ARPA-H Launches with $1 Billion Initial Funding: Can It Become the DARPA of Biotech?

Just last month, U.S. President Biden realized his ambition to establish a major biomedical research agency, as Congress announced the creation of the Advanced Research Projects Agency for Health (ARPA-H) and allocated $1 billion in initial funding.

In fact, as early as April last year, Biden proposed the establishment of ARPA-H, positioning it as the biomedical counterpart to the U.S. Department of Defense’s Advanced Research Projects Agency (DARPA). With the goal of “driving transformative innovation in health research and accelerating the application and implementation of health breakthroughs,” ARPA-H has been allocated a substantial budget of $6.5 billion.

Despite high expectations for its launch, as an “emerging entity,” ARPA-H has naturally sparked a wide range of public questions. For instance, why was ARPA-H established? What is the value of its creation? Through what mechanisms can it achieve its objectives? And what challenges does it currently face? To address these issues, VCBeat’s Orange Fruit Desk has compiled publicly available information to conduct a systematic analysis of the ARPA-H initiative and provide answers to the aforementioned questions.

Before delving into the establishment of ARPA-H, let us first examine the following background.

Undoubtedly, the United States is the current global “leader” in biotech innovation. Whether in the development of cancer therapeutics or COVID-19 vaccines, the U.S. biomedical and pharmaceutical system has demonstrated formidable strength.

Moreover, in recent decades, driven by the dual forces of continuous breakthroughs in basic research and vibrant commercial activities within the biopharmaceutical industry, the biopharmaceutical sectors of various countries have witnessed substantial development, with the United States being no exception.

In the United States, basic research is generally conducted by universities, non-profit organizations, and government laboratories, with funding primarily sourced from the federal government and supported by the National Institutes of Health (NIH).

It has been estimated that every $1 invested by the federal government generates at least $8 in economic growth, with support from the National Institutes of Health (NIH) playing a significant driving role behind this impact. This also demonstrates that substantial federal investment in basic research has a crucial influence on the development of the U.S. healthcare industry.

In terms of commercial practices within the biopharmaceutical industry, numerous biotechnology companies are able to bring more advanced treatment options to patients through the research, development, and marketing of specific products. Furthermore, protected by intellectual property rights, developers can recoup their costs in a shorter period of time.

Today, an increasing number of success stories underscore the robust foundational infrastructure of the biopharmaceutical industry and its immense prospects for future development. Advancing technologies are also providing potential opportunities for the prevention, treatment, and even cure of major diseases such as cancer, infectious diseases, and Alzheimer’s disease. Unfortunately, some innovative projects with the potential for significant breakthroughs are not well aligned with existing research support mechanisms.

Typically, these projects are characterized by high risk, excessively long development cycles, a strong orientation toward academic frontiers, insufficient projected market size, and multifaceted limitations on market application.

However, within the current mechanism for advancing biomedical innovation projects in the United States, NIH support for research projects tends to favor incremental studies, while commercialization requires that projects achieve milestones sufficient to attract investors within a reasonable timeframe. Consequently, some projects with significant breakthrough potential struggle to come to the forefront.

The establishment of ARPA-H was precisely aimed at addressing this issue.

As a systematic initiative spanning from molecular coverage to societal impact, ARPA-H has focused since its inception on funding high-risk, innovative projects capable of driving breakthroughs in medical technology, thereby delivering transformative solutions for patients.

It is evident that high risk and high reward are both prominent features embedded in ARPA-H’s DNA. In fact, these characteristics were inspired by the U.S. Defense Advanced Research Projects Agency (DARPA).

Since its establishment in 1958, DARPA has facilitated a series of innovations in fields such as personal computers, the Internet, GPS systems, weather satellites, laser weapons, and unmanned aerial vehicles (UAVs). It has made outstanding contributions to maintaining the United States’ leading technological advantage and has inspired countries like Japan and Germany to emulate its model. The United States itself has established several DARPA-like “clone agencies,” including the Homeland Security Advanced Research Projects Agency (HSARPA) in 2002, the Intelligence Advanced Research Projects Activity (IARPA), which funds broad cutting-edge technologies, in 2006, and the Advanced Research Projects Agency-Energy (ARPA-E), dedicated to developing advanced energy technologies, in 2009.

DARPA’s ability to serve as a model for numerous organizations stems from its unique organizational structure and management culture. In brief, DARPA’s success can be attributed to the following factors: emphasis on breakthrough technologies and outcomes, high tolerance for failure, a flat organizational management system, project managers, and an outsourced project model. Notably, this does not involve the substantial financial investment commonly assumed by the public.

On March 28 this year, the Biden administration released its $5.8 trillion budget proposal for fiscal year 2023. Although the proposal did not disclose complete budget figures for individual agencies, Dr. Stefanie Tompkins, Director of DARPA, revealed in a recent online conference that DARPA had submitted a budget request of approximately $4.1 billion for fiscal year 2023. Given that DARPA’s annual budget has historically been around $3 billion, it is evident that DARPA’s funding has consistently accounted for less than 1% of national R&D expenditures.

Yet it was precisely this investment, which paled in comparison to other projects, that gave rise to numerous far-reaching and disruptive technologies.

Currently, DARPA consists of approximately 220 government employees across six technical offices, including nearly 100 program managers. These program managers are drawn from academia, industry, and government agencies, serving limited terms typically lasting three to five years. This relatively short tenure fosters a sense of urgency among program managers to drive their projects forward.

DARPA Organizational Structure

So, specifically, what are the advantages and unique characteristics of DARPA?

DARPA program managers wield significant decision-making authority in project selection and personnel recruitment, with the autonomy to initiate projects and manage budgets. Throughout project implementation, they receive expert support in security, legal and contractual matters, finance, and human resources, enabling them to achieve major breakthroughs and accomplishments within their relatively short tenures.

In terms of organizational management, DARPA adopts a “flat” and “highly agile” organizational structure, while implementing metric-driven accountability for project managers. This approach encourages them to explore diverse methods to achieve these quantifiable targets, thereby mitigating the overall risks associated with the “flat” model. Project managers maintain close communication with team members to continuously monitor project progress and ensure strict adherence to deadlines in project execution.

In conducting disruptive technology research, DARPA is primarily outcome-driven, generating concepts based on pre-defined objectives rather than engaging in pure scientific research. Furthermore, DARPA projects are outsourced to other R&D institutions or corporate teams during implementation. Program managers are responsible for selecting researchers from U.S. defense contractors, private enterprises, and universities, and funding the outsourced teams to translate new ideas into tangible results, thereby ensuring the efficient advancement and practical deployment of these projects.

Of course, while emphasizing the “high-risk, high-reward” nature of its projects, DARPA does not shy away from failure; drawing lessons and experience from failures has long been a hallmark of the agency. William Bonvillian, a DARPA research expert at the Massachusetts Institute of Technology, has also stated that the DARPA model would not work if program managers were not granted the latitude to fail.

Influenced by the DARPA model, ARPA-H is designed as a lean, flatly managed, and flexible organization within its current framework. Similar to DARPA, ARPA-H plans to recruit program managers from academia, government agencies, and research institutions through short-term contracts (with terms of approximately three years), granting them substantial operational autonomy and resource support.

In project planning, ARPA-H requires program managers to identify critical unmet needs that cannot be addressed by existing solutions. These needs typically originate from patients, healthcare professionals, academic research teams, and federal agencies. Based on these needs, program managers will design high-risk, high-reward breakthrough solutions.

Once the concept is finalized, the project manager may submit the proposal directly to the ARPA-H Program Manager, who has the authority to determine the feasibility of the project and establish its priority. Upon approval, ARPA-H will solicit applications and conduct reviews in accordance with the DARPA model and the principle of pursuing high-risk, high-reward opportunities.

In terms of institutional functions, based on DARPA’s mission, ARPA-H’s mission is “to make critical investments in breakthrough technologies and broadly applicable platforms, configurations, resources, and solutions that have the potential to transform important areas of medicine and health for the benefit of all patients.”

Selected Project Plans Currently Announced by ARPA-H

Although the project plans currently announced by ARPA-H mostly focus on diseases such as cancer and Alzheimer’s disease, this does not mean that ARPA-H will only pay attention to specific diseases or conditions. On the contrary, ARPA-H has an extremely broad scope of focus, with the goal of establishing and developing platforms applicable to various diseases.

In the face of innovative project planning across multiple domains, ARPA-H, like DARPA, maintains a high tolerance for failure. Within ARPA-H’s culture, if all projects and initiatives succeed, it反而 suggests that they lack sufficient breakthrough potential.

In terms of project promotion, following the DARPA model, ARPA-H is highly unlikely to maintain dedicated laboratories for conducting project research; instead, it will likely support other R&D institutions or corporate outsourcing teams to carry out project research through contracted arrangements.

In addition, pursuing equity in health services is a fundamental element of the operation of each ARPA-H project. Therefore, ensuring that ARPA-H funding broadly covers China and populations with significant deficiencies in medical research and access to healthcare resources will be a priority task in ARPA-H’s development.

To achieve this goal, ARPA-H will designate a senior leader internally to conduct comprehensive equity assessments across various stages, including project initiation, award mechanisms, and staff recruitment.

Since the ARPA-H initiative was proposed, there has been considerable controversy over its ultimate organizational placement.

One perspective holds that ARPA-H’s objectives are fully aligned with the NIH’s mission—to explore fundamental knowledge in the life sciences and behavioral sciences, and to apply this knowledge extensively to extend human lifespan and to prevent, diagnose, and treat various diseases and disabilities. Therefore, operating ARPA-H within the NIH would not only ensure robust resource support from the NIH but also facilitate the rapid accumulation of specialized expertise required for establishing a new agency. In other words, leveraging the NIH as an incubator for ARPA-H would help accelerate the launch and implementation of ARPA-H projects.

And while the NIH appears more “conservative” compared to ARPA-H’s more aggressive project advancement strategy, it actually has long-standing experience in promoting certain breakthrough initiatives through a DARPA-like model, as exemplified by the Human Genome Project launched in 1990.

A recent example is the NIH’s response to COVID-19. Following the outbreak, the NIH rapidly established the Accelerating COVID-19 Therapeutic Interventions and Vaccines (ACTIV) initiative and the Rapid Acceleration of Diagnostics (RADx) program. Under the funding and coordination of the NIH, ACTIV brought together multiple government agencies—including the NIH, FDA, CDC, DoD, VA, BARDA, and EMA—as well as researchers from academic institutions and numerous private companies.

Others argue that ARPA-H must operate as an independent agency to break away from the NIH’s traditional risk-averse investment model and establish a truly differentiated approach. To achieve innovative breakthroughs, ARPA-H requires sufficient autonomy in its operations, decision-making, and budgeting. Without protection from external interference, its projects would be highly susceptible to disruption.

Moreover, the NIH grant application process is relatively cumbersome, requiring peer review by scientists outside the NIH during the evaluation period. In particular, when new proposals feature more cutting-edge and forward-looking characteristics, they often struggle to secure adequate funding due to risk considerations.

In stark contrast, ARPA-H’s project model operates differently: its program managers wield substantial authority in project selection, and ARPA-H actively strives to avoid being influenced by the NIH’s traditional peer-review process in project evaluation.

Furthermore, some believe that incorporating ARPA-H into the NIH would adversely affect research funding for other health programs within the NIH.

Regarding the question of ARPA-H’s affiliation, a corresponding solution was provided in the Consolidated Appropriations Act for Fiscal Year 2022, which was passed by the U.S. House of Representatives in early March this year. Of course, the Act did not directly decide on ARPA-H’s affiliation; rather, it granted the Department of Health and Human Services (HHS), to which the NIH belongs, the authority to determine whether ARPA-H will be an independent agency or part of an existing organization.

After prolonged deliberations, U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra announced in late March that the Advanced Research Projects Agency for Health (ARPA-H) would become part of the National Institutes of Health (NIH). Although ARPA-H is affiliated with the NIH, its director will report directly to Xavier Becerra. This decision has finally put to rest the uncertainties surrounding ARPA-H.

Although the issue of affiliation has been resolved, there are still many questions from the outside world about the operation of ARPA-H.

For instance, in terms of operational model, although DARPA serves as an excellent reference for the establishment of ARPA-H and includes a Biotechnology Office within its organizational structure, it is not, on the whole, a perfect model for the field of biomedical research.

There are three reasons. First, DARPA serves a single “client”—the U.S. Department of Defense—with projects focused on national security, many of which pertain to engineering systems. In contrast to engineering systems, biomedical research involves biological system interactions that are more complex and harder to control.

Second, biomedical projects require close interaction with a wide range of stakeholders, including patients, hospitals, physicians, pharmaceutical companies, and payers.

Third, the implementation of biomedical projects must take into account the influence of human behavior and social factors, while also addressing the relevant regulatory environment. Therefore, while ARPA-H can learn from DARPA, it still needs to develop a model better suited to its own operations.

Apart from some controversy surrounding the adoption of the DARPA model, public attention has also focused on intellectual property rights for final research projects; however, this issue is not addressed in the current ARPA-H roadmap.

However, the Bayh-Dole Act, enacted in the United States in 1980, allows universities and small businesses to retain intellectual property rights arising from government-funded projects. Although the Act stipulates that intellectual property generated by large enterprises through government funding remains owned by the government, Congress authorized DARPA to waive this requirement under specific circumstances, thereby significantly encouraging greater corporate participation in defense technology innovation.

ARPA-H has drawn extensively on DARPA’s operational model. Although there are currently no clear regulations regarding intellectual property ownership, ARPA-H can similarly refer to DARPA’s approach to handling patents and intellectual property in its planning.

Overall, ARPA-H remains in a very early stage, with many details still in the planning phase. However, this does not diminish our expectations that it will transform the future trajectory of medicine. Although the journey may be fraught with numerous challenges, for ARPA-H, which embraces risk-taking, these obstacles are precisely the necessary path to success.