to speak with a united voice and educate our elected officials about the consequences for patients and innovation absent a policy course correction," Hastings concluded.