The Reagan administration's budget scalpel has begun cutting into federally funded biomedical research, sending shudders of concern through the biotech industry that grew out of such research.
Four decades of federal support for biomedical research produced the scientific knowledge and the scientists that are the basic resources of modern biotechnology.
University scientists, supported by federal grants, unlock secrets about the genetic code and cell behavior. Private biotech firms use these discoveries and employ the scientists to develop new ways of treating disease, growing crops, producing chemicals and flavoring food.
Industry observers worry that a decline in federal support for research will limit the growth of those resources and jeopardize the United States' world lead in biotechnology.
Some experts also expect the academic research community to turn increasingly to private business as an alternative funding source, despite questions about industry's willingness or ability to pick up the slack.
"Continued government support of basic research is critical," said David A. Jackson, senior vice president and science director of Genex Corp. "The reason the [biotech] industry is as healthy as it is today is because of the nation's science base, which must continue to be nurtured." Jackson's work on genetic engineering at Stanford University was partly supported by government grants.
The federal government's primary channel of biomedical research funds is the National Institutes of Health, which already has felt the effects of the president's proposed spending cuts.
Reagan's fiscal 1986 budget proposal says that total "outlays," or actual spending, on basic, health-related research will rise to $5.2 billion, a 4 percent increase over the fiscal 1985 level. NIH's outlays will increase because of savings from program cuts this year.
Congress appropriated $5.1 billion for NIH in fiscal 1985, enough to fund 6,526 new research grants. But last month, the Office of Management and Budget directed NIH to fund only 5,000 new research grants and to save the unspent funds for future years.
That cutback would bring spending in line with the president's proposed 1986 budget, which would limit the number of new grants to 5,000 and cut NIH's appropriation to $4.9 billion.
New one-year grants will be worth an average $146,000 this year, up from $133,000 last year. Most are awarded to university scientists, but some go to other research institutions and private companies.
The cut in grants will not pull the plug on research that is already under way: It affects only the number of new research projects, those that compete for start-up funding this year.
The average research project lasts 3.2 years, and NIH feels a "moral commitment" to continue funding through the second and third year, a spokesman said. If NIH were to fund 6,526 new projects this year and the president's 1986 budget were approved, the agency would be unable to support those projects into their second and third years, he said.
OMB also directed NIH to support only 500 research centers this year, although Congress appropriated funds for 533. The president's 1986 budget proposes reducing the number to 455.
The cut in the number of research centers funded will not affect existing centers and, in fact, will represent an increase from the 496 centers funded in 1984.
Sen. Lowell P. Weicker (R-Conn.), chairman of the Senate subcommittee with authority for NIH's budget, is "concerned about this practice" of cutting new grants below the amount intended by Congress, an aide said. Weicker will examine the issue during budget hearings this year, the aide said.
The cuts follow five years of tightening resources at NIH, a period of decline in the number and value of research training awards and research and development contracts.
"There is a strong concern that this shows a general lack of foresight," said Harvey Price, executive director of the Industrial Biotechnology Association.
"There is a lot of research in biotech to be done which will yield new discoveries and new commercial opportunities . . . . we want to continue to maintain the edge we have competing with other countries."
Foreign governments in Japan and Western Europe are committing large sums of money to developing biotechnology. Already the Japanese have taken the lead from the United States in amino acid production.
"If U.S. government funding for basic life-science research continues its decline, the science base, which is the source of innovation in biotechnology as well as in other fields, may be eroded," the U.S. Office of Technology Assessment said in a report last year.
Biotech companies will not suffer directly from current cuts in basic research, because most are working to translate existing knowledge into products, to scale up their manufacturing processes or to market their goods.
Reducing research support is more likely to affect the future advancement of knowledge and the training of scientists, most biotech experts say.
"By limiting basic research, we would certainly tend to restrict the future of the whole biotech industry," said Thomas M. Li, president of Biotech Research Laboratories Inc. of Rockville.
Industry analysts expect the cuts to be felt most in two areas: in the study of less-glamorous, but commercially useful scientific fields, and in the training of young scientists.
The experienced, famous, elite scientists will continue to get funding for the most exciting work, the kind that wins Nobel prizes, said Nelson Schneider, managing director of TEI Medical Partners, a venture capital fund for investment in biotechnology.
But there may be less money for the more mundane projects that provide the bridge between "esoteric knowledge" and practical applications, he said.
"U.S. government funding of generic applied research, especially in the areas of bioprocess engineering and applied microbiology, is currently insufficient to support rapid commercialization," the OTA report said.
There also will be less money for new scientists. "We're worried most about the new faculty," said Harvard University's associate dean of research, Richard G. Leahy. "It will be hard for new faculty members to get started."
Experienced scientists also will "lose against the inflation factor and the sophistication factor," Leahy said.
To progress from one level of investigation to a more advanced project, a researcher often needs a more sophisticated -- and more expensive -- set of equipment. Rising capital costs of biomedical research add to the financial squeeze.
The decline in federal support "will certainly energize faculty members' interest in developing corporate ties," Leahy said, adding that Harvard has "no problem" with that trend and monitors it closely to "protect the public interest."
Industry has increased its support of health-related research, spending $4.6 billion in 1984, or 39 percent of the national total. But some biotech experts express doubts about industry's ability to make up for reduced federal spending.
As a new industry, with many companies in the research and development phase, biotech funds itself through investment rather than product sales, said Bruce Mackler, general counsel for the Association of Biotechnology Companies.
The current slowdown in biotech investment "limits the ability of industry to pick up the slack," Mackler said. "An adequate level of government funding is necessary for the continued growth of biotech."