A view from the Center


Deloitte's Life Sciences & Health Care Blog

Could changes to funding streams put biomedical innovation at risk?

Funding and other support from private organizations and philanthropists has helped keep many medical researchers at the forefront of their fields, which has resulted in some cases in longer life expectancies and a higher quality of life for people affected by certain diseases. To help ensure science funding pipelines continue to be robust—and to help train the next generation of researchers—nonprofit biomedical funding organizations should pay close attention to the changing nature of giving.

Keeping the funding pipelines full is critically important to many life sciences companies. Nonprofit biomedical funding organizations often serve as an engine of discovery and are singularly focused on advancing science. The role they play can help pharmaceutical and biotechnology companies push new innovations through the research and development (R&D) pipeline.

Nonprofit organizations that provide funding to biomedical research, or impact the research ecosystem, typically fall into three types:

  • National organizations: These groups often have broad mandates that cover access to care, research, patient services, and policy. They typically have local affiliates or chapters and can also have complex governance.
  • Venture philanthropy groups: Typically, these organizations are born out of a need identified by an individual directly affected by a disease. Sometimes it is a group of impacted people. These groups are often willing to fund high-risk, high-reward research. Venture philanthropy groups tend to see themselves as de-risking the science to get to a better pipeline of opportunity to be discovered, researched, and commercialized.
  • Advocacy groups: These groups might work at a national level to create a public-policy environment that leads to better conditions for people who are impacted by a disease.

People are giving more, but their motives may be changing

In 2017—driven by a thriving economy, Americans gave more than $400 billion to charities—up 5.2 percent from 2016, according to Giving USA’s Annual Report on Philanthropy. Individuals made up 70 percent of the overall giving, which outpaced giving by both foundations and corporations. The report also identified a drop in bequests from estates. Some people have called this a democratization of philanthropy. It’s important to note that although donations are on the rise, the funding sources appear to be shifting.

Biomedical nonprofits are likely going to have to calibrate future income forecasts based on these changing dynamics. Corporate giving also appears to be undergoing a transition, which can impact nonprofit biomedical funders. Many organizations that contribute funding are increasingly interested in transparency and the organizational principles that influence a nonprofit’s agenda. These changing giving trends may be particularly relevant to pharmaceutical, biotechnology, and device manufacturers. The National Health Council, for example, posts its policy on corporate relationships on its website and this is widely expected from nonprofits. The organization’s Standards of Excellence provides a checklist of 35 standards for their member organizations to pursue including the transparency of donors.

Philanthropists are placing bigger bets

There appears to be a trend among philanthropists of placing bigger and broader bets on science. This trend began decades ago with the creation of entities such as the Ford Foundation, the Henry J. Kaiser Foundation, and more recently the Bill & Melinda Gates Foundation. Even more recent endeavors include the Chan Zuckerberg Initiative and the Parker Foundation. These two entities are examples of a new generation of philanthropists. Both groups have an orientation toward technological disruption and have clear perspectives about how new models in science are warranted.

Financial resources are also being aggregated into larger funding vehicles (e.g., the Stand Up to Cancer Foundation model of funding). Stand Up to Cancer was set up a decade ago to fund collaborative, multidisciplinary, and multi-institutional efforts to fight cancer. The organization has pledged $480 million, so far. It can be challenging for a nonprofit biomedical group to become a part of these large-scale enterprises, or their work just might not fit into that landscape. Additionally, to avoid creating financial dependence, some philanthropists provide seed funding rather than creating traditional funding streams that they think might breed over-reliance.

These trends in philanthropy help illustrate why nonprofit biomedical research groups should plan ahead and why life science companies should pay close attention. The more philanthropic capital that is put toward discovering the mechanisms of diseases such as cancer or Alzheimer’s disease, the more opportunity there will likely be to develop new therapies. We are likely to see further shifts in the philanthropic sector.

Generational changes could impact giving

In addition to shifts in philanthropy, we are witnessing demographic changes in our population. Millennials (i.e., people born between 1981 and 1996) now make up about one-third of the workforce, according to an analysis of US Census Bureau data conducted by the Pew Research Center. The influence of the Baby Boomer generation could be waning as they retire, and Generation X may not be far behind.

Nonprofit biomedical funding organizations should understand the giving patterns of millennials, and how that generation views science and their role in advancing it. Companies might need to change the way they reach out to potential donors given that many people no longer have a home telephone or interest in opening direct mail. What about Generation Z (i.e., people born between 1997 and 2010)? A recent Wall Street Journal article cites a profound impact the financial crisis had on this generation’s view of income and work. This may be influencing their giving patterns as they get older.

Many nonprofits do not have endowments, and some fundraise from zero each year using a constellation of walks, marathons, bike rides, planned giving, chapter giving, corporate giving, and philanthropy. There are a variety of factors that could make it more challenging for nonprofit biomedical groups to attract the resources needed to keep research pipelines flowing. This trend could lead to volatility among nonprofits and the treatments they are aiming to develop for their patient populations.

The to-do list for biomedical nonprofits

How should nonprofit biomedical groups prepare for these changes in giving and philanthropy? First, they should acknowledge that the next generation of donors will likely have different motivations than the current generation. In response, they should determine their glide-path so they are not caught off-guard if a funding stream starts to wane. Nonprofit biomedical groups also should figure out what motivates this new generation of donors—especially when it comes to the amazing science that nonprofits are funding and catalyzing.

As for the macro philanthropy trends, every nonprofit biomedical group likely wants to be in the room with the big potential donors. But it might not make sense to always follow the major biomedical funding streams. Biomedical nonprofits should figure out the space that their disease area needs and then determine the best way to fill it. This can help ensure the donor base can buy into whatever role they plan to play in helping biomedical groups develop new treatments. Nonprofit biomedical groups also should enable their patient populations to aggregate their data and experiences. Patient centricity is likely not a passing fad, and tying patient data to funding can help ensure that medical researchers can continue to make important clinical breakthroughs even as the nature of giving changes.

Author bio

Margaret is a managing director engaging across the federal health, nonprofit, and life sciences sectors where she is focused on advancing treatments and interventions for patients, as well as helping to improve the outcomes and efficiency of research and delivery systems. Prior to Deloitte, Margaret advocated for cross-sector collaboration, cultivated a culture of innovation, and engaged patients as partners while serving as executive director of FasterCures, a Washington DC-based center of the Milken Institute. She has worked on biomedical and public health policy serving previously at the Congressional Office of Technology Assessment, as program director at the Society for Women’s Health Research, and as a health science analyst at the American Public Health Association. Margaret has served on national boards and committees including the NIH National Center for Advancing Translational Sciences Advisory Council and Cures Acceleration Network Review Board, and National Health Council. She currently serves on the boards of ACT for the NIH, Asthma & Allergy Foundation, FasterCures, Friends of Cancer Research, and Melanoma Research Alliance. Anderson holds a bachelor’s degree from the University of Maryland and a master’s degree in science, technology & public policy from George Washington University.