days in mid-February 1999, more than thirty experts in the federal
budget process, public policy, and several areas of scientific research
met to discuss alternative funding mechanisms for medical research
outside the traditional appropriations process. The objective was
to stimulate a dialogue about these mechanisms, their potential
advantages and disadvantages, and the barriers to their implementation.
More importantly, the workshop was designed to move that dialogue
beyond the conventional level of debate to the question of whether
such alternative mechanisms are both feasible and compelling as
a means of securing dedicated support for medical research.
Why seek alternative
mechanisms and why now? After all, health-related research has enjoyed
relatively uninterrupted growth since the early 1960s. Federal funding
in the broad field of health-related research has increased from
approximately $2 billion in fiscal year (FY) 1960—in constant, inflation-adjusted
(FY 1999) dollars—to slightly less than $16 billion this fiscal
year. Similarly, R&D investments by research-based pharmaceutical
companies have grown from $2 billion in 1980 to $21.1 billion in
1998. The future for federally supported research, however, is far
more uncertain than its record of growth might imply. The National
Institutes of Health (NIH), the major source of federal dollars
for medical research, and other federal research agencies rely on
the annual decisions of congressional authorizers and appropriators.
These decisions are subject to the fits and starts of current economic
and political conditions and, in the future, outside pressures may
upset the long-term stability that this field has enjoyed.
volatility of the budgetary environment can dramatically change
the fiscal landscape within which priority decisions are made. For
example, in the budget process for FY 1999, Congress appropriated
a substantial 15 percent increase in NIH’s budget. Due to tight
budgetary caps placed on discretionary spending, President Clinton’s
FY 2000 budget proposal for NIH provides barely enough additional
support to offset the effect of inflation during the coming year.
The administration’s intention, based on policy statements, would
have NIH funding increase 50 percent by FY 2004. The hopes and expectations
of the medical research community have been raised. The reality
is that issues such as Social Security, tax cuts, and Medicare are
in the foreground, and the remaining discretionary pool of programs,
within which research programs are funded, must live within budgetary
constraints even in a time of anticipated multi-billion dollar surpluses.
the fiscal and economic unpredictability of federal funding for
medical research is its growing complexity. Increasingly, advances
in research to improve public health build upon basic research in
other fields such as physics, chemistry, engineering and mathematics,
all of which are supported by agencies other than NIH. Some of these
agencies also contribute directly to medical advances through life
sciences research in support of their own missions. The interdependence
of research among many scientific and engineering disciplines requires
long-term, stable commitments to ensure that a balanced portfolio
of research programs is maintained. Stability in research funding
among the various disciplines is needed to lay a solid foundation
for securing our national intellectual capital through the creation
of new knowledge, an educated workforce, and advanced tools.
in the workshop on “How to Fund Science” were selected on the basis
of their knowledge and experience and the institutional perspectives
that they brought to the table (but not as representatives of those
institutions). The group heard expert presentations on the federal
funding environment for research; funding from both for-profit and
non-profit sources; trust funds and entitlements; and research funding
through private and public payer insurance, Medicare, and tax credits.
The presentations were followed by spirited plenary discussions
and then by breakout groups where recommendations for action were
debated. While no effort was made to force consensus on the group,
a sense of the meeting developed, which is reflected in the findings
and recommendations below.
Mark Hatfield stated in his opening remarks, “History is composed
of moments of opportunity for bold, creative, new, risky solutions
to meet national needs.” This workshop is just a first step in this
Finding. Medical research is an interdisciplinary, multi-agency
effort involving the federal government, academic institutions,
and the private sector, and requiring progress in many diverse fields
of science and engineering to succeed. Therefore, medical research
should be defined in the broadest possible sense, encompassing not
only NIH but life sciences research in other agencies, health care
and health services research in the Department of Health and Human
Services, enabling research in other scientific and engineering
disciplines, and infrastructure and facilities as well.
1. The primary source of federal funding for medical research
should remain within the discretionary portion of the federal budget
and should be allocated through established authorization and appropriations
processes. Participants agreed that the existing funding system,
while not perfect, does exemplify the democratic process upon which
the principles of our government are based. While several potentially
attractive ideas for supplementary funding mechanisms were discussed,
none was seen as capable of replacing the current system. However,
it will not be possible to accommodate significant growth in research
under the Balanced Budget Agreement of 1997 without reductions in
other important programs. Lawmakers should candidly and realistically
address current limits on discretionary spending as Congress completes
action on the FY 2000 budget.
2. A secondary source of funding, in the form of a trust or
reserve fund for medical research, in addition to the regular discretionary
budget, could provide an important supplement to annual appropriations.
Any secondary source of funding should complement and not replace
the annual appropriations, and should be analyzed for cost-benefit
impact and political viability. Potential mechanisms for such a
fund, which should feature a dedicated funding source, could include:
a) taxes on tobacco products or allocations from state tobacco settlements;
b) assessments on private health insurance premiums; c) fees on
medical products resulting from federally funded research, in the
form of payments in exchange for patent extensions; and d) federal
reallocation of funds within the existing highway trust fund. These
mechanisms are not listed in any priority order and the level of
importance placed on them varied among the workshop participants.
3. Public and private insurance systems should be mandated to
pay the cost of health care services for beneficiaries participating
in federally-supported clinical trials. Insurance providers should
be exempt in cases where a patentable product is foreseen or commercial
profit can be specifically linked to the outcome of the trial.
4. The research and experimentation (R&E) tax credit should
be made permanent and expanded to include research in clinical trials.
The basic research credit, which applies to industry-academic research
contracts, should be restructured as a flat credit at a 20 percent
rate and enhanced with incentives to better encourage partnerships
between industry and academic institutions.
1999 American Association for the Advancement of Science