Speaker 1: Hey, Oddlots listeners, we're coming to DC.
Speaker 2: We're finally doing it, Joe. It's going to be our
Speaker 2: first live show in Washington, DC, our nation's capital. It's
Speaker 2: also finally going to be the time where we actually
Speaker 2: talk about the Jones Act.
Speaker 1: Listen talk about doing the Jones Act episode of Odd
Speaker 1: Lots for a long time, and it's become this recurring
Speaker 1: joke that we've never done on But we're going to
Speaker 1: do it in grand style because we're going to be
Speaker 1: doing it live in DC and it's actually going to
Speaker 1: be a debate.
Speaker 3: Yeah.
Speaker 2: So we have Sarah Fuentes from the Transportation Institute. She's
Speaker 2: going to be taking the pro side, and we also
Speaker 2: have Colin graybou of the Cato Institute. He'll be taking
Speaker 2: the against side. It's going to be really interesting to
Speaker 2: see how all of that shakes out.
Speaker 1: In addition to that, we're going to be speaking with
Speaker 1: Blair Levin, who was around during the telecom bubble, and
Speaker 1: we have Andrew Ferguson, the new head of the FTC,
Speaker 1: the one who's replaced Lina Kong. We're going to be
Speaker 1: talking about mergers and acquisitions and all that stuff. So
Speaker 1: it should be a really fun name.
Speaker 2: If you want to come and join us for that evening,
Speaker 2: it's going to be on March twelfth at the Miracle Theater.
Speaker 2: Go to Bloomberg dot com forward slash odd Lots and
Speaker 2: you can find the link to purchase tickets. We hope
Speaker 2: to see you there.
Speaker 4: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 1: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 1: I'm Jill Wisenthal and.
Speaker 2: I'm Tracy Alloway.
Speaker 1: Tracy, we're recording this February twenty fifth, and we're just
Speaker 1: a little bit over a month into the new Trump
Speaker 1: administration and sitting aside how one views the long term
Speaker 1: goals of the administration. From the outside, it's chattic, and
Speaker 1: there have been a lot of cuts, and it doesn't
Speaker 1: look like scalpel types of cuts. Many things have been
Speaker 1: shut down or frozen completely in some respect, and you
Speaker 1: see a lot of people talk about the implications of
Speaker 1: these moves, but I find it hard to wrap my
Speaker 1: head around.
Speaker 2: There's a lot happening, that's for sure, and I think
Speaker 2: one of the struggles of everyone who's trying to follow
Speaker 2: this at the moment is that you have new executive
Speaker 2: orders coming out almost daily. Then you have the legal
Speaker 2: challenges to those, and then you have the administration itself
Speaker 2: sometimes arguing within itself about whether or not certain orders
Speaker 2: should be followed, certain emails should be replied to. It
Speaker 2: does feel very chaotic.
Speaker 1: One area that I think has caught a lot of
Speaker 1: people's attention, in particular, has been immediate moves at the NIH,
Speaker 1: the National Institute of Health. And there are multiple moving
Speaker 1: parts here, but from what I've been understand that when
Speaker 1: there are grants awarded, some of the money goes to
Speaker 1: direct costs and some of it's indirect, and there has
Speaker 1: been a change in what's allowed on the indirect And
Speaker 1: then I've also seen, and it's almost hard to believe,
Speaker 1: but I've now seen it in an places that there
Speaker 1: have been like whole programs that got hit with an
Speaker 1: immediate freeze, which I have to imagine in science creates
Speaker 1: all sorts of problems imagined. There are lots of endeavors
Speaker 1: that can't just be stop started on a switch, and
Speaker 1: so understanding what's actually happening right now in science funding
Speaker 1: and the implications of some of these moves is obviously
Speaker 1: something we need to discuss, especially given the broader thing
Speaker 1: of like we want to be, I think, a country
Speaker 1: at the leading edge of science and technology.
Speaker 2: Yeah, this is exactly the tension.
Speaker 5: I think.
Speaker 2: So even Elon Musk and Donald Trump will talk about
Speaker 2: how important it is for the US to be technologically
Speaker 2: advanced and to beat competitors like China. But at the
Speaker 2: same time they're doing this, and I guess their argument
Speaker 2: is that by capping some of the cost of research,
Speaker 2: you might make it more efficient, you might make it
Speaker 2: more monetizable, you might see more breakthroughs. But again, there
Speaker 2: is this tension to the sledgehammer approach that we've seen,
Speaker 2: where if you just put in a cap on something
Speaker 2: like indirect funding, it can affect a bunch of research programs,
Speaker 2: So we should talk about it. I also, I must
Speaker 2: admit I don't know anything about NIH funding. It seems
Speaker 2: very sprawling and very complicated, so I want to get
Speaker 2: into that as well.
Speaker 1: All right, well, I'm very excited to say we have
Speaker 1: the perfect guest, someone who actually is a scientist in
Speaker 1: the lab working on these things and has been talking
Speaker 1: about the impact of the moves over the last several weeks.
Speaker 1: Thrilled to bring on to the show. Carol Lebon, Professor
Speaker 1: of Molecular Biosciences at Northwestern University, Professor Lebon, thank you
Speaker 1: so much for coming on the out Lots podcast.
Speaker 3: Happy to be here.
Speaker 1: What's happened in the last month?
Speaker 3: Why don't you ask a broad question?
Speaker 2: So we need forty minutes for just answering that question.
Speaker 3: Fine, Three major things have happened in the last months.
Speaker 3: One is what you alluded to already, this attempt to
Speaker 3: cap the indirect costs for grants at fifteen percent. And
Speaker 3: I'm happy to go into that. Well, but you can
Speaker 3: think about it if you pick any area of research
Speaker 3: that you might care about. Let's say pediatric cancer, that
Speaker 3: basically amounts to a fifteen to twenty percent decrease in
Speaker 3: funding for studying those cancers. And this is an area
Speaker 3: where NIH has made huge progress. So forty years ago,
Speaker 3: if your child was diagnosed with cancer, there was less
Speaker 3: of a sixty percent of those children that would still
Speaker 3: be alive in five years. Today there's a ninety percent
Speaker 3: survival rate. So I mean, these are impacts that are
Speaker 3: going to be huge.
Speaker 1: I'm gonna actually stop you right there because I think
Speaker 1: this is important. There is science research that happens outside
Speaker 1: of the NIH. When you look at that forty year history,
Speaker 1: how do you draw the line for someone who'd you know,
Speaker 1: people are aware of big pharma companies exist that this
Speaker 1: is like the NIH should get credit for that progress.
Speaker 3: So the NIH is really sort of two different systems.
Speaker 3: They have an intramural system. So there are scientists running
Speaker 3: laboratories at the NIH, and by the way, they have
Speaker 3: not been exempt from these cuts to probationary people. I
Speaker 3: know of young scientists who have started their independent laboratories
Speaker 3: at the NIH in the last couple of years, who
Speaker 3: least a week ago Saturday received an email at night
Speaker 3: saying that they were terminated and that their access to
Speaker 3: campus was gone. So there's intramural research, but the vast
Speaker 3: majority of NIH grant funds go into their extramural program.
Speaker 3: These are funds that go to grants at universities in
Speaker 3: all fifty states, and they are incredibly important for all
Speaker 3: levels of science. Basic research, translational research, clinical trials are
Speaker 3: going on not at the NIH, but in Iowa and
Speaker 3: in Ohio and in Florida, and so you know, it's
Speaker 3: estimated that these grant monies that come to the universities
Speaker 3: they support directly about four hundred thousand or more employees
Speaker 3: across those fifty states. But also they drive more more
Speaker 3: than ninety three billion dollars of economic activity each year.
Speaker 3: And again that's across all fifty states. That's not staying
Speaker 3: in Washington, DC. If there's an estimate that for every
Speaker 3: dollar of NIH grant money that is granted, it generates
Speaker 3: almost two dollars and fifty cents worth of economic activity.
Speaker 2: Just to press on Joe's point, how do you actually
Speaker 2: measure the success of NIH funding? Is it you produce
Speaker 2: some new wonder drug that is monetizable and everyone starts
Speaker 2: using it. Is it just the sort of nebulous concept
Speaker 2: I guess of like advancing scientific research, how do you
Speaker 2: judge the success and efficacy?
Speaker 3: So I think that you can look at that on
Speaker 3: two levels. So there are the studies that are translational
Speaker 3: studies that immediately impact human health, and those are very,
Speaker 3: very important, but just as important as the kind of
Speaker 3: research that the general public sometimes has trouble wrapping their
Speaker 3: heads around because you don't necessarily see an immediate as
Speaker 3: from that research in human health. But most of the
Speaker 3: advances that we see today that are being translated and
Speaker 3: are really making a direct effect on human health. They
Speaker 3: stem from studies that were done ten or even twenty
Speaker 3: years ago that were foundational that at the time, again
Speaker 3: didn't This is called discovery based science or basic science
Speaker 3: or fundamental research. But it's these foundations that are built
Speaker 3: on in the more clinical studies and also in industry,
Speaker 3: in the pharmaceutical industry and biotech, they are building on
Speaker 3: these basic discoveries that were funded by the NIH. I
Speaker 3: can give you one really cool example. So you've got
Speaker 3: to have heard of ozenpic right, the semaglut hide that's
Speaker 3: everywhere these days. Did you know that that came from research,
Speaker 3: very basic research that was done ages ago on a
Speaker 3: venomous lizard called a gilla monster. A gila monster at
Speaker 3: this Scala monster is native to the southwest of the US,
Speaker 3: and people noticed that. Scientists noticed that it had the
Speaker 3: ability to fast for an incredibly long period of time,
Speaker 3: so wanting to understand the biological mechanisms of how it did,
Speaker 3: that led them to isolate from the saliva of a
Speaker 3: Glian monster. This what would eventually become ozenpec.
Speaker 1: Talk to us about the math of direct versus indirect costs,
Speaker 1: because I think this is just something that was in
Speaker 1: the headline of the announcement. And I don't think I
Speaker 1: really have a concrete understanding of what the difference is,
Speaker 1: why there is this distinct allocation. What do you walk
Speaker 1: us through a year ago or just in the up
Speaker 1: until recently, what this allocation was all about.
Speaker 3: So every grant that goes to let's say Northwestern where
Speaker 3: I am, has two components to it. Direct costs that
Speaker 3: come directly to my research laboratory, and indirect costs that
Speaker 3: are used to support my research. So a lab like
Speaker 3: mine is analogous to running a small business. So let's
Speaker 3: say that business as a restaurant. Ye costs or the
Speaker 3: restaurant would be the food, the cooks, and the servers.
Speaker 3: But there are other costs to running a restaurant business.
Speaker 3: You have inventory and purchasing and upkeep the kitchen equipment
Speaker 3: and the building, et cetera. And so the restaurant can't
Speaker 3: run without those other things. It can't exist with just
Speaker 3: the food, the cooks, and the servers. And so for
Speaker 3: a research lab like mine, the direct costs are the
Speaker 3: chemicals and the reagents and the salaries of the scientists
Speaker 3: who are carrying out the studies. But there's also indirect costs,
Speaker 3: and those again include maintenance and replacement of equipment, ordering, bookkeeping,
Speaker 3: handling hazardous waste, compliance with government regulations, all of which
Speaker 3: are absolutely essential to doing the research. And the reason
Speaker 3: it gets separated out like this is actually to save
Speaker 3: money because while the direct costs are specific to my
Speaker 3: particular research, most of those indirect costs are for most,
Speaker 3: if not all, research labs at a given university, and
Speaker 3: so you get economies of scale by lumping those together.
Speaker 3: Does that make sense?
Speaker 2: Yeah, So going back to your restaurant analogy, I guess
Speaker 2: it's kind of like your funding of food court, right,
Speaker 2: So each individual restaurant within a food court might have
Speaker 2: their own direct costs, but then the cost of actually
Speaker 2: maintaining the space, renting out the space is sort of
Speaker 2: shared by everyone doing different things.
Speaker 3: Sure, I think that's a great advance on the analogy,
Speaker 3: and it would be particularly so if they had a pooled,
Speaker 3: let's say, central building, so that they didn't each have
Speaker 3: to handle the finances individually.
Speaker 2: So one thing that I was wondering is how the
Speaker 2: NIH cap on indirect funding currently or I guess up
Speaker 2: until a month or two ago, actually compares with other
Speaker 2: medical research organizations because I'm thinking specifically about organizations like
Speaker 2: the Gates Foundation, and I think in the announcement that
Speaker 2: NIH talked about aligning with other types of research organizations
Speaker 2: like the John Templeton Foundation. So how do private research
Speaker 2: organizations manage to keep their own indirect costs down? And
Speaker 2: why do their indirect costs seem lower than the nihs?
Speaker 3: Oh, I mean they are lower, and there are in
Speaker 3: fact some types of small foundations that have no indirect costs.
Speaker 3: I remember back when I was a graduate student at Harvard.
Speaker 3: Harvard wanted to stop letting their researchers take those grants
Speaker 3: because they were not paying for the other real costs
Speaker 3: of doing research. But in general, over time, what's come
Speaker 3: out of it is in the research ecosystem, universities admit
Speaker 3: that these smaller foundations and even something like the Gates Foundation,
Speaker 3: you know, they're directing money at very specific things, and
Speaker 3: they can do more with their work if they lean
Speaker 3: on the NIH and universities for covering more of those
Speaker 3: indirect costs. So they don't cover the indirect costs, it's
Speaker 3: just that it's understood that they can't.
Speaker 1: So your assertion here is that what appears to be
Speaker 1: a finance mechanism with lower indirect costs is capable of existing.
Speaker 1: Because I don't know if free writing is the right word,
Speaker 1: but because there is also the indirect costs that come
Speaker 1: from the NIH too aligned or the same labs.
Speaker 3: Absolutely, they're like a lost leader.
Speaker 1: So one of the arguments is that a lot of
Speaker 1: NIH funding goes to a handful of extremely well endowed universities.
Speaker 1: It's a skewed That also is something you hear a lot,
Speaker 1: including from people academia, that there is a tremendous amount
Speaker 1: of bureaucratic bloat that exists. And I think, setting aside
Speaker 1: the science, it does not surprise me that the current
Speaker 1: administration wants to take aim at bureaucratic bloat within America's universities,
Speaker 1: et cetera. Why shouldn't we be skeptical of the degree
Speaker 1: of costs that these labs have born.
Speaker 3: I mean, I think you shouldn't be skeptical because these
Speaker 3: are negotiated between Health and Human Services and the universities
Speaker 3: through a very thorough process where they sit down and
Speaker 3: really have to lay out what the costs are and
Speaker 3: show proof that that's what the costs are. So this
Speaker 3: isn't somebody picking the number out of the air. This
Speaker 3: has been the result of negotiations to really figure out
Speaker 3: what the costs are. And you know, most university would
Speaker 3: tell you that even the negotiated interrect cost raise don't
Speaker 3: cover all the costs of research.
Speaker 2: This is a very wide ranging question. But going back
Speaker 2: to Joe's point about the administrative burden, could you maybe
Speaker 2: walk us through the process of getting an NAH grant, Like,
Speaker 2: how does it actually work, how long does it take?
Speaker 2: How many steps do you have to go through?
Speaker 3: Yeah, so NIH runs three funding cycles, each of them
Speaker 3: take more than half a year to complete, almost three
Speaker 3: quarters of a year. So basically, there will be one
Speaker 3: date where grants are submitted, another date where grants are
Speaker 3: reviewed by a panel of experts from around the country,
Speaker 3: usually a panel of twenty five to thirty scientists with
Speaker 3: subject matter expertise in the area of the grants, and
Speaker 3: those are called study sections. And then finally they'll be
Speaker 3: reviewed by an advisory council that will basically okay grants
Speaker 3: for funding. So here's an example. I have a really
Speaker 3: talented post doctoral fellow working in my research group who
Speaker 3: applied for a career transition award back in the summer.
Speaker 3: His grant was reviewed in October by a study section.
Speaker 3: It got a phenomenal score that should have been funded.
Speaker 3: His council was supposed to meet at the beginning of
Speaker 3: this month in February, but because no study sections or
Speaker 3: councils have been allowed to meet, his grant can't be
Speaker 3: approved for funding. So there are three of those cycles
Speaker 3: a year, and right now, I mean, I'm not sure
Speaker 3: that if your listeners are aware of this, but besides
Speaker 3: the kinds of things that we're talking about with indirect
Speaker 3: costs and direct costs, HHS has blocked NIH from posting
Speaker 3: in the Federal Register. And why that matters is in
Speaker 3: order to hold one of these study sections, these grant
Speaker 3: review sections, or hold one of these advisory councils, they
Speaker 3: have to be posted in the Federal Register at least
Speaker 3: fifteen days ahead by law. So when a judge put
Speaker 3: a restraining order on the freeze to grants, HHS got
Speaker 3: around this bureaucratically by just simply not letting NIH submit
Speaker 3: those notices. So the whole system has been ground to
Speaker 3: a halt. Grants that were reviewed like my postdocs last
Speaker 3: fall can't get approved at council grants that should have
Speaker 3: been reviewed this month can't be reviewed, and who knows
Speaker 3: whether their councils will meet coming in May when they should.
Speaker 3: So right now, labs are really in sort of an
Speaker 3: existential crisis. I mean so again, going back to this
Speaker 3: small business model, labs are businesses that run on very
Speaker 3: tight margins. And so if I'm going to be running
Speaker 3: my laboratory on one of these NIH grants, which let's
Speaker 3: say is four years long, in year three, I would
Speaker 3: be applying for a renewal of that grant to continue
Speaker 3: that research, and remember research that the NIH has already
Speaker 3: invested in. If that grant can't get reviewed or funded,
Speaker 3: then I'm turning around to the people in my lab
Speaker 3: and saying, I don't want to have to do this,
Speaker 3: but I'm going to have to let you go. So
Speaker 3: not only is that a real cost in terms of
Speaker 3: jobs for people who are again experts in what they're doing,
Speaker 3: but you're damaging research that you've already invested in. The
Speaker 3: whole thing is kind of senseless. That's certainly not government efficiency.
Speaker 1: Can you talk more about what's being frozen right now?
Speaker 1: So you've just described the stopping of the review process.
Speaker 1: So Theoretically, if this freeze is in place by the
Speaker 1: time you need your next transfer funding and it can't happen,
Speaker 1: then you could have what's happening operationally in labs that
Speaker 1: you know of right now as a result of the
Speaker 1: overall freeze. Are there specific trials or tests or I
Speaker 1: guess experiments is what a lay person might call them,
Speaker 1: that had been going on in January that aren't happening
Speaker 1: right now.
Speaker 3: So I think there are some clinical trials out of
Speaker 3: NIHS that have been affected directly. For most of us,
Speaker 3: it's damaging things, but we could still pull back from
Speaker 3: it being absolutely disastrous if things get turned around very
Speaker 3: very soon. But otherwise, the layoffs are going to include
Speaker 3: people who take care of research animals. It's going to
Speaker 3: include the people that make sure that hazardous waste is
Speaker 3: supposed of safely. And right now it really depends on
Speaker 3: each university. A lot of universities have begun to either
Speaker 3: rescind offers for graduate students for the coming fall, or
Speaker 3: basically decide not to have the next class of graduate
Speaker 3: students who are cut it down by twenty to fifty percent.
Speaker 3: And I think this is something it's important to bring up.
Speaker 3: So NIH research really does three things, right. It funds
Speaker 3: the science that we've been talking about, so making drugs
Speaker 3: like ozienpic or pediatric cancer research. It funds money in
Speaker 3: the economy, as I mentioned, so hundreds of thousands of jobs,
Speaker 3: ninety three billion dollars a year in economic activity. But
Speaker 3: the other thing it does is to train the next
Speaker 3: generation of research scientists. And I can tell you that
Speaker 3: the train needs right now. Graduate students and postdoctoral fellows
Speaker 3: are completely scared and demoralized and wondering whether there is
Speaker 3: a future for them in science. And if we lose
Speaker 3: the next generation of scientific researchers, it's not just going
Speaker 3: to affect academic research. We train the workforce for the
Speaker 3: pharmaceutical industry and the biotech industry. This is going to
Speaker 3: decimate US scientific biomedical research broadly written.
Speaker 2: So just on that note, one thing you hear from
Speaker 2: the Trump administration continuously is this idea that we need
Speaker 2: to compete with China. And it's certainly true when it
Speaker 2: comes to electronics technology like semiconductors, And they say also
Speaker 2: in the realm of scientific funding, can you maybe talk
Speaker 2: a little bit about how the Chinese research model stacks
Speaker 2: up against the US research model, and I guess how
Speaker 2: much competition there is currently between the two countries for
Speaker 2: that younger generation of talent.
Speaker 3: Yeah. No, absolutely, As I'm sure you're probably aware, federal
Speaker 3: investment in science like at NIH and the National Science
Speaker 3: Foundation after World War Two was what drove the US's
Speaker 3: enormous growth in the fifties and sixties and really boosted
Speaker 3: America to the forefront of the world in technology development
Speaker 3: in science, and we barely keep pace. I mean, to
Speaker 3: say that we spend too much money on science is
Speaker 3: so far from being true that it's crazy. On the
Speaker 3: other hand, China recognizes what these investments do, and they
Speaker 3: have been upping and upping the kinds of investments that
Speaker 3: they make in biotechnology and another technology because that is
Speaker 3: what's going to drive the economic growth of the future.
Speaker 3: The investments that US has made in science today have
Speaker 3: driven the formation of entire industries, not just innovations in medicine,
Speaker 3: but also in engineering and technology. We are going to
Speaker 3: lose that leadership.
Speaker 1: You've given these examples of talented postdocs being unsure that
Speaker 1: they're going to get their funding, or the prospect that
Speaker 1: the next generation of talent who will go into private
Speaker 1: sector labs is going to be devastated because their education
Speaker 1: trajectory is off. One of the arguments for NIH reform
Speaker 1: is that a lot of NIH grants actually go to
Speaker 1: established professionals, that there is this hierarchy that a lot
Speaker 1: it's very hard or very rare to get grants for
Speaker 1: people under forty. Setting aside the Trump elon reforms, do
Speaker 1: you believe that there are flaws within the existing NIH
Speaker 1: regime causing money to not go into the most promising areas.
Speaker 3: So I would take issue with what's going on being
Speaker 3: termed that. But Okay, the problem is that there's not
Speaker 3: enough money in the system. And so those grant cycles
Speaker 3: that I just mentioned, so one of the study sections
Speaker 3: is going to be evaluating many, many dozens of grants
Speaker 3: in each cycle, and then there are many study sections
Speaker 3: that are evaluating different areas of science. At current funding levels,
Speaker 3: less than ten percent of those grants are going to
Speaker 3: be able to be funded. Where is the line that
Speaker 3: I could draw where I could clearly say that these
Speaker 3: ones are absolutely should be funded and these ones maybe
Speaker 3: need more work or more thought. That line is more
Speaker 3: around the twenty five to thirty percent. So we are
Speaker 3: really underfunding research and you're right. When you are under
Speaker 3: funding research, there is going to be, if you will,
Speaker 3: a competitive advantage to establish researchers versus your researchers. But
Speaker 3: the NIH recognizes that, and so they have put in
Speaker 3: place a number of different mechanisms to try to alleviate that.
Speaker 3: So there are score boosts for early career investigators that
Speaker 3: help more of them get funded. They are special granting
Speaker 3: programs that are aimed at those early career investigators. So,
Speaker 3: I mean, one of the things about NIH is that
Speaker 3: it's really conscientious about trying to course correct. They are
Speaker 3: constantly looking at what they're doing and what the outcomes are,
Speaker 3: and then consulting with the broader scientific community about where
Speaker 3: they could find efficiencies or how they could solve particular problems.
Speaker 3: It's not like all of this is going on in
Speaker 3: a vacuum and nobody's paying attention.
Speaker 1: That makes a lot of sense to me. I'm just
Speaker 1: looking at stats. The median age for researcher designated an
Speaker 1: NIH award for the first time had increased since nineteen
Speaker 1: ninety five and is now, according to something that was
Speaker 1: reported in twenty twenty one, over forty years old. Like government,
Speaker 1: corporate prosties whatever. There's always, as you say, there's course correcting,
Speaker 1: there's awareness of the issues, but awareness is not the
Speaker 1: same thing as addressing them. And I'm just trying to
Speaker 1: press on whether there are reasons to be skeptical about
Speaker 1: the efficacy of the existing system or the ability of
Speaker 1: the existing system to course correct or is this not
Speaker 1: a number that we should care about at all? Does
Speaker 1: that not mean anything that the average age of a
Speaker 1: first time awardy has gone up. Maybe that's not necessarily
Speaker 1: a bad thing.
Speaker 3: Yeah, So, you know, one thing you can say about
Speaker 3: almost anything this large is it's the best flawed system
Speaker 3: that we have. The US scientific research enterprise is the
Speaker 3: envy of the entire world, hands down. The reason for
Speaker 3: the increase in age has nothing really to do with
Speaker 3: the NIH and so that's more on science and scientists.
Speaker 3: To some extent. The time to degree for graduate students
Speaker 3: has been creeping up, how long it takes them to
Speaker 3: earn their PhD, and also the time that faculty spend
Speaker 3: as postdoctoral fellows. And you know, when I was first
Speaker 3: starting out as a graduate student in the nineties, there
Speaker 3: were people who were hired into faculty positions that never
Speaker 3: did postdoctoral fellows. Then that became almost non existent, and
Speaker 3: now there are some programs like the Whitehead Fellows where
Speaker 3: you have mentored postdoc positions where they are independent faculty
Speaker 3: member like people, but with a little bit more safety
Speaker 3: net than a typical assistant professor would have. And so
Speaker 3: you know, I'm going to swing back to those people
Speaker 3: that get fired from their laboratories at THEIH two weeks ago.
Speaker 3: So each one of those people will have spent more
Speaker 3: than ten years training for their jobs, generally more than
Speaker 3: twelve years training. But between graduate school and their postdoctoral fellowship,
Speaker 3: each one of those people was almost certainly supported by
Speaker 3: NIH funding through those dozen years, whether it be independent
Speaker 3: fellowships to them personally or funding from their pi's research grants.
Speaker 3: So these are people who the US has already made
Speaker 3: an enormous investment in and they were successful at getting
Speaker 3: research laboratory positions at one of the top places in
Speaker 3: the world, the NIH. So these are the best of
Speaker 3: the best, and we just fired them by email on
Speaker 3: a Saturday night. That's a waste of all that money
Speaker 3: that was spent training those people and the research they
Speaker 3: were doing.
Speaker 2: You mentioned slim profit margins earlier, and I think This
Speaker 2: is one of the things that a lot of people
Speaker 2: struggle with when they talk about public funding for research
Speaker 2: at elite universities, in particular, because you see numbers like,
Speaker 2: you know, the Harvard Endowment has more than fifty billion dollars,
Speaker 2: and there are other universities out there with even more.
Speaker 2: And I guess the question is, why can't universities that
Speaker 2: are charging incredibly high tuition, that run these massive investment
Speaker 2: accounts and that also get donations, why can't they fund
Speaker 2: everything themselves?
Speaker 3: Okay, so first I just want to make a correction
Speaker 3: that it's not profit margins. There's no profit here. It's
Speaker 3: operating margins, right, It's the ability to keep your laboratory afloat.
Speaker 3: So that said, endowments are not this sort of bucket
Speaker 3: of free funds. Endowments are a collective of money that
Speaker 3: has been donated by specific donors and earmarked for particular things,
Speaker 3: and so there are legal requirements that you spend that
Speaker 3: money on what the donor asks for it to be
Speaker 3: spent on. There are a few places Johns Hopkins is
Speaker 3: a great example. Bloomberg himself has made investments there that
Speaker 3: can be spent directly on science. That's making a huge
Speaker 3: difference there. But in general, at most universities, people who
Speaker 3: are funding endowments are funding the sports stadium. Unfortunately, they're
Speaker 3: funding financial aid, which is great. My own university has
Speaker 3: made enormous strives in having an increase in Pelgramt eligible students,
Speaker 3: which is super important. But for the most part, they're
Speaker 3: not general funds that can be used to support anything
Speaker 3: you want to.
Speaker 1: Let's get back to operational realities. So some of your research. Recently,
Speaker 1: I'm reading an article at Northwestern dot edu about lamp
Speaker 1: pre eels, and obviously, as you mentioned, with the example
Speaker 1: of ozempic and the Gila monster, you know what seems
Speaker 1: like sort of pure lab experimentation in biology has the
Speaker 1: potential to turn into an incredible profit. But even sitting
Speaker 1: aside that question, Okay, let's say you have some new idea,
Speaker 1: there's something new you want to explore about the biology
Speaker 1: of eel and eel sells, et cetera. How do you
Speaker 1: come up with the price you're applying for a grant
Speaker 1: you want to build on some research that you do.
Speaker 1: Talk to us just about that process of you think
Speaker 1: you need or you feel you need X money, etc.
Speaker 1: What do you do how do you blank sheet of paper,
Speaker 1: you want to do a new experiment and you want
Speaker 1: an IH money. What does that process look like of
Speaker 1: coming up with that number?
Speaker 3: Okay, so there's coming up with the ideas and coming
Speaker 3: up with the grant numbers and budget it yourself. The
Speaker 3: ideas usually stem from research that you've been doing and
Speaker 3: are informed by research that other people are doing. It's
Speaker 3: usually you will get into conversations with other researchers to
Speaker 3: refine those ideas to really make them to the point
Speaker 3: where they're shovel ready for actually doing experiments so you
Speaker 3: can apply for grant funding for them. So the NIH
Speaker 3: has two kinds of granting mechanisms going back since the
Speaker 3: early two thousands. One is which has been the main
Speaker 3: way that people get funding, is called modular grants. And
Speaker 3: those grants are really a set amount of money, so
Speaker 3: there's there's no sort of negotiating for what their actual
Speaker 3: costs are. It's just that this is the amount of money,
Speaker 3: and that amount of money has not changed in the
Speaker 3: last twenty five years. And so while costs for personnel
Speaker 3: and cost for reagents and everything else has gone up
Speaker 3: a lot, that amount of grant money has not gone up.
Speaker 1: What is are we talking one million?
Speaker 4: Like?
Speaker 1: What is a what is a money?
Speaker 3: We're talking about two hundred and fifty thousand dollars a
Speaker 3: yach ok Okay, So this is not a lot of money, right,
Speaker 3: So if you want more money than that, and more
Speaker 3: and more people are having to do this because two
Speaker 3: hundred and fifty thousand dollars is not enough to support
Speaker 3: a research laboratory anymore, then you have to submit a
Speaker 3: non modular budget where you basically have to estimate in
Speaker 3: excruciating detail how many personnel it needs and how much
Speaker 3: that will cost. What are the actual animal costs, what
Speaker 3: are the let's say sequencing costs for next generation sequencing,
Speaker 3: genum sequencing, What are the reagent costs, etc. Do you
Speaker 3: need any specialized pieces of equipment? Attach a quote for
Speaker 3: me for that to show me exactly how much that
Speaker 3: piece of equipment will cost. So this is non trivial.
Speaker 3: You might argue, if you're looking for inefficiencies in the system,
Speaker 3: that making people go into that much detail and then
Speaker 3: needing people at the NIH to go into a forensic
Speaker 3: dive onto each of those things is maybe not the
Speaker 3: most efficient way of doing it, but it's the only
Speaker 3: way of doing it right now, So it's not that
Speaker 3: you're sort of pulling some number out of thin air
Speaker 3: and saying, hey, dude, this is how much money I
Speaker 3: need to do my research. It's going to get scrutinized.
Speaker 3: At the university level. We actually have to submit even
Speaker 3: more detailed budgets than will actually go into the NIA,
Speaker 3: because they want to make sure that we are in
Speaker 3: compliance so that we don't ever get in trouble with
Speaker 3: the NIH. So I get asked for things internally that
Speaker 3: are even beyond what NIH is going to ask for,
Speaker 3: and then NIH will get those budgets and that will
Speaker 3: get scrutinized before anything gets paid out. And it gets
Speaker 3: scrutinized in two ways. It gets scrutinized during the grant
Speaker 3: review process, where the reviewers are asked away in on
Speaker 3: the budget and whether it's appropriate for the research that
Speaker 3: is proposed. It will be scrutinized by the council, who
Speaker 3: will do the same thing and who are increasingly, particularly
Speaker 3: at the National Institutes of General Medical Sciences, are capping
Speaker 3: the total amount of money that anyone investigator can have.
Speaker 3: And it will get again scrutinized at the program officer
Speaker 3: level before those grants are paid out.
Speaker 2: I find this so interesting. How do you actually come
Speaker 2: up with the estimate for some of the costs and
Speaker 2: how does THEIAH actually go about evaluating whether or not
Speaker 2: it's reasonable, because I think about with scientific research often
Speaker 2: you're doing something very novel. So going back to the
Speaker 2: Gila monster example, I mean, how do you know the
Speaker 2: cost the reasonable cost of housing like two dozen deala
Speaker 2: monsters for a few years while you experiment on them.
Speaker 3: You have to do due diligence and figure it out,
Speaker 3: and it does. It's time consuming. So a lot of
Speaker 3: what faculty like me spend their time doing is deep
Speaker 3: diving into these costs and keep diving into the accompanying
Speaker 3: paperwork and administrative burden for lack of a better word,
Speaker 3: that comes with a lot of these mechanisms, but it
Speaker 3: is the only way to get the funding to do
Speaker 3: the research. So if some things are easy. We know
Speaker 3: in any given market what a competitive salary is for
Speaker 3: a scientist at this level or that level, et cetera.
Speaker 3: We know, at least at the beginning of the grant
Speaker 3: what the costs for the reagents that we know that
Speaker 3: we're going to need are. But You're right. As you
Speaker 3: proceed in the grant, you may require a kind of
Speaker 3: technology or kinds of reagents that you didn't initially budget for,
Speaker 3: and that's when you're scrambling to find additional funds to
Speaker 3: be able to do that, and that's where some of
Speaker 3: these foundation graps sometimes come in.
Speaker 1: I just have one last question. You know, obviously science
Speaker 1: is a very broad category, but the thing that excites
Speaker 1: people from a sort of commercial or return on public
Speaker 1: spending investment perspective is the connection between science funding. Often
Speaker 1: and it turned into a drug or a new therapy
Speaker 1: of some sort. You mentioned to zempic and anti cancer
Speaker 1: drugs and so forth. We've never like really done an
Speaker 1: episode on the economics of labs in general, etc. And
Speaker 1: I want to do way more on this because I
Speaker 1: think it's really important. Can you sort of paint us
Speaker 1: a general outline of in America right now, at the
Speaker 1: source of original discovery, what is the distribution between sort
Speaker 1: of what happens between the public sector versus a research
Speaker 1: institution and then private sector labs.
Speaker 3: Yeah, I mean since the nineteen fifties, this has been
Speaker 3: an invaluable three way partnership. Right The government wants to
Speaker 3: do research, but it knows that it doesn't have the capacity,
Speaker 3: let's say, to do it all on the NIHS campus,
Speaker 3: and so it partners with scientific laboratories at universities by
Speaker 3: providing grant money so that basic research can be done.
Speaker 3: The pharmaceutical industry or the biotechnology industry, they don't make
Speaker 3: investments in that kind of foundational research because there's no
Speaker 3: exact timeline for when you might get a payoff from that.
Speaker 3: So what they do is look to the universities to
Speaker 3: provide them with that foundational knowledge that then they can
Speaker 3: make a startup company or take your promising results on
Speaker 3: what could be a new drug and fund the clinical
Speaker 3: trials that are going to see whether it's effective. And
Speaker 3: this partnership has been incredibly successful and it is the
Speaker 3: reason why the US is a leader in this area worldwide.
Speaker 2: Just on this point, is there an argument to be
Speaker 2: made that maybe universities could monetize some of their research better,
Speaker 2: maybe have higher equity stakes or any equity stakes in
Speaker 2: promising new drugs in exchange for the work they basically
Speaker 2: do for big pharma.
Speaker 3: Oh, you know, I think you could take that argument
Speaker 3: even more broadly. So why is it that a drug
Speaker 3: that was developed at Northwestern and there's a real example
Speaker 3: for this, but i'll leave the drug in the person
Speaker 3: out of it that was then turned into trillions of
Speaker 3: dollars by a pharmaceutical company. Now the university did get
Speaker 3: a cut of that because they had the patent on it.
Speaker 3: But you know who isn't getting the benefits of it? You,
Speaker 3: So you were getting charged huge amounts more money for
Speaker 3: that same drug that was developed using US research funds
Speaker 3: than someone in Europe. Is that, I think is where
Speaker 3: the inefficiencies in the system were.
Speaker 1: There's so much more I want to do on this.
Speaker 1: Sometimes you read like a story about like some MIT
Speaker 1: professor and somehow some biotecher was born out of his
Speaker 1: labs and retires and is a billionaire, And I want
Speaker 1: to understand more the economics of then how that was allocated.
Speaker 1: But this was a fantastic introduction to the topic of
Speaker 1: what's going on. So Carol Lebond, thank you so much
Speaker 1: for coming on off lots happy to have talked with you.
Speaker 3: Thank you very much.
Speaker 2: Thanks Carol, that was great and I'd be happy.
Speaker 3: To explain Lamprey to you.
Speaker 2: At some point they frightened me. I think yea much
Speaker 2: like I find them very interesting, but I also find
Speaker 2: them extremely off putting.
Speaker 3: At the same time, I'm convinced that they are the
Speaker 3: inspiration for the Demi gorgan.
Speaker 2: Oh yeah, you're right.
Speaker 3: They look like that absolutely, But they are like a
Speaker 3: living fossil. They are the closest thing we have to
Speaker 3: a living example of what the most primitive vertebrate was.
Speaker 3: And so if you want to understand where you, as
Speaker 3: a human vertebrate comes from, we can look to evolutionary
Speaker 3: studies using the lambrey.
Speaker 1: Can we keep this last little bit? And that was
Speaker 1: actually really.
Speaker 5: Good, Thanks Carol, Thanks bye bye, Tracy.
Speaker 1: I thought that was a really good introduction to the topic.
Speaker 1: I will say this, like, I'm sure that someone could
Speaker 1: walk in here and convince me, or at least make
Speaker 1: a compelling argument that we need radical overhaul to the
Speaker 1: NIH way we do drug discovery.
Speaker 2: Or the way physcal shock therapy.
Speaker 1: Yeah, or just that we really need to totally rethink
Speaker 1: the way we do science investment in this country. I
Speaker 1: also think that if the main lever you pull is
Speaker 1: just less money, and it means that there are going
Speaker 1: to be people who have worked for ten years and
Speaker 1: then their career is derailed or various labs get shut
Speaker 1: down or in a state of limbo that I'm very
Speaker 1: skeptical that that alone would turn into better results.
Speaker 5: Yeah.
Speaker 1: Well, a couple things here.
Speaker 2: So Number one, I liked your plea for billionaire researchers
Speaker 2: to get in touch with thoughts, So I'll just repeat that.
Speaker 2: If you are a researcher who has made tons of money,
Speaker 2: yeah some invention, then please get in touch with us.
Speaker 2: But secondly, I thought the point Carol made at the
Speaker 2: very end of the podcast about how you know, a
Speaker 2: lot of these discoveries, a lot of scientific advancement does
Speaker 2: eventually get monetized, usually by private companies, even though it's
Speaker 2: funded through public grants, And I think that's I mean
Speaker 2: to her point like that is a huge area of inefficiency.
Speaker 1: It's very easy to look around and find things you
Speaker 1: don't like about any system, and there's too much paperwork,
Speaker 1: or there are things that slow it down, and or
Speaker 1: there is money that is going towards such a nebulous
Speaker 1: area of science and you find some random example that
Speaker 1: has no prospect of commercial application. I'm sure all of
Speaker 1: that exists to an extent. It also seems objectively true
Speaker 1: that at least at this moment in twenty twenty five,
Speaker 1: the US has the world's most advanced pharmaceutical and biotech industry.
Speaker 1: Could it be way better in some sort of like
Speaker 1: alternate scenario where everything moved faster and more efficiently. It
Speaker 1: seems plausible. But I think to Carol's point that I
Speaker 1: really liked is that for the last several decades, the
Speaker 1: US has really had the leading edge industry of the
Speaker 1: world of studying the hard sciences, and those sciences have
Speaker 1: turned into all these sort of commercialized technological breakthroughs. I
Speaker 1: think people should appreciate what we have currently in this
Speaker 1: country and understand the interplay between public money, research foundations
Speaker 1: and commercial ventures that it put us at the technological frontier.
Speaker 3: No.
Speaker 2: Absolutely, And the one other thing I would add on
Speaker 2: is I really like the Gila monster octhic example, because
Speaker 2: this is something else that you see happen quite a
Speaker 2: lot when people talk about research studies. So I think
Speaker 2: Elon Musk has talked about like all these crazy scientific
Speaker 2: projects like having shrimp run on treadmills and things like that,
Speaker 2: but some of them actually lead to monetizable drugs, And
Speaker 2: I think the shrimp example they were actually stress testing
Speaker 2: marine animals or crustaceans ability to withstand environmental stresses. So
Speaker 2: even if the projects sound very niche like with lampreys
Speaker 2: or gila monsters, they can have interesting and potentially profitable consequences.
Speaker 1: I'm never compelled, you know. People love to point out
Speaker 1: areas of like, look at this, they spent one million
Speaker 1: dollars to hold a really race among shrimp, you know,
Speaker 1: or something like that. And I'm never compelled by I
Speaker 1: believe that there exists government waste. There probably is even
Speaker 1: a lot of it. I find those to be like
Speaker 1: the least compelling. But it's not SPS. Maybe it's but
Speaker 1: I but I do think we need to spend more
Speaker 1: on shrimp doing relay races.
Speaker 2: You know, It's funny whenever I hear guila monster. So
Speaker 2: my dad, one of his best friends is called Gilah
Speaker 2: and her husband is Dusty, and I always think that's
Speaker 2: like the most Texan duo ever, Guila and Dusty.
Speaker 1: Well that is, you know whatever, I always think about Guila,
Speaker 1: although I see it's actually I was gonna say Guila
Speaker 1: is one of the few words that was imported into
Speaker 1: the US language from Southeast Asia. But actually in this case,
Speaker 1: it is not. It has a totally different etymology. It
Speaker 1: has something to do with the Southwest. So I thought
Speaker 1: I knew something, but I don't.
Speaker 5: Okay, shall we leave it there?
Speaker 1: Let's leave it there.
Speaker 2: This has been another episode of the All Thoughts podcast.
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1: And I'm Jill Wisenthal. You can follow me at the Stalwart.
Speaker 1: Follow our guest Carol Lebon, She's at Lebon Lab. Follow
Speaker 1: our producers Carmen Rodriguez at Carmen Arman, dash, Ol Bennett
Speaker 1: at Dashbott and Keil Brooks at Cale Brooks. For more
Speaker 1: odd Lost content, go to Bloomberg dot com slash odd Lots.
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