Medical research is funded primarily by two sources: private industry and the federal government. In the United States, pharmaceutical, biotech, and medical device companies provide roughly 58% of all biomedical research and development funding, while federal agencies cover about one-third. The remaining share comes from philanthropic foundations, universities, venture capital firms, and state governments.
Private Industry: The Largest Funder
The pharmaceutical industry is the single biggest spender on medical research. In 2019, the industry devoted $83 billion to R&D, up from about $5 billion in 1980 and $38 billion in 2000. That growth reflects both rising drug development costs and expanding pipelines in areas like cancer, immunology, and rare diseases. Members of the Pharmaceutical Research and Manufacturers of America, the industry’s main trade group, account for roughly 75% to 85% of total industry R&D spending in any given year, with smaller biotech and device companies making up the rest.
Industry-funded research skews heavily toward later-stage development: clinical trials, regulatory submissions, and the testing needed to bring a product to market. This is expensive work. A single large clinical trial can cost hundreds of millions of dollars, and most drug candidates fail before reaching patients. Companies fund this research because successful products generate revenue, which means the diseases they study tend to be ones with large patient populations or high-value treatments.
The Federal Government and NIH
The National Institutes of Health is the largest public funder of biomedical research in the world. The FY 2026 budget request for NIH was $27.9 billion. That money flows to thousands of researchers at universities, medical schools, and independent research institutions across the country through a competitive grant process.
Government funding fills a gap that industry largely ignores: basic science. The early-stage work of understanding how cells communicate, how genes influence disease, or how the immune system functions rarely has an obvious commercial payoff. But these discoveries form the foundation that companies later build on when developing drugs and devices. Federal funding also supports research into diseases that affect smaller populations or where commercial incentives are weak, such as infectious diseases common in low-income countries.
Getting an NIH grant is highly competitive. In 2024, only about 19% of research project grant applications were funded. For brand-new proposals that hadn’t been submitted before, the success rate dropped to 17%. Researchers often spend months preparing applications and may resubmit multiple times before receiving funding, if they ever do.
Philanthropic Foundations
Charitable giving to science and health research totaled more than $30 billion in 2019 alone. This category includes major foundations like the Bill & Melinda Gates Foundation, disease-specific charities, and family endowments. While that $30 billion figure is substantial, it includes gifts to hospitals, public health programs, and science education alongside direct research funding. The portion going specifically to biomedical R&D has historically been estimated at a smaller fraction, though it still represents billions annually.
Philanthropic funding has a geographic pattern that mirrors where donors are based. The Gates Foundation, headquartered in Seattle, directed over 20% of its research funds to projects in Washington state between 2010 and 2019. The Lilly Endowment sent 62% of its research funding to institutions in its home state of Indiana. The Dennis Washington Foundation, based in Montana, funded health and science research exclusively at Montana universities, contributing more than $20 million. This local concentration means philanthropic dollars don’t spread evenly across the research landscape.
Foundations play an outsized role in specific areas. Disease-focused organizations like the Cystic Fibrosis Foundation or the American Cancer Society fund targeted research that might not attract enough government or industry attention. Because their budgets are smaller than NIH or pharma, many foundations use a leveraging strategy: they provide seed funding for promising early work, then help researchers attract larger grants from government or industry to continue.
Venture Capital and Biotech Startups
Venture capital has become a major force in translating laboratory discoveries into potential treatments. In 2024, the biotech venture capital landscape was defined by massive early-stage funding rounds. Xaira Therapeutics launched with a $1 billion Series A round to develop AI-driven drug discovery. Kailera Therapeutics raised $400 million for obesity and metabolic disease programs. Candid Therapeutics secured $370 million for autoimmune disease research. These are remarkable sums for companies that, in some cases, had no approved products yet.
The 2024 environment favored large, well-connected companies. Total investment eclipsed the prior year even though fewer individual funding rounds closed, meaning more money was flowing to fewer bets. Smaller biotechs or those without established leadership teams found it harder to raise capital. This pattern matters because it shapes which diseases get attention: investors gravitate toward areas with clear commercial potential, like obesity drugs and AI-enabled drug discovery, rather than conditions with smaller markets.
Universities and Their Own Funds
Academic institutions contribute their own money to medical research, though these amounts are modest compared to industry or government spending. Universities use endowment income, internal grants, and discretionary funds to support researchers, particularly in two situations: when a scientist is between external grants and needs bridge funding to keep a lab running, or when a project is too novel or early-stage to compete for traditional grants.
Johns Hopkins University, for example, offers internal funding to sustain research programs that have a high likelihood of securing outside funding soon but need interim support. These institutional funds also maintain shared equipment and infrastructure that individual grants can’t always cover. For researchers at well-endowed institutions, this safety net can mean the difference between keeping a promising line of investigation alive and shutting it down.
Rare Disease Research: A Special Case
Rare diseases pose a unique funding challenge. With small patient populations, the commercial incentive to develop treatments is limited. Congress addressed this with the Orphan Drug Act in 1983, which created financial incentives for companies willing to develop products for rare conditions. The FDA’s Office of Orphan Product Development runs grant programs that fund clinical trials, natural history studies, and product development for rare diseases. A newer program established in 2021 specifically funds research into ALS and other rare neurodegenerative diseases.
These programs work alongside patient advocacy groups that raise funds directly. For many rare diseases, a small foundation started by affected families is the primary engine driving research forward, funding early studies that eventually attract interest from larger funders.
How These Sources Shape What Gets Studied
The balance between public and private funding has real consequences for which diseases get attention. Industry funding, which makes up the majority of total spending, naturally gravitates toward conditions where treatments can generate significant revenue. Government funding is more evenly distributed and more willing to support basic science with no immediate commercial application. Philanthropy fills specific niches but tends to cluster geographically and around diseases that attract public sympathy and donor interest.
The interplay between these sources creates a pipeline. Government-funded basic research identifies a biological mechanism. A university scientist publishes findings. A foundation provides seed money for early translational work. A venture-backed startup licenses the technology and runs initial trials. A pharmaceutical company acquires the startup or partners on later-stage development. Each funder plays a different role, and gaps at any stage can stall progress on a disease for years.