As the workshop
participants represented a diverse group of individuals, the plenary
sessions and paper presentations were organized to provide all workshop
participants a “level playing field” in order to ensure a thorough
and candid discussion.
Papers on historical
funding trends from federal, private for-profit, and private non-profit
sources provided a foundation on the state of research funding.
In total dollars, the support is certainly strong. Federal support
for the broad category of health-related research has grown from
$2 billion to slightly less than $16 billion since the 1960’s. Within
the private-sector, pharmaceutical companies that conduct research
have increased their R&D support from $2 billion to an estimated
level of $21.1 billion in 1998. Non-profit, non-governmental organizations
also provide significant support to health-related activities. As
of 1995, the top twenty-five independent foundations provided a
total of $1.2 billion in grants, of which the share for medical
research was 22 percent.
While the appropriation
of monies to support medical research has been relatively stable,
the political environment has not. Even though funding increased
significantly in the past few years, it has not come close to matching
the rhetoric on the subject. The 15 percent increase in FY 1999,
may just become a spike in the historical record, regardless of
the fact that our nation appears to be operating in a surplus environment.
As it turns out, the politics of surpluses is not that different
from the politics of deficits.
funding mechanisms (i.e., outside the existing appropriations process)
that were presented and discussed centered on five general sources:
trust funds, entitlements, public- and private-payer insurance,
Medicare, and tax credits. These five sources are already utilized
in some fashion to fund federal programs and activities.
It was noted
that converting medical research from discretionary to mandatory
funding would be a difficult task, given that most congressional
leaders would not want to cede authority over the budget. Another
important point was that automatic obligation of funds, for example
in the case of a trust fund, does not necessarily guarantee that
it will be removed from appropriations oversight. Even mandatory
spending programs have their own political constituent base, and
still would compete with other national priorities within the mandatory
portion of the federal budget. Another concern raised was the assumption
that the surplus will actually remain in the future. If the surplus
disappears, one must consider the impact that additional mandatory
spending will have on other discretionary programs. In the case
of Medicare, a portion of its trust fund is expected to be depleted
by 2001. Generally, the employer’s costs to Medicare are offset
by lower wages. Employees would therefore have to carry the burden
in their payroll taxes. Other funding streams, for example private
insurance premiums, may not be available to fill the gap. Premiums
pay for products beyond general health care delivery, such as research
conducted at teaching hospitals, medical schools, and universities.
However with the increased use of managed care organizations it
has become difficult to balance the costs of patient care with the
benefits associated with broader public good investments. Finally,
research tax credits are considered by some to be too small a pool
of funds to significantly impact medical research spending.
arguments were made in support of the creation of alternative funding
mechanisms. Public and congressional pressure to fund disease-specific
projects could imperil basic scientific research that provides an
underpinning of knowledge across the spectrum of diseases and health
needs. Independence from the discretionary appropriations process
could ensure that the underpinnings of basic research remain strong.
In the case of clinical research trials conducted in academic institutions
or other non-profit institutions, pressure is growing within the
private insurance community to reduce financial support. Even Medicare,
which can benefit from the generation of shared knowledge, often
does not cover the cost of treatment. Our nation risks creating
a gap in an important element of research if it relies strictly
on the private-sector to support clinical research trials. Therefore,
new and alternative mechanisms for public-sector funding may be
warranted. In the case of research and experimentation tax credits,
an argument could be made to strengthen incentives for private-sector
firms to collaborate with academic institutions on basic research.
Building partnerships between academia and industry may reduce the
need for federal support in some areas, and in the case of clinical
research trials, it may help to bridge any potential gaps.
mechanism is utilized, questions still remain as to how much additional
revenue should flow to a non-discretionary program: Who should pay
for it? How should it be allocated? What are the fiscal impacts
on the discretionary budget? What additional costs, if any, will
be carried by private individuals and institutions? Balancing any
near-term costs to the public with the long-term benefits arising
from investments that the public will reap is a major challenge.
presentations and initial plenary discussions, the conferees were
divided into three breakout groups in order to discuss further the
various mechanisms that had been presented and to consider specific
recommendations regarding alternative sources of funding for medical
research. These groups met twice: on the afternoon of the second
day and on the morning of the third. Each included a discussion
leader and rapporteur, and each gave a report to the final plenary
session, the results of which are described in the following section.
It became obvious
in the discussions of funding, whether by public or private sources,
that the definition and scope of health-related activities varied.
Within federally supported activities, support for research came
under the term life sciences. Philanthropic organizations broaden
their perspective to include hospitals, medical care, public health,
and health policy. Private, for-profit firms conduct research in
pharmaceuticals, vaccines, and medical devices. Even the performance
of R&D is conducted within a wide array of venues including public
and private labs, academic institutions, and hospitals.
There was general
recognition of the fact that progress in medical research depends
on more that just increased funding for NIH. In addition to NIH,
the Department of Health and Human Services supports research at
the Centers for Disease Control, the Agency for Health Care Policy
and Research, and the Health Care Financing Administration. Medical
research is embedded in the fabric of science and engineering. It
is an interdisciplinary, multi-agency effort. Advances in such fields
as chemistry, physics, electronics, and mechanical engineering,
supported by the National Science Foundation, the Department of
Energy, the National Aeronautics and Space Administration, and the
Department of Defense, among others, illuminate medical science
and provide instruments and insights that complement it. Other agencies
should not treat areas that address medical issues as solely NIH’s
bailiwick, and advocates for medical research should not ignore
the contributions of agencies other than NIH and the importance
of addressing their budgetary needs.
entered the breakout sessions with a general sense that the current
system of annual appropriations within the discretionary budget
was the best vehicle for overall continued federal funding of medical
research. And while each discussion group approached the problem
of alternative funding mechanisms differently, there was a consensus
opinion that any alternative mechanisms that might be proposed should
supplement the current process in a complementary fashion rather
than replace it. Funding mechanisms outside the current system were
recognized as useful tools to provide a modicum of stability to
such an important research area. The main concern about the current
budgetary process was that the caps on discretionary spending had
become too restrictive and were not adequate to meet essential program
Among the ideas
that emerged from the breakout groups were the following:
a trust fund for medical research. The idea would be to create
a dedicated funding source in order to buffer medical research
from any drastic changes in funding through the discretionary
process. One group suggested that the trust fund be given a specific,
targeted mission supplementary to medical research such as infrastructure
development, funding for clinical trials, or support for behavioral
science research. Suggestions for revenue sources for the trust
fund included “sin” taxes on tobacco; fees for medical products
resulting from federally funded research in the form of patent
extensions; and a tax on private insurance premiums.
the costs of clinical trials to free up federal research dollars.
Clinical trial funding should be absorbed or at least shared
by those who would profit from the trials. Suggestions for payers
included pharmaceutical companies and public and private health
portions of the individual states’ tobacco settlements to medical
research. One idea proposed was to withhold the amount of
each state’s settlement from its federal Medicare payments. It
was noted that the settlement formula varies from state to state,
and therefore any withholding would likely require a sliding scale
to parallel state settlements.
strong sentiment, not just in the discussion groups but
during all the proceedings of the conference, for providing
additional resources for medical research infrastructure.
Apart from establishing a trust fund, one group suggested a government-backed
borrowing authority to lower the cost of non-government investments
in equipment and construction. This could involve issuing bonds,
subsidized loans for equipment or facilities, or a guaranteed
student loan program.
A novel idea
that came out of one group was to earmark funds from the Highway
Trust Fund for medical research. This money could go to medical
research in fields related to motor vehicle injuries, such as
spinal cord injury, treatment of trauma, or alcoholism. An extra
tax on gasoline could also be added for this purpose.
group devoted a considerable amount of attention to the need to
revise the research and experimentation (R&E) tax credit and
make it permanent. This group recommended that the credit
should be altered to strengthen incentives for industry partnerships
with universities as well as clinical research. Also, the credit
should be a flat credit rather than an incremental one. These
ideas found considerable support in the final plenary session.
and recommendations outlined in the next section of this report
are based on discussions from which these points were derived. They
are the ideas that, in the view of the workshop staff, received
general support among the participants in the meeting. This should
not be taken to mean that all of the ideas met with universal approval.
Most of the debates on the various funding concepts centered on
their political viability, definition and scope of the research
objective, and the cost-benefit ratios. The level of importance
placed on these issues varied among the diverse group of workshop
suggested, for example, that using taxes on insurance premiums to
support a medical research trust fund would be regressive and ultimately
increase the cost of health care. So-called “sin” taxes were discussed
and viewed by some participants in the same manner. Others argued
that if the objective were narrowly defined to support research
in behavioral science, infrastructure development, and models of
care delivery, for example, it could ultimately work to lower health
care costs. In the case of using the tobacco settlement, some participants
felt that such an account should be required to support research
directly related to health impacts from tobacco products. Others
felt that funds made available should benefit research in all relevant
areas, including health services research and prevention studies.
to the extent that there was a “sense of the meeting,” the authors
of this report have tried to reflect it fairly and objectively.
The circulation of this report in draft to the participants has,
hopefully, helped to assure that this has been accomplished.
1999 American Association for the Advancement of Science