A Reality-Based View of Government Funding of Science

Getting the diagnosis right before designing treatments

This is a back-and-forth between Jeremy M. Berg (University of Pittsburgh School of Medicine, longtime NIH grant applicant, grantee, reviewer, and institute director), and Aishwarya Khanduja + me.

A RESPONSE FROM DR. BERG:

I read with interest “Venture Capital Has Lessons for Government and Philanthropy” by Khanduja and Buck. Discussions and analyses of the benefits and weaknesses of different approaches to providing science funding are important, but these should be based on well-informed perspectives and not on anecdotes and straw man arguments. I will focus of funding by the National Institutes of Health (NIH) as I have decades of experience as an applicant, a grantee, a peer reviewer and study section chair, an NIH institute director (the National Institute of General Medical Sciences, NIGMS, 2003-2011), and a trans-NIH program development leader. I will illustrate my observations with specific examples, all related to discoveries related to DNA and RNA biochemistry and its applications.

There are many misunderstandings and myths in this piece. Perhaps the most fundamental one is captured here.

By the time you get the funding (if at all) and execute the research plan, you might learn that your first idea wasn’t quite right and that an even better approach might work (*Marcia McNutt told one of us that this is what regularly occurred when she was a practicing scientist). But if you try to amend the grant, you will need to navigate the federal bureaucracy once again.

This fundamentally misunderstands that most NIH funding comes in the form of grants, not contracts. My experience and that of essentially every practicing scientist I know is completely aligned with that ascribed to Dr. McNutt. In the course of a executing a research plan, you discover the need for alternative approaches or learn of results, presented or published, that affect your chosen research topic. But you do not have amend anything! You pursue the science and describe whatever changes in approach in your annual progress report. NIH program officers understand that this is the nature of the research and, indeed, often that your are working in a desirably dynamic field.

An often-discussed example of this is represented by the work of Tom Cech when he was a young investigator at the University of Colorado. His proposal was to purify and characterize the protein enzyme responsible for splicing a particular RNA molecule, removing internal portions that were not present in the mature, functional RNA molecule. During these studies, Cech and his coworkers discovered that the RNA would splice itself, without the need for any protein at all! He was able to pursue this discovery, focusing on the requirements for this RNA-driven process, without contacting NIH or amending his grant in any way. When he submitted his grant renewal and reported that no protein was required, the study section response (according to Dr. Cech) was “Cool. That’s even better.”

Several paragraphs later, the piece continues with this:

Program officers face perverse incentives too. If a major federal initiative funds a bunch of failed ideas, Congress might hold a hearing. But if a given grant succeeds brilliantly, Congress doesn’t hold a ceremony to give the program officer a medal. Agency bureaucrats get paid the same salary either way, with no upside for identifying breakthroughs and serious downside for visible failures.

In my view, this completely misunderstands or misrepresents the motivation of program officers and the relationship, cultivated over decades, between the NIH and Congress. Program officers are public servants who are not motivated much by money but rather by helping science advance. As an institute director, I oversaw the administration of the small bonuses and discretionary salary increases available to program directors in my institute. We tried to reward hard work and creativity, providing good guidance to their applicants and grantees, and teamwork within the institute and in cross-institute initiatives. We never even considered giving any special compensation to a program officer whose grantee received a Nobel Prize (and there was at least one Nobel Prize awarded to an NIGMS grantee in 6 out of the 8 years I was director). The program officers across the institute were already proud enough of having contributed in some way to a discovery that was so recognized. NIH directors, as well as individual NIH institute and center directors, have spent many decades informing members of Congress and staff about how NIH funding works. I know of no examples where there have been Congressional hearings about funding “failed ideas”. Congress may express concern or frustration over slow progress on an important health issue, but they generally understand that this is almost always due to fact that science, in general, and biology in human populations, in particular, is hard.

The section concludes with a discussion of Katalin Karikó and her role in developing mRNA vaccines. It is true that she struggled to get NIH funding for this work, likely because it was perceived as too risky. I will discuss risk tolerance at NIH below. I find her university’s decision to demote her because of these funding challenges more troubling as it represents what I see as a more serious flaw in the biomedical research system, particularly at medical schools. What is missing from the discussion in the essay is the timeline, Karikó’s demotion was in 1995 and the DARPA funding noted occurred in the early 2010’s. Thus, more than 15 years were required to move her ideas forward, even with support from other sources including BioNTech. Much remained to be discovered to enable mRNA vaccines including development of an understanding of the innate immune response to single-stranded RNA. Perhaps the major enabler of mRNA technology was the discovery that modified bases could be introduced that would not trigger the innate immune anti-viral responses but would still act like natural bases for protein coding. Effective Liposome-based deliver systems also were needed, These discoveries were not made until the early 2000s, in studies unconnected to potential mRNA technologies. I doubt many venture capital-style funders would have the patience necessary for these long and uncertain timelines.

I now return to the conservative nature of NIH peer review and funding. In my view, there are two major factors that contribute to this. First, being a successful researcher generally requires identifying many of the potential problems associated with experiments. Because of this, many, but not all, scientists are relatively conservative, readily identifying and articulating potential challenges. I witnessed an example of this when I was NIGMS Director. Mario Capecchi shared the Nobel Prize in Physiology or Medicine in 2007. He was a long-time NIGMS grantee. I was shocked when I saw him quoted saying the NIH had not funded his Nobel-winning research on homologous recombination used for gene modification because I knew that NIGMS had funded him continually for many years. It turned out that he was referring to a comment in his NIH peer review critique that this part of his proposal was “not worthy of pursuit” as it was unlikely to work. But he still got a very good score overall and NIGMS fully funded his proposal. This again illustrates that power of NIH grants as opposed to contracts. He was free to pursue this approach and he did so, getting it to work somewhat in about four years.

More important, in my view, is the fact that NIH study sections receive a very large number of high-quality applications. Empirically, it seems that most reviewers will favor, at least somewhat, high-quality proposals that are almost certain to yield interesting and important, even if incremental, results over proposals that have potential but might yield little. However, there is a straightforward solution to this which has been implemented at NIH for decades, namely having programs that are specifically for high risk-high reward research.

Applications are submitted that are supposed to contain high risk-high reward ideas and reviewers are specifically selected and instructed to look for such projects. If a proposal is solid and well-supported by preliminary data, then it should not be a priority for funding through such programs. On the other hand, a proposal that addresses an important problem and it appears that the investigator(s) has a novel approach is ideal for such a program. I helped run the NIH Director’s Pioneer Program for 2005 through 2011 and helped create the partner NIH Director’s New Innovator Program beginning in 2006, while I was at NIH. These programs are still in place. They might need tweaking and expansion, but they were thoroughly evaluated in the past (https://commonfund.nih.gov/pioneer/programevaluation and https://commonfund.nih.gov/newinnovator/programevaluation) and were deemed to be successful in achieving their main goals (compared to other NIH funding programs).

The question for NIH leadership is much like that for a financial portfolio manager. What percentage should one invest in solid, dividend-paying established companies and what percentage should be devoted to start-ups that might flame out but might lead to the “next big thing”? This can be managed easily by setting aside funding for these different programs without the need for radical experiments that have not already been tested.

In summary, I agree that funding approaches at agencies like NIH should be examined thoughtfully and creatively. But this should be done will full knowledge of how these agencies actually function. As is almost always the case in medicine, it is essential that one arrive at the right diagnosis before deciding on a treatment.

Foundation and Venture Capital Funding

Although I have less experience with foundation and VC funding than I do with federal grants, I do have some experience. When I became a department director at Johns Hopkins University in 1990, the rebuilding of the department was being supported, in part, by the Lucille P. Markey Charitable Trust. This foundation has a substantial impact on several fields of biomedical research.

However, two points deserved comment. First, the areas of impact were limited because of the limitations on the resources available, both financial and staff expertise. The trust chose a small number of specific areas in which to specialize and hired program officers to cover those areas. This is, in my experience, typical of most foundations and this limits to ability of foundations to cover a wide range or emerging areas of science. Second, many foundations are limited by the resources that they can make available as they general spend only some or all the income generated by their endowments. The Markey Trust had a relatively large impact because they spent down all their resources including the principal over a 15-year period. Foundations can provide flexible funding that can be used for high risk-high reward research, but foundation support is often used for infrastructure that can be hard to support through other mechanisms.

Although I have never founded a company, I have served in the past on the scientific advisory boards of three venture capital supported companies beginning at the time of their founding. The first company was a structure-based drug design company called Three-Dimensional Pharmaceuticals. The company hired some talented scientists and developed some impressive technology.

However, my main impression was that the venture capitalists involved waited until the company was on the verge of financial failure before stepping in, obtaining larger and larger equity in the company, and replacing the very creative CEO who had built to company with leadership with the goal of selling to company without much emphasis on new technology development. This did occur and the company was sold to Johnson and Johnson.

The second company was Sangamo Biosciences which was originally focused on zinc finger proteins, a group of gene regulatory proteins that I had played a major role in discovering and characterizing. The company was founded by a relatively savvy CEO with industrial experience. Their strategy was largely based around wide control on intellectual property. Sangamo did develop some impressive technology and applications and it still an independent, publicly traded company.

The third company was Gryphon Biosciences which was founded to investigate proteins made out of D- rather than L-amino acids. The company dissolved within a year due to lack of financing. I note the this field is still an active area of study with several companies working in this space more than 30 years later although there are no huge practical applications that have gone to market to date.

While this is a limited experience set, at no time in these interactions did I see any evidence that venture capital approaches were particularly effective in driving scientific advances. The venture capital approach was useful to help guide technologies to potential markets and partners which is something with which most academics including myself have limited experience.

My experience was that the venture capital approach was to hear lots of ideas and pick a small number on which to focus, based on their potential marketability in the short or, at best, the medium term. Many ideas that had had more potential in the long term to answer important questions and needs in the long term were discarded.

A REPLY FROM AISHWARYA KHANDUJA AND STUART BUCK:

We’d like to thank Dr. Berg for his gracious response (and his continuation of the meme!), and would just like to add a few notes in reply.

As an initial matter, it looks like we are all basically agreed on a significant number of points from the original essay. That is, Dr. Berg doesn’t contest the points (most of which are not original to us!) that:

• traditional government funding does require too much paperwork

• reporting requirements as to time and effort can be overly burdensome

• most traditional funders take too long to get money out the door

• being a good science funder requires a different skillset from that for being a good scientist

• the government doesn’t have enough focus on funding so-called “high risk, high reward” research outside of a handful of small programs

• both government and philanthropy are less subject to market competition than VCs

• NIH reviewers favor “proposals that are almost certain to yield interesting and important, even if incremental, results over proposals that have potential but might yield little”

• Katalin Karikó was mistreated by her university

• government efforts to fund small businesses are often run by people with no relevant experience as a VC funder.

So, to focus on the few areas where Dr. Berg identifies a strong disagreement:

First, Dr. Berg points out that the burden of NIH bureaucracy is less than we imagined, because there is actually no need to amend a grant if you “discover the need for alternative approaches or learn of results . . . that affect your chosen research topic.”

At the same time, the official NIH Grants Policy Statement says that a grant recipient “must obtain prior approval [emphasis in original] from the NIH” for a change in a grant’s scope, with the first example being a “change in the specific aims approved at the time of the award.” Other examples of prior NIH approval needed (there are many more): “substitution of one animal model for another,” “shift of the research emphasis from one disease area to another,” “changing assays from those approved to a different type of assay,” or “purchase of a unit of equipment exceeding $25,000.”

It seems obvious to us that this policy is much more restrictive than any VC funder, regardless of the details as to which actual activities need advance approval or not. Our point here is about the relative balance of bureaucracy vs. flexibility/discovery, not about which precise activity lands in the category of “NIH will allow an exception.” Because NIH and other federal science-funding agencies are funded with taxpayer monies and are subject to sometimes irrational Congressional oversight, federal agencies tend to be quite bureaucratic and not as flexible and agile as many private funders including VCs.

A second major disagreement is over our assertion that program officers (and the like) ought to see some financial reward for being prescient enough to fund scientific work that would turn out to be groundbreaking. Dr. Berg objects on the ground that government funders are “not motivated much by money but rather by helping science advance,” and by personal pride in “having contributed in some way to a discovery.”

We agree that today’s public servants are likely motivated by those rationales, not by money (or else they would be doing something else with their careers). All the same, we are living in a world where, outside of academia, smart people with expertise in science face a dichotomous choice: government service with lots of job security (at least in most typical years) and little chance for financial upside, or private careers in finance, tech, etc., with no job security but lots of potential upside.

We suspect that government might be able to recruit from a larger talent pool if there was more room for a brilliant decision to result in financial upside. We also suspect that government and philanthropy program officers might be more risk-tolerant if there was more potential upside for themselves. [And we could systematically test this sort of question via prospective metascience interventions at the policy level!]

We might well be wrong, but we can agree to disagree.

Relatedly, Dr. Berg notes, “I know of no examples where there have been Congressional hearings about funding ‘failed ideas.’” Here, we admit to a slight overstatement based on the past 50 years of everything from Senator Proxmire’s “Golden Fleece” awards to the recent DOGE attempt to ridicule seemingly-silly scientific studies. Our only point is that the public scrutiny here can be highly asymmetrical.

Third, Dr. Berg concedes the “conservative nature of NIH peer review and funding,” but notes that “there is a straightforward solution” that has already been implemented: specific programs that target so-called “high risk, high reward” research.

We agree. Indeed, we applaud programs like the NIH Director’s Pioneer Program and the New Innovator Program. But those programs are fairly small in the grand scheme of things. The Pioneer Program typically funds all of eighteen people per year, while the New Innovator Program isn’t much bigger (56 people per year). By comparison, the NIH makes about 9,000 grants per year. We think it is still fair game to critique the other 98% of NIH grantmaking.