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| THE FUTURE OF PHILANTHROPIC SUPPORT FOR MEDICAL/HEALTH RESEARCH | ||
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Enriqueta C. Bond, Martha G. Peck, and Melanie Scott*
The purpose of this paper is to review current support of medical/health research by philanthropy, describe the diversity of the philanthropic community and how it sets priorities for its support, and consider the role of philanthropy in the future support of medical research. Recommendations are made for ways to increase private support for medical/health research. What
are Foundations? Figure 1 shows grants made by foundation type for 1996. (Foundation Giving, 1998) Independent foundations accounted for 77.4% of total giving and comprise most of the largest funders. Corporate foundations contributed 13.3% of total giving, with community foundations at 6.9%, and operating foundations at 2.4%. Interestingly, community foundations have reported the largest gains in funding over the past several years (18% in 1996) and are poised to grow even faster, as will be described later in this paper. What are the special characteristics of nonprofit foundations? The Treasury Department, in a 1965 Report on Private Foundations, described foundations as "uniquely qualified to initiate thought and action, experiment with new and untried ventures, dissent from prevailing attitudes, and act quickly and flexibly." Foundations, we believe, fill a crucial niche in the support of medical research; ways to extend their involvement should be pursued vigorously. Size
and Scope of the U.S. Philanthropic Enterprise
Religion received the largest allocation of total philanthropic dollars, 47%, or approximately $74.97 billion, with education second at 13.5% of total giving. Giving to health was third, amounting to $14.03 billion, or 8.8% of total dollars. "Health," however, is classified quite broadly--encompassing not only medical research but also support of health services and facilities, such as hospitals and nursing homes, and organizations that address general health issues or specific diseases We have no way to identify how much individual giving goes to support medical research, although we can glean from the publicity of some large awards (and medical school annual reports) that a number of gifts are directed annually toward the support of health research. For example, Gladys Holm regularly visited Children's Memorial Hospital in Chicago to deliver teddy bears to sick children. When she died in 1997 at the age of 86, administrators were surprised that she had bequeathed $18 million to the hospital for heart research. Ms. Holm made her fortune by buying stocks in health-related companies, including her one-time employer, American Hospital Corporation, although she herself never earned more than $15,000 in annual income. Another private bequest for medical research and training came in the spring of 1998, when Sanford I. Weill, head of the Travelers Group, announced he was contributing $100 million to Cornell Medical School. Foundations have historically shown strong support of the health field. Until the end of World War II, private foundations were the major independent source of funds for medical research. In 1940, for example, foundations provided 27% of the $45 million spent on health-related research. Foundations such as the Rockefeller Foundation (among others) sponsored initiatives in schools of medicine and public health, establishing the concept of institutional support for research and medical education. This institutional emphasis was credited with developing and strengthening the research infrastructure in academic centers. Later, foundations began redirecting their support to individual researchers and to catalyzing the development of particular areas, such as tropical medicine, molecular biology, and neuroscience. From the 1950s forward, governmental support for research came to dominate and now eclipses the combined grant budgets of all private foundations. Foundations currently direct 16.2% of total grant dollars, or $1.2 billion, to the broad category of health. (Foundation Giving 1998) Medical research has a 22% share of total health giving by foundations, which amounts to about $265 million. The largest share of health giving, 58%, goes to the general and rehabilitative subcategory, which includes hospitals and medical care, reproductive health, public health, health policy, and management. A 1998 report, Health Policy Grantmaking, lists the top 25 independent foundations by giving for health (which includes support of research), as seen in table 2. Diversity
of the Private Health Funding Sector Voluntary health agencies (also known as operating foundations) are public charities largely supported by contributions from their constituents or the general public. Many health-oriented operating foundations were founded by individuals or by the family and friends of individuals suffering from a given disease; thus, the organizations commonly target a single disease or category of diseases. Through their policy and advocacy efforts, operating foundations are in large part responsible for the tremendous growth of the National Institutes of Health (NIH) budget from the 1940s to the present. Their activities also include patient services, continuing education for health professionals, public education regarding disease and prevention, and support of research. Not every voluntary agency invests in health research, but several, such as the American Cancer Society and the American Heart Association, provide substantial amounts--in excess of $100 million per year. For many of these agencies, support of research is targeted to draw the best researchers to study their disease. The voluntary health agencies that comprise the National Health Council contributed a total of $347,836,000 to health research in 1996, representing an average program expense of 30%. Table 3 (Report on Voluntary Health Agency Revenue and Expenses, National Health Council) The Howard Hughes Medical Institute (HHMI) represents another type of philanthropic supporter of biomedical research--in this case a medical research organization. Currently the largest private funder of medical research in the United States, HHMI was founded in 1953 by the aviator-industrialist Howard R. Hughes, with a mission to promote "human knowledge within the field of the basic sciences (principally the field of medical research and medical education) and the effective application thereof for the benefit of mankind." HHMI has taken a unique approach to funding research that sets the organization apart from other grantmakers. The organization hires its grant recipients (scientists) as HHMI employees. In this arrangement, HHMI's scientist-employees conduct research at their home institutions across the country while enjoying budgets that support lab overhead, research assistants, technicians, and state of the art equipment. Benefits of this approach include freeing HHMI scientists from pressures that others face in attracting and maintaining funding. Further, the stability of HHMI employment allows the investigators to set their own research agendas and pursue long-term or risky projects that NIH, for political or monetary reasons, might not fund. In 1997, HHMI dispersed $352 million and employed 318 HHMI investigators in laboratories at more than 60 sites. In addition, HHMI spent another $95 million to support charitable activities in the area of science education. Corporate foundations make significant contributions to medical research. Many of these foundations derive funds from a for-profit company or corporation and make grants on a broad basis, generally related to the business interests of the supporting corporation. Board members and staff are usually drawn from the corporation. A Conference Board report, Corporate Contributions in 1997, cites a 20% increase in 1997 in companies' gifts of cash and products. Such donations represented an average of 0.8% of corporate pre-tax income, slightly up from the prior year's average of 0.7%. The study reported that for the first time in more than a decade, health and human services, rather than education, received the largest proportion of corporate gifts (35% of the total). Pharmaceutical companies, followed by computer companies, were the largest philanthropic contributors. The most recent Taft Corporate Giving Directory lists five pharmaceutical manufacturers in its top 10 corporate givers (Merck is #1, followed by Johnson and Johnson, Pfizer, Eli Lilly, and Bristol-Myers Squibb). However, it should be noted that 60% of pharmaceutical and computer corporate contributions were in the form of product donations. Examples include product distributions by SmithKline to eradicate elephantiasis and Johnson & Johnson's fight against intestinal parasites among Central American children. Corporate foundation grant programs in support of medical research include Bristol-Myers Squibb Foundation Unrestricted Biomedical Research Grants Program and the Merck Genome Research Institute. The Bristol-Myers Squibb Foundation Unrestricted Biomedical Research Grants Program awards five-year research grants of up to $500,000 in six fields, including infectious diseases, cancer, neuroscience, nutrition, orthopedics, and cardiovascular/metabolic diseases. The Merck Genome Research Institute provides funding for functional genomics technology and has made grants to support genome sequencing, bioinformatics programs, and gene expression/function assays. An independent, private foundation derives its funds from a single source, such as an individual, a family, or a corporation. The source of funds often defines the mission area for the foundation program. Priorities are set by the board of directors of these organizations, resulting in a wide range of support for biomedical research. Some, such as the Charles A. Dana Foundation and the Whitaker Foundation, direct their grants to a single research area-neuroscience and bioengineering, respectively. Others, such as the Kresge Foundation, support equipment, facilities renovation, and construction for biomedical laboratories in colleges, universities, teaching hospitals, and independent research institutions. Another example of private, independent foundation support comes from the Robert Wood Johnson Foundation (RWJF), which funds a considerable amount of health-services research. RWJF's three major grant areas relate to health care access, chronic health conditions, and substance abuse. In 1997, for example, the foundation launched a $20.5 million national program to investigate public policies, programs, media, and other environmental influences to learn which of these have the most impact on increasing and discouraging youth substance abuse. Our own organization, the Burroughs Wellcome Fund (BWF), focuses its grantmaking exclusively on the support of biomedical research and science education. BWF's strategy is to support the careers of young scientists and to invest in undervalued areas of research, such as parasitology, clinical research, and interdisciplinary training. In 1997, BWF committed $38 million in grants, the majority through competitive award programs on behalf of young investigators. A 1996 report, Trends in U.S. Funding for Biomedical Research, released by the University of California-San Francisco Center for the Health Professions and the Pew Charitable Trusts, profiled 18 private foundations active in biomedical research (table 4 and table 5). This listing is not inclusive of all private foundations engaged in biomedical research, but demonstrates the variety and scope of funding available. In 1997, the Pew Charitable Trusts, in collaboration with the Burroughs Wellcome Fund, the American Cancer Society, and the Howard Hughes Medical Institute, conducted a survey of private funders of biomedical research (i.e., foundations, voluntary health agencies, and medical research organizations) to gather information about specific programs in biomedical and health research that were being supported. Survey results showed that a total of $1.3 billion was awarded to biomedical and health-related research programs in 1997 by the 87 respondents (118 surveyed). Other pertinent findings included:
Future
Sources of Philanthropic Support for Medical Research A major future target for health research dollars are individuals. If one were to encourage or capture individual giving (amounting to $121.89 billion in 1997) at the same percent of total giving as indicated by the Pew survey ($1.3 billion)-i.e. about 10% of total "foundation" giving (which was about $13.8 billion)--then an additional $12 billion dollars might be captured for medical research. Some consideration might be given in this conference to policies or legislative approaches that could provide an additional incentive for individuals or foundations to direct their charitable giving toward medical research. A special institutional mechanism might be established to provide a "home" and administrative structure to manage and direct such funds. Academic Heath Centers and medical schools are in an excellent position to capture individuals' gifts for medical research. An example of a major campaign is the Duke University campaign to raise $1.5 billion in the next five years. The medical center's goal is $550 million to provide support for students and faculty and to make capital improvements. Part of the campaign is targeted to raise $200 million to create an Institute for Human Genome Research. The development division recognized that 3% of donors give 87% of gifts. The most likely philanthropic sources of such funds will be alumni and patients. Another potential stream of private philanthropic dollars for research comes from future estimates of charitable giving. The amount of wealth expected to be transferred during the 50-year period 1990-2040 has been estimated to exceed $10 trillion. There is evidence that this is already occurring. Asset growth in 1996 was boosted by a record-breaking $16 billion in new gifts to endowed and non-endowed foundations. By rate of growth, the 56.1% jump surpasses every year in recent history. But in order to capture these dollars for medical research, donors would need to be persuaded of the benefits of such investments. Community foundations, which function in much the same way as private foundations but derive their support from many donors and target a particular community with their grants, stand to benefit most from these future dollars. Community foundations are in many ways the perfect vehicles for donors who want to build permanent resources for their communities. Donors can "buy into" the community foundation as a vehicle for their own long-term philanthropy, regardless of whether the donors want to stay actively involved in all the grantmaking decisions from year to year. Donors can structure planned giving arrangements or make immediate donations, whichever fits their own financial situation. And they can benefit from the informed counsel brought to them by foundation staff and board members about community needs that individual donors are hard pressed to keep up with on their own. Unfortunately, community foundations have not traditionally provided much support for medical research, although one large community foundation in New York is an exception to this rule. The New York Community Trust provides grants in the areas of health services, policy, and biomedical research. Examples of biomedical research funding include a grant to Columbia University School of Medicine to study the role of environmental toxins on prenatal and early childhood development in Northern Manhattan, and a grant to the Public Health Research Institute to study the prevalence of drug-resistant Staphylococcus bacteria in New York City. The Burroughs Wellcome Fund has recently established a donor-advised fund at the Triangle Community Foundation in North Carolina in memory of Dr. George H. Hitchings, former BWF President and Nobel Laureate. The "Hitchings Fund for Medical Research and Science Education" will provide new investigator awards to local researchers and is an effort to model how research-support programs might be established and administered in other community foundations. Another potential source of support for health research may come from the so-called conversion foundations established as nonprofit health institutions when hospitals or insurers convert to profit-making organizations. Because the net asset value of the nonprofit entity must remain in the nonprofit sector, most often the resources, community-benefit mission, and charitable purposes of the former nonprofit are vested in a new foundation, or occasionally in an existing charity--creating hundreds of millions of dollars, and, in some cases, billions of dollars of new charitable funds. Many claim these conversions represent the largest redeployment of charitable assets in history. They also represent a shift in resource concentration; in the past, the "very big dollars" were in the national foundations. New conversion foundations may signal a potential change in the field of health philanthropy by bringing very large philanthropic resources to local foundations. Health Care Conversion Foundations: 1997 Status Report, noted that as of September 1,1997, there were 81 conversion foundations in 30 states and the District of Columbia (see table 6). Another nine foundations were in the process of forming from completed conversion transactions, while up to a dozen more foundations might be created from conversions under discussion. Together, these 81 foundations had $9.3 billion in assets as of December 31, 1996. Their median asset size was $57 million, and ranged from $4 million (Truman Heartland Foundation) to $2.2 billion (California HealthCare Foundation). Many conversion foundations are the largest in their state or region. Examples include the California Endowment Foundation and the California Healthcare Foundation, with $3.2 billion for both, or the Kansas Health Foundation, with an endowment of $221 million. If these foundations donated 5% of their assets every year, as philanthropies classified as "private foundations" by the IRS are required to do, they would contribute $465 million annually for charitable purposes. There is some contention concerning how conversion foundations should use their funds. One view, based on the belief that a foundation resulting from a hospital conversion should make up for the free care that was provided by the nonprofit hospital, holds that funds should be used narrowly--to offset the cost of providing health care to the uninsured. Others believe that a more expansive view of health is appropriate and that grantmaking should extend to health promotion, disease prevention, and activities in the community to bring about changes in the health system. A third view holds that these new foundations' assets should not be restricted to health, but used in the broadest possible way for community benefit. Currently, surveys show that "67% of the conversion foundations are dedicated exclusively to health and health care," but a closer inspection of their grantmaking shows support targeted for medical/health research is quite limited. We would argue that some percentage of grants (5-25%) should be directed to research since new knowledge is needed to guide better approaches to care for disenfranchised populations. Finally, the future outlook for increased giving from foundations already in existence is very good. An uninterrupted boom in U.S. investment markets has enriched foundation endowments. Even accounting for possible market corrections, this should result in continued double-digit growth as pay-out catches up to elevated asset levels. The long-term prospects for growth are further enhanced by solid economic growth, subdued inflation, and a high level of investor confidence in the market. Beyond the strength of the economy, the future growth of contributions will be affected by federal tax policy. A provision in U.S. tax law, (Section 170(e) 5), converted from temporary to permanent status in 1998, permits living donors to deduct the full market value of publicly traded stock to private foundations. This has proven to be an important incentive in fostering the growth of private foundations. Philanthropy's
Role in Strengthening Health Research: Gaps and Opportunities Private funders generally can move quickly to fill a gap; function as neutral conveners for identification of priorities; can model successful approaches; disseminate approaches that work; develop information to inform debate; fund politically unpopular areas of research; and especially take risks that may have high payoffs such as support of young scientists. Private funders also have some limitations that constrain their potential approaches. These include limited funds to commit to research versus the increasing costs of research; less willingness to support overhead or infrastructure; desire to model and then move on, often not providing long term sustained support for an area; or the tendency to carry out their own programs rather than work collaboratively. Given the expense of research, funders will have to partner and work more collaboratively. The Sloan Foundation has partnered with the Department of Energy to support fellowships in computational biology. The Pew Charitable Trusts and the James S. McDonnell Foundation support a successful collaboration in the cognitive neurosciences. In an effort to identify gaps and opportunities that currently exist in the rapidly changing environment for health research, the American Cancer Society, the Burroughs Wellcome Fund, the Howard Hughes Medical Institute and the Pew Charitable Trusts convened a meeting of leading experts in February 1998. Among the issues emerging from the meeting where private support should be considered are the following: ·
The private sector funders at the meeting agreed that it would be useful to continue to meet and investigate further these topics in an effort to define a more strategic set of approaches and to position investments in areas where federal or industrial support is not available or in less supply. As the potential "risk capital" in the system, charitable dollars need to find those niches where smaller investments can show the way for the more stable, larger investments to be made by government and industry. (Strengthening Health Research: Opportunities for Philanthropy, 1998) Recommendations
for Increasing Private Support for Medical Research Charitable giving is likely to continue to increase over the next several decades. More dollars may be captured for medical/health research if tax policies that favor such giving are implemented and if an institutional mechanism were developed, both at the national and community level, to administer these funds. Interestingly, a new nonprofit organization, the Institute for Science Philanthropy (ISP), has recently been established to match individual or private funders with researchers and laboratories whose activities might benefit from philanthropic support. ISP provides administrative support, tracks the researchers and their projects, and reports progress to the donor. The Burroughs Wellcome Fund provided initial support to help ISP launch its activities. Foundations have formed affinity groups in other special interest areas, such as the environment, education, and the arts. There is no such affinity group for health research, although one organization, Grantmakers in Health (GIH), does have participation by a number of foundations oriented to "health." Current efforts are under way to broaden GIH's agenda to include health research. A forum where public and private sector donors could meet to analyze current investments in medical/health research and to identify gaps or special opportunities for different sectors would be a valuable ongoing activity. Numerous surveys by Research! America indicate that the public favors investments in medical research. A major challenge is to educate foundations and individuals on how they can support such research. It will be important to overcome perceptions that research cannot be supported by small foundations (70% of the 41,588 U.S. foundations have assets of $1 million or less); that research requires scientific staff (approximately 75% of foundations are unstaffed); and, perhaps most importantly, that research is the sole province of government and industry. An interesting analogy is to compare attitudes towards the private support of education with those for research. The federal commitment to public education was estimated at $107.2 billion in fiscal year 1998. (Federal Support for Education Fiscal Years 1980 to 1998, National Center for Education Statistics) Private giving for all education totals $21.5 billion. Despite significant governmental investment, education captures the second greatest share of total private dollars, and the public perceives public-private educational partnerships to be very beneficial. Is there a way to foster such thinking as it relates to public-private investments in health research? Corporations, especially in the pharmaceutical and health care industries, might be given further tax incentives to increase their charitable contributions, whether cash or product donations. Just as patent extensions and special provisions for the development of new medications for orphan diseases are in place, there may be creative opportunities to pursue increased charitable support of medical research. Interestingly, Section 70(e) 4 of the Tax Code provides a larger deduction to corporations "for gifts of inventory for scientific research." Since product donations represent a large part of corporate philanthropy, is there a way to foster increased donation of supplies and equipment for research? Managed health care organizations, which traditionally have not been highly involved in medical research or in charitable giving, may be another source of private support. In an editorial (JAMA, July 16, 1997) Kenneth Shine recommended that a 1% assessment on health care premiums implemented over a four-year period to support clinical research could raise $4-8 billion dollars. The Centers for Disease Control and Prevention (CDC) established a foundation in 1996 "to focus public attention on CDC's role in maintaining the public's health and to enlarge its capacity to respond to threats in health." The CDC Foundation is fostering public-private partnerships to speed the development and support of the infrastructure and individuals needed to meet the challenges of global and local health issues. For the year ended June 30, 1997, the foundation received almost $4.4 million in contributions from individuals, academic institutions, corporations, and foundations. George Potter of Maine and Muriel Mullenbach of Arizona, among others, were moved to make gifts to the CDC Foundation after viewing a TV documentary, The Coming Plague, in April 1997. The Eli Lilly Pharmaceutical Company has established a new fellowship program with the CDC Foundation to provide training opportunities in emerging infectious diseases for international participants, and the Atlanta-based Tull Charitable Foundation also has given a grant for international training. In its two years of operation, the CDC Foundation has demonstrated success as a new model to gather private support for a federally supported research organization. The National Institutes of Health has also established a foundation to help support its activities. Though this nonprofit organization has not yet been able to build the necessary visibility and financial assets, it has the potential to become a privately-supported mechanism to allow NIH to fill gaps in funding. Carefully defining the rationale and essential role for this foundation should make it an attractive vehicle for donors. A 1995 national poll by Lou Harris and Associates found 60% of Americans would "definitely or probably" donate some of their tax refund for medical research if there were a check off box on their federal income tax return. When those willing to designate a portion of their refunds were asked the dollar amount, the median response was $23. Assuming this amount was captured from 100 million tax refunds, this plan could net $2.3 billion, representing 15% of the current NIH budget. The NIH or CDC Foundation, or another entity, might be charged with dispersal of these funds. The Institute of Medicine Committee on the NIH Research Priority-Setting Process has called for an increased level of public participation in and greater public accountability for NIH decision-making. The Committee said the NIH should create new public liaison offices in the office of the director and in all of its 21 research institutes to allow interested people to formally take part in the process. "By creating formal links to the general public, NIH can ensure that all have a voice in what gets funded, and that more people understand how such decisions get made," said committee chair, Leon Rosenberg of Princeton University. Report on Scientific Opportunities and Public Needs: Improving Priority Setting and Public Input at the National Institutes of Health). These activities, coupled with NIH's increased visibility, may serve also to spotlight private sector opportunities for investing in medical research. Another potential avenue for creating a research-funding mechanism might be through health-related legal settlements. The environmental area has benefited thusly. In 1997, Allied Chemical Corporation was fined $13.25 million for polluting the Virginia James River. The Virginia Environmental Endowment Fund came into being with an $8 million settlement gift "to support activities to improve the environment." This Virginia nonprofit has received an additional $450,000 from three other federal case settlements, and its grants provide support for policy and environmental research. Other nonprofits with an environmental focus have been formed from interesting coalitions. Con-Edison Electric Company contributed $12 million to start the Hudson River Foundation in 1981. Maryland uses a portion of its license plate income to support the Chesapeake Bay Trust. The Great Lakes Protection Fund was established through state appropriations from seven states in the Great Lakes region. One golden opportunity for supporting health research would have been through the failed "tobacco bill" of 1998. According to budget projections, slightly less than 40% of the five-year total of tobacco company payments (about $25.3 billion) would have gone for federal research. NIH would have received the largest chunk, paying for a 48% budget increase over five years. The eventual tobacco settlement that was reached in November 1998 is State-focused. The major tobacco companies will pay $206 billion to 46 states, the District of Columbia, and five United States territories. State totals range from about $684 million for South Dakota to $25 billion for California and New York. Use of these monies is at each State's discretion. Although health care and particularly coverage of the uninsured, have been advocated most frequently, is there a way to direct a portion towards health research, particularly for prevention and treatment of tobacco-related illness? Legislation was introduced in the 1998 Congress that would allow the tax-free rollover of funds from Individual Retirement Accounts (IRAs) if these funds went directly into public charities. Considered to be a boon to community foundations and the higher education community that supported the legislation, the bill did not pass, but is expected to be reintroduced in the 1999 Congress. If successful, more philanthropic dollars could be available, a portion of which might be captured for health research. Conclusion *The authors are affiliated with the Burroughs Wellcome Fund, an independent private foundation established to advance the medical sciences by supporting research and other scientific and educational activities. BWF is located at 4709 Creekstone Drive, Suite 100; Durham, North Carolina 27703. Enriqueta C. Bond, Ph.D., President; Martha G. Peck, Vice President; and Melanie Scott, Programs Assistant.
© 1999 American Association for the Advancement of Science |
