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Trump Budget Blueprint Would Slash NIH Funding by 20 Percent

This article has been updated to include details about the blueprint's plans for US Food and Drug Administration medical product user fees, as well as Wall Street analysts' views on the budget.

NEW YORK (GenomeWeb) – President Donald Trump released his budget blueprint today for the coming fiscal year, calling for a series of spending cuts including a nearly 20 percent reduction in funding for the National Institutes of Health.

In a report called "America First: A Budget Blueprint to Make America Great Again," President Trump proposed a $5.8 billion reduction in the NIH's fiscal 2018 budget to $25.9 billion, along with "a major reorganization of NIH's institutes and centers to help focus resources on the highest priority research and training activities." This shakeup would include eliminating the NIH's Fogarty International Center, which facilitates collaboration between US and international scientists, and consolidating the Agency for Healthcare Research and Quality — currently part of the Department of Health and Human Services — within the NIH.

Additional details about the proposed reorganization have yet to be provided, but Trump's budget promised "other consolidations and structural changes across NIH organizations and activities," as well as reductions in administrative costs and a rebalancing of federal contributions to research funding.

If approved by Congress, the NIH budget cuts would represent a major change for the agency, which had dealt with more than a decade of stagnant funding before receiving a $2 billion boost in fiscal 2016 under President Barack Obama. An additional $4.8 billion over 10 years was also earmarked for the NIH with the passage of the 21st Century Cures Act late last year.

The blueprint also called for the recalibration of US Food and Drug Administration medical user fees to over $2 billion in fiscal 2018 compared with roughly $1 billion in 2017, replacing the need for new budget authority to cover premarket review costs. This increase, the report added, will be accompanied by "a package of administrative actions designed to achieve regulatory efficiency and speed the development of safe and effective medical products.

"In a constrained budget environment, industries that benefit from FDA's approval can and should pay for their share," it stated.

Whether President Trump's budget plan will be enacted in its current form, however, remains unclear. A number of congressional leaders have indicated that it will not receive support for a variety of reasons, including Senator Lindsey Graham (R-S.C.), whom NBC News quoted as calling the blueprint "dead on arrival."

Evercore ISI analysts Ross Muken, Vijay Kumar, and Michael Newshel agreed, calling the budget a likely "non-starter" and noting that the broad bipartisan support the Cures Act received suggests that the NIH cuts would not likely be approved by Congress.

Still, the proposed NIH budget reduction comes as a "significant negative surprise to those both within and outside Washington," and could potentially impact life science firms with significant exposure to the academic/government end market, Cowen analyst Doug Schenkel wrote in a research note.

Leerink's Puneet Souda echoed this sentiment, warning of a "significant impact to the smaller and less diversified companies ... that are more exposed to academic funding.

"Congress sets and passes budgets and funding," Souda added. "Nonetheless, the White House sets a tone and direction for Congress to consider, and with Republicans firmly in charge of this Congress, [the budget blueprint is] more important than many for investors to scrutinize."

Fiscal Year 2018 starts on Oct. 1, 2017.