Interview transcript

Jared Serbu Jere, let’s start with some big picture issues here. Bring us up to speed on — now that we’re pretty well a month into the lapse at this point, what we know about where things stand with the overall program and what kind of work can and cannot proceed at this point.

Jere Glover Well, all phase-one and phase-two contracting process and solicitations has [coverage] by the labs. If you have an existing contract, you’re allowed to continue working on those contracts. And phase three follow-on contracts, which have gotten bigger and bigger over the years, are now several billion dollars a year — these are contracts that follow on to government work, but did not include SBIR/STTR funding. Those are allowed to continue. That’s a recent change. Any previous lapse, they’ve always said it wouldn’t continue, but phase threes — and we’re talking about huge amounts of money now — more money goes out in phase three contracts than is actually spent on the SBIR program. So that is allowed to continued.

Jared Serbu And was that a surprise? Did people see that coming when the program first lapsed? The fact that phase threes were going to allow it to be able to continue.

Jere Glover No, we were concerned because previous times they had said no, and General Council Office and DoD put out a guidance memo that said that they were going to be allowed to, making it also clear that existing contracts could continue as well. So, [both came out at the same time].

Jared Serbu As we get into the discussion here, I want to talk about some recent work you all have done on drugs, specifically, but just sticking with the broader big picture of the program, what have you all been hearing from members about what this lapse has meant to them in the real world?

Jere Glover Well, it’s a serious problem. As you probably know, cash flow is a horrible problem for all small businesses, but especially in the technology world, where you’re hoping to expand, and thinking you got a great program, and you’ve borrowed enough money from family and friends and others to get through a few months. Well, months delay, several months delay, not only does it take that time, but it takes the time to gear back up and get things back underway. So for example, a solicitation that had a closing date during this period of time: it takes a while for the government to go back on, republish when the solicitations can be received. It creates not only time, but confusion, delay, and uncertainty. It’s really bad for small businesses because cash flow is critical. And often these companies have put everything they have [into it], mortgaged their houses, borrowed money from their family and friends, and expect an award. And then suddenly [they] find out that the award doesn’t come through. But they also run into the situation [where] it’s not just the period of time, it’s how long it takes to start the process back up. And the uncertainty is just horrible for companies, especially new companies.

Jared Serbu I know it’s hard to set aside those cash flow issues in particular, but whenever we come out of this, how much of this lost time is recoverable? Can program offices within the government work through whatever backlogs are building up right now and kind of get things up to the point where this lapse would be, sort of, otherwise unnoticeable or are we losing unrecoverable activities here?

Jere Glover It’s hard to say because we don’t know how long the lapse is going to be. You know, the longer the lapse, the harder it is to recover, the more time it takes and the more is lost.

Jared Serbu Fair enough. Jere, I want to get into some very specific research that you all have done that you and I were just talking about off the air around pharmaceuticals. Not an area that, frankly, I’d think of as the first thing being associated with SBIR, but you found some major impacts there. Tell us what you found.

Jere Glover In 2022, the National Academy of Sciences issued a study looking at the SBIR program. What they found was that of all new drugs approved in the last 20 years, 12% came from the SBIR/STTR program. What we did recently is look into — we finally got the list of those drugs, looked into those drugs, and found that those drugs have annual sales of $36 billion a year. Nine of them had sales of over a billion dollars. And these drugs are pretty remarkable. And the reason is that they treat diseases like Hodgkin’s, multiple myeloma, Parkinson’s, smallpox, multiple sclerosis, and HER2 breast cancer. When you lose time on developing these critical new drugs for public health, it’s hard to make that back up. And some of these companies have great ideas. It’s amazing that this SBIR program, as great as it is, and as conscious as it is allowed to lapse and go silent.

Jared Serbu Was it surprising to you to see how much small business involvement there is and has been in the pharmaceutical field and these innovations period?

Jere Glover Yes, I was surprised because, quite frankly, you don’t expect pharmaceuticals to come out of small business and for this program to be so successful. We knew from the National Cancer Institute study a few years back that it was phenomenally successful in treating cancer and developing devices and technology for cancer, but to find out in drugs — which we ordinarily think of as a billion-dollar industry [with] millions dollars to get a drug to approval — that SBIR in particular played an important role in this in this program

Jared Serbu Let me wrap up with just kind of another big picture question, you know, and I know the hope right now is let’s just get the program reauthorized and back up and running, but looking a little bit further down the road, what sorts of reforms and changes should Congress be considering as they look toward a long-term reauthorization?

Jere Glover Well, the first thing they ought to do is increase the size of the program and they ought to make it permanent. These stop-starts every few years really do disrupt the program, and the idea that every year we can do it — and in this case, one senator alone can say, I don’t want this to go out, I’m going to let this program lapse — that’s hard to have a program that does this much good in a situation where it’s subject to the whims of one particular person.

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