The Research Industrial Complex Wastes Big Money

Published on Jul 7, 2016

When President Dwight Eisenhower left office, being a former WWII general, he knew all too well how industry was playing the beltway game of milking the DC cash cow. He warned us of a military-industrial complex. A new editorial now warns of a biomedical-research-industrial complex that, like its partner in the Pentagon, wastes more money than it applies to good use. Let me explain.

My Experiences with Stem Cell Research

When I first began to use stem cells clinically as part of an IRB-approved trial in 2005, a lot of basic science research was needed to guide the project. After reviewing the first couple of hundred research papers, a theme began to appear. The basic science in the world of mesenchymal stem cells was often wasteful and repetitive. There seemed to be little coordinated rhyme or reason, with studies appearing to be on random topics.

A great example of this waste is the Hedgehog pathway. First, I have to congratulate the grad student who named this thing, as being a fan of early video games, it’s very cool to have a hard-core science concept named for Sonic the Hedgehog (yes, one of the component parts is named “Sonic”). This is a signaling pathway that’s involved in how cells differentiate and behave. One of the best-studied Hedgehog pathways shows us how a limb develops in an embryo. A disruption of the pathway is also involved in how cancer cells develop from stem cells.

Given all of the important things that the Hedgehog pathway does, it’s certainly reasonable to have a good number of studies figuring out its component parts. Having said that, as of right now, in the US National Library of Medicine, we have 4,458 research articles on this topic. If we make the search terms broader, we have more than 12,000! How many is enough? That’s a good question, but the point is that if this research were being coordinated and focused on one goal, like curing cancer or getting stem cells to do x or y, my guess is that a thousand studies would be too much. And that’s the point—this type of focused research is uncommon.

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The Research Industrial Complex

A nice piece on this topic was just published by Seth Augenstein. He brings out that a few brave and important scientists are starting to criticize the scientific establishment for wasting big bucks. For example, Michael Bracken, a Yale epidemiologist, blasted scientific waste at a speech at the National Institutes of Health. He estimates that 87.5% of biomedical-research money is squandered on the disorganized and random studies like the Hedgehog experiments above. He also discussed how wasting these dollars also impacts patients who die while their tax dollars are squandered rather than being used to discover cures. The Lancet recently weighed in on the issue, saying that $200 billion, in 2010 dollars, is likely being flushed down the science toilet per year.

The Problem: The Modern University Is a Business, Just like Coca Cola

When most of us think of universities, we think of ivory towers and kids toiling away studying. The average American today thinks of a university much in the same way that the average middle-age European thought of the church—as having a higher calling. However, is the image in our heads of threadbare academics toiling away for peanuts to solve the world’s problems true?

First, let’s look at the scale. Harvard has over a $4 billion annual budget, Stanford’s is $5.5 billion, and Ohio State’s is $4.7 billion. That makes these universities equivalent-sized businesses to Coca Cola ($4.4 B). More importantly, these universities blow away most US businesses with cash on hand (their endowments). Harvard has $37 billion, Stanford has $22 billion, and OSU has $3.6 billion. In fact, just a handful of the richest universities in the United States have more cash on hand than the federal government at $49 billion (this is operating cash as the feds can obviously print money as needed).

How Does a University Earn Money?

A modern research university earns money in two key ways:

Taking a significant “vig” off of every research dollar. In most universities, this is approximately 35–45% of every grant or research-study dollar that walks in the door.
Patenting discoveries paid for with your tax dollars. Here the university gets a double bite at the apple—once when it takes your tax money from the feds to fund research and then a second time when it patents the discovery and then licenses those patents to university-owned businesses that exploit the discovery.

How University Inc. Interfaces with Stem Cells

University professors generally don’t like that physicians are using stem cells to treat disease. An entire lexicon of negative sound bites has been developed and are used in the news. As I’ve blogged before, I can’t disagree with their recent contention that many physician stem cell clinics are out of control—treating any patient with any disease who has a credit card that clears. Having said that, it’s important to place that university angst over physician stem cell use into perspective—it’s simply bad for business.

As discussed, University Inc. makes its money by taking its vigorish of grant proceeds and by licensing discoveries paid for by your taxes. Physicians using stem cells reduces the income from both. Who needs a thousand basic science studies of the stem cell Hedgehog pathway when we already know what they can do clinically? Who will license a stem cell patent when there are already 1,000 clinics using stem cells? All of this is very bad for University Inc.’s bottom line. Hence, there is no mystery as to why university professors aren’t fond of stem cell clinics.

How Do We Fix University Inc.?

First, it’s important to understand that University Inc. has done some great things. The Bayh-Doyle Act of the 1980s, which allowed universities to make money from licensing patents, did increase the pace of discovery. However, it’s our biomedical grant system that’s broken. Universities should be celebrating and assisting the translation of stem cells from the bench to the bedside, and instead they have done everything in their power to obstruct it. There’s simply more money to be made by throwing up barriers and prolonging basic science research.

Fixing University Inc. needs to start with realigning research priorities at NIH. First, we need to tie continued grant money to real progress in finding cures. This isn’t a new idea. Smart nonprofits like the Michael J. Fox Foundation do this already. Google does it with their research dollars as well. Here’s a plan:

Twenty-five percent of NIH funds go to fund pure basic science. These are the moonshot ideas that aren’t expected to yield fruit, other than through accidental discovery, or might not find cures for many, many years.
Fifty percent of NIH funds go toward 10-year disease-focused research. You must prove that your basic science research has a plan to get to a cure. To get continued funding, you must show real progress toward that cure.
Twenty-five percent of NIH funds go to toward 3-year disease-focused research. You must show that your idea could translate into a clinical cure used in the clinic within 3 years.

This system would get rid of the waste and refocus a generation of scientists toward finding cures for disease rather than churning basic science topics to get grant funding. Scientists and universities that are incentivized this way would look at the best of what’s happening in the clinical use of stem cells today and quickly partner with physicians on 36-month projects toward cures rather than throwing up roadblocks because basic-science grant money is threatened.

The upshot? University Inc. is broken. Given the immense value of the modern university toward making our lives better, it must be fixed if we’re to see all of the fantastic possibilities biomedical research will bring us over the next century. Some brave university professors are sticking their necks out to open a dialogue on how the system can be made better—I applaud their efforts!