U.S. Risking its Scientific Research Edge?

0:00Professor Lisa Larrimore Ouellette:There are clinical trials that have been stopped, which if there's someone who has cancer and they're in a trial that's giving them a drug that may be helping them, that is devastating consequences for their lives and for the people working in these labs. This is a lot of research that could be very promising and is now being put on hold.

0:26Professor Pamela Karlan:This is Stanford Legal, where we look at the cases, questions, conflicts, and legal stories that affect us all every day. I'm Pam Carlin. Please subscribe or follow this feed on your favorite podcast app. That way you'll have access to all our new episodes as soon as they're available. Well, one of the things that's most striking, I think, about the United States in the 20th and then into the 21st century is just how much of our economy and how much of the way we live is a function of federal investment in basic science in all sorts of ways. Public investment in medicine, in technology, everything from the internet to the drugs we use is a product of that kind of investment.

1:09Professor Pamela Karlan:And in a recent Just Security essay, my colleague here at the law School, Lisa Larimore Ouellette, looks at how since World War II, the federal government has set a standard for public investment, and then what's been happening during this second Trump administration. Lisa's interest in these areas stems from many articles she's written about innovation policy, particularly in the medical context. Based on her work, she was appointed last year to a committee for the National Academies of Sciences, Engineering, and Medicine, which recently released a report on the fact that some of the diseases causing the most suffering and death in the United States don't always attract investment in new treatment.

1:48Professor Pamela Karlan:Today, we're going to dive into this topic of federal investment in research and what we're seeing now that's quite new and different. So I want to welcome you to the show, Lisa. Thanks for joining us.

2:02Professor Lisa Larrimore Ouellette:Thanks for having me. Yeah.

2:03Professor Pamela Karlan:So in this just security piece, which I think people should just Google just security in your name, because it's a very accessible piece, even for people who aren't steeped in these issues, you make a point about some really fundamental changes, I think, to how the federal government has been treating research. And I thought maybe we should start with the baseline of what used to be the rule before this Trump administration came in. How did things used to operate? Sure.

2:33Professor Lisa Larrimore Ouellette:I mean, so the current structure has been in place since World War II, when Vannevar Bush and other scientists convinced FDR to fund a lot of science research that might be relevant for the war effort. And that was really the first time the federal government provided substantial external funding to researchers at universities and firms. And it led to all kinds of key technologies, like not just the atomic bomb, but also medical breakthroughs like penicillin and malaria treatments, plus radar and early computing. And the success was so obvious that after the war, there was bipartisan agreements to keep it going, which is how we got the National Science Foundation or NSF and a much bigger NIH.

3:15Professor Lisa Larrimore Ouellette:And the basic model that we use today, where the government funds a lot of competitive research at universities while giving professors the freedom to see where that research leads. And the amount of money we're talking about is enormous. Today, the federal government's total annual research budget is around$200 billion. A lot of that's for research at government labs, but over$50 billion of this goes to universities largely for basic research.

3:41Professor Pamela Karlan:And when you say basic research, what does that mean?

3:45Professor Lisa Larrimore Ouellette:It means research where it's not clear exactly what we're going to get out of it. It's the exact technological application. We're not trying to make a particular widget. it. It's more trying to understand the fundamental mechanisms of how the world works. So in the medical context, it's understanding basic cell biology or the mechanisms behind the disease, which maybe will lead to breakthroughs like a particular drug, but it's less directed than that. Or understanding things like basic physics, which has led to all kinds of technologies and modern computing and things we use today.

4:21Professor Pamela Karlan:So the way this money was handed out was through, as I understand, was through a competitive process. How did that process work?

4:29Professor Lisa Larrimore Ouellette:So Congress appropriates money to the federal funding agencies, which define priorities, general areas of research, like the NIH might say, we want to study things generally related to cancer. And then scientists at universities will submit grant proposals for specific projects of what aspect of cancer research they want to learn about. And that pool of grants is then all evaluated by peer review by other experts who rank proposals based on their scientific merit and potential impact. And then the grants that rise to the top of that peer review process get funded.

5:06Professor Pamela Karlan:Yeah, and as I understand it, when you get one of these grants, there's money for the basic thing you're doing. And then there's something called indirect costs that comes on top of that. What's that about?

5:20Professor Lisa Larrimore Ouellette:Yeah, so the indirect costs, they fund all the things that aren't specific to a project, like the lab space or the computing or the utilities or the regulatory compliance to deal with all the federal regulations related to that. And for over 60 years, the NIH and other grant making agencies have reimbursed universities for these indirect costs. And it's based on the actual negotiated costs, based on audits of what the university's costs are. And that averages now over 50%.

5:53Professor Pamela Karlan:Yeah, and that 50 % goes to everything from keeping the lights on in the building where the scientist is working, or having a custodial crew that cleans the building, or the fringe benefits for the employees who work. So it kind of makes it possible to do the research at essentially no cost to the researcher. Yeah, that's exactly right. Yeah. So this system has worked really well overall. I mean, the United States, the universities in the United States are the envy of universities everywhere in the world. the number of inventions coming out of U.S. universities and the number of kind of basic understandings of, as you say, the way the world works.

6:38Professor Pamela Karlan:It's been a pretty successful system overall. And yet one of the things that your just security piece points out is that we're seeing three really huge changes to this system that have been kind of just kind of thrust onto the system really in quite a catastrophic way. And I want to go through them kind of one by one and start with the one that you call blacklisting research topics. What's this about? I mean, I've only heard like anecdotal stories. Like I have a friend in the medical school who studies basically the germs and bacteria that are in people's mouths. And he said that he got held up for a while because he talked about the diversity of the oral biome or something like that.

7:24Professor Pamela Karlan:I mean, what's going on here?

7:26Professor Lisa Larrimore Ouellette:Yeah, I mean, I think the funding is being cut for a variety of reasons. And one of them has been to target blacklisted research topics that the administration doesn't like. A lot of the canceled grants have been related to DEI or vaccine hesitancy or misinformation or climate research. And the grants that have been targeted have been found through over-inclusive searches for words like diversity or equity in the grant proposal. I mean, I think this has been a super troubling development. And these are grants that have already gone through this rigorous peer review process we've talked about and been approved for funding.

8:05Professor Lisa Larrimore Ouellette:So they're now being canceled because of the viewpoint of what the grant is about, which unsurprisingly has led to legal challenges to these cancellations. And there was one Reagan appointed judge in Massachusetts who said that he's never seen government racial discrimination like this in the way that the government was just canceling grants based on things like talking about diversity.

8:32Professor Pamela Karlan:Yeah, I mean, you and I talked about this kind of offline once and kind of interesting question. You know, clearly the government has the right to say we want you to do cancer research with this money rather than doing acne research with this money. Or we want you to look at climate change rather than at economic inequality or whatever. I mean, they're kind of big content things in the government. Obviously, it's the government's money. They should make a decision through whatever process they make it. But then there's what sometimes is referred to as viewpoint discrimination, which is, you know, should the government be deciding, well, we care more about the cancers that disproportionately strike men or we care more about the kind of cancer that disproportionately strikes Caucasians or something like that.

9:19Professor Pamela Karlan:We're not interested in doing any more research on sickle cell because that's a disease that's primarily afflicts people who are black. Yeah. So what's really going on here is the government is taking a side in sort of scientific disputes.

9:34Professor Lisa Larrimore Ouellette:Yeah, I think it's doing more than simply setting broad research priorities. And obviously, as you just indicated, it's a tricky line, this line between when is it setting an overall goal and defining the scope of a program versus discriminating based on viewpoint and people who are applying for that program. But I think what they've been doing here has been crossing that line. And that's led to injunctions from the district courts so far that have determined this. And the government's raised the defense that, oh, this is government speech. We can spend our money how we want. And so far, the courts that thought about that have said, no, you're not just defining the scope of a program.

10:13Professor Lisa Larrimore Ouellette:You are targeting specific programs because of them talking about things you don't like.

10:19Professor Pamela Karlan:Well, and these, as you pointed out just a moment ago, these are actually grants that were already given. And the government is now saying, actually, no, we're not going to give you this money that we already sort of signed a deal with you on. And after you published your piece, which, again, I just want to commend to our listeners, because I think it does a terrific job of laying this all out. There's actually a decision last Friday from a Trump-appointed judge who said, I'm not going to decide whether this is okay or not. This was in a lawsuit brought by a number of states. I'm going to tell you, you have to go to what's called the Federal Court of Claims, which is a special court when you sue over government contracts, as opposed to what's been going on in Massachusetts, or as you say in the article with Judge Lynn out here in the Northern District of California.

11:08Professor Pamela Karlan:Is this going to just gum up the work so it's going to take even longer to figure out whether the government has to stand by its word or not?

11:15Professor Lisa Larrimore Ouellette:It may. I saw that. It was the case in SDNY against the NSF. And I think it's a tricky issue.

11:23Professor Pamela Karlan:I should say SDNY is the Southern District of New York, and NSF is the National Science Foundation. Yes.

11:29Professor Lisa Larrimore Ouellette:And the district court there, as you say, they denied this preliminary injunction and said they likely don't have jurisdiction. The case ought to be filed in the Court of Federal Claims as a suit for money damages under what's called the Tucker Act, which is basically the law that governs when you can sue the government for money. And I think that will make it harder. I mean, if there are more courts and this, this Supreme Court may be sympathetic to that argument that some of these suits that are being filed against the grant making agencies really belong in the court of federal claims. But if it requires everyone who has received a grant to go to the court of federal claims and ask for their money, that's not really remedying the underlying concern that the government is engaged in viewpoint discrimination in these cases or engaged in violations of the Administrative Procedure Act and things like that.

12:18Professor Pamela Karlan:Yeah. And one of the things I think some of the people who are doing biomedical research sort of pointed to this is while they're not getting the money, what's the effect of this in the short term of not getting the money that you were already promised?

12:32Professor Lisa Larrimore Ouellette:I mean, it's enormous. There are clinical trials that have been stopped, which if there's someone who has cancer and they're in a trial that's giving them a drug that may be helping them, that is devastating consequences for their lives and for the people working in these labs. I mean, this is a lot of research that could be very promising and it's now being put on hold.

12:53Professor Pamela Karlan:And I mean, it's like they're not bringing, they're not admitting people to graduate programs, you know, PhD programs. They're euthanizing lab animals that were having drugs, you know, that were being given these drugs. They're stopping clinical trials. And this is all in the context of things that could take years to work their way through the system. And these are on the grants that have already been given. And, you know, we'll get in a moment, I think, to your third bucket, which is what about the stuff that hasn't yet been given and what's going to happen there. But I wanted first to actually turn to your second bucket, which is about what's sometimes called the indirect cost controversy.

13:37Professor Pamela Karlan:And what's happened there?

13:39Professor Lisa Larrimore Ouellette:Yeah, so I think this has gotten less media attention, but it could be truly devastating. We've already talked about how indirect costs cover these non-project specific costs, like keeping the lights on in the lab or covering other people involved in lab administration. and how these have been for 60 years based on these negotiated rates, currently averaging over 50%. This spring, a number of the grant-making agencies, the National Institute of Health, the National Science Foundation, the Department of Energy, the Department of Defense, they all announced that they are capping indirect costs at just 15%, which doesn't even come close to covering the real costs of doing research.

14:18Professor Lisa Larrimore Ouellette:and so far the courts have blocked this like all of these have been enjoying for now and i actually worked with some of the leading economists on this dan gross bovin sampat and pierre azale to file an amicus brief in the pending appeal in the first circuit because we'll see what happens on appeal and i think there is a good argument that the way all of these agencies did this is a violation of the Administrative Procedure Act and not being kind of reasoned at all. This is a very short opinion that makes a number of fundamental mistakes. But we'll see what the First Circuit does.

14:55Professor Pamela Karlan:Yeah, so it's kind of taking a meat axe to the money that's traditionally gone into this. And they've done this at the same time that the so-called Big Beautiful Bill has increased the tax on university endowments. So universities are getting kind of hit from both sides. That is, the money that's theirs, they're taking some of that away. And then on the money that they're supposed to give, do you think the government's theory here is that the universities will just suck it up and eat this cost? Or are they trying to use this as another way of stopping research they don't like? Because the university will just look and say, well, if you can't cover the indirect cost of this research, we're not going to let you do the research at all.

15:40Professor Pamela Karlan:It's hard to know. It's probably some of both. I mean, I think some of what's been going on is general leverage over universities.

15:48Professor Lisa Larrimore Ouellette:We've seen the administration trying to use federal funding as leverage for other things that are not really related to the canceled grant at all, like trying to get them to adopt their view of viewpoint diversity and have more government oversight over university operations.

16:04Professor Pamela Karlan:It seems odd to say we're going to take away several hundred million dollars of your medical school funding because we don't like what your Department of Mid-East Studies is teaching.

16:15Professor Lisa Larrimore Ouellette:Yeah, exactly. But it is putting institutions in impossible positions where they, like in some ways, have to trade off the academic freedom of scientists who are working on these threatened projects with the academic freedom of other aspects of university operations.

16:30Professor Pamela Karlan:And yeah, it's a it's a it's a just a kind of amazing assault on one of the you know, it's part of, I guess, from my perspective, a series of assaults on various aspects of civil society, on the media, on universities, on law firms, on scientific knowledge generally. And then we come to your kind of third bucket, which is what you call attacking institutions and agency budgets. And this is not just attacking institutions like universities, but attacking the government's own institutions, like some sort of weird autoimmune response.