Navigating NIH Funding Cuts, Diversity Bans, and Tariff Challenges: Legal and Industry Implications for Medical Research

PE: What should these stakeholders have top of mind as they find new ways to effectively navigate and continue medical research?

Lanton: Things have definitely changed. I think that funding is now the biggest issue regarding the future of research. People need to get used to the idea of shifting from relying on federal grants for funding to exploring other possible sources.

Currently, there is a policy in place that caps indirect costs at 15%. When people ask what I mean by indirect costs, I’m referring to administrative costs, overhead, and regulatory compliance—factors that are included when determining the necessary funding. It used to be 50%. A company would calculate total costs, and then the government would provide 50 cents on the dollar for these indirect costs. Now, that’s been reduced to 15%, and unsurprisingly, lawsuits have been filed. As of now, the courts have halted it, but the agency has found other creative ways to push funding freezes. One particularly interesting approach was using the Federal Register. The Federal Register issued a notice freeze, which essentially halted the review of all grant proposals submitted to the NIH. This is significant because, for future applications to be considered, notices about upcoming meetings and their impact on research must be published in the Federal Register.

Stakeholders now have to seek new funding sources outside of the NIH, which will be incredibly challenging. They’ll need to turn to the private sector. But if everyone is turning to the private sector for additional funds, there could either be a chilling effect—where people stop planning certain projects—or so much competition that initiatives the NIH was working on won’t receive as much attention. Right now, we’re all just waiting to see how this unfolds.

PE: In addition to the NIH funding cuts, how do you see the clinical trials industry navigating other political challenges, such as the diversity bans?

Lanton: Researchers will have to add an extra layer of consideration to something they haven’t really done before. They now have to view their trials through a more conservative lens. When conducting research to solve a problem, one would expect the process to be objective, but unfortunately, that’s the reality we’re in now.

This entire situation is disheartening. It could halt many clinical trials focusing on minority groups and stifle progress on certain vaccines. This could lead to entire sectors of science receiving neither funding nor attention. I don’t think we fully understand the magnitude of this yet—it won’t be clear until it actually happens. It’s ironic in a way, but an important question must be asked: What happens when others refuse to innovate? I believe those innovators will leave for places where they’re welcome. Unfortunately, if this continues, we may see a significant exodus of talented scientists from the U.S. over the next few years. I wouldn’t be surprised if many relocate to the EU, Asia, or other regions where scientists are encouraged to be more creative and address critical needs. Regardless of funding, these scientific advancements remain necessary and demand attention.

PE: With some judges indicating that the NIH funding freeze may be illegal, are there grounds for the NIH to continue conducting research, and what options do they have?

Lanton: NIH has been ordered to continue its current research funding, which is good. The available options will depend on several factors, and those factors will take time to unfold. The only way NIH could move forward without interference from the administration is if Congress steps in and drafts laws that explicitly prevent research funding from being influenced by political reasons. However, given today’s hyper-partisan environment, I don’t believe such legislation will pass.

PE: How could the funding freeze potentially play out legally if the administration defies the courts' ruling, and what are the potential legal implications of such an action?

Lanton: It’s a nightmare scenario—not just for lawyers like me, but for anyone invested in this issue. It never used to be, but I think it’s the number one concern right now. If the administration defies court rulings, that’s a constitutional crisis—it would fundamentally disrupt how the federal government operates.

I remember back in law school, we discussed this possibility, and it seemed so theoretical, so far-fetched. But now, we have to seriously consider it. The legal implications are too numerous to outline entirely because they depend on how it happens, which cases are affected, and the specific facts of those cases. Then, we’d have to extrapolate to understand the broader consequences. Ultimately, it would mean a collapse of our checks and balances system—the foundation of our democracy. I don’t mean to sound alarmist, but that’s exactly what it is. It’s like a Jenga tower—you pull one piece from the center, and the whole structure collapses. It would throw everything into chaos. Hopefully, this scenario won’t play out, but based on recent events, we have to consider these possibilities.

PE: What are the legal implications of the latest tariffs—including the "reciprocal" variety—and what challenges do they present to the pharma supply chain?

Lanton: Reciprocal tariffs could create significant disruptions in the supply chain and many commercial contracts. I don’t want to get overly technical, but many contracts include clauses that activate certain procedures or nullify agreements when events beyond a party’s control occur—such as embargoes or excessive tariffs. These clauses will become increasingly relevant as they may need to address the impact of excessive tariffs. Supply chain disruptions could arise at any moment, particularly with raw materials, which are frequently sourced from overseas.

Some people may have different opinions, but in my view, these tariffs will negatively affect the supply chain and, ultimately, our economy at every level. Prescription drug costs will likely rise significantly as a result.

Unfortunately, Congress has granted broad authority to the executive branch through legislation. Specific laws that come to mind include the Trade Expansion Act of 1962 and the International Emergency Economic Powers Act of 1977. These laws delegate power to the president to adjust tariffs in response to specific circumstances, such as national security concerns or trade negotiations, without requiring new congressional approval. Because of this, the president holds significant control over tariffs, and unless Congress enacts new legislation to curtail this power, the courts have limited options to intervene.

At this point, I’m not entirely sure how the power dynamic will unfold. It used to be that Congress and the president shared these responsibilities, but now, we have to wait and see. Tariffs could be an experiment. That seemed to be the case during this administration’s previous term—some tariffs led to negative consequences, while others remained in place.