Recent Trends in the Federal Funding of Research and Development Related to Health and Information Technology

Michael McGeary

McGeary and Smith

INTRODUCTION

This paper documents recent trends in federal funding of research related to health and information technology (IT). It shows especially the impact of the halt in growth of federal funding for several years in the mid-1990s, which resulted in a substantial shift in the composition of the federal research portfolio. In broad terms, federal investment in biomedical research has expanded relative to federal investment in most fields of the physical sciences and engineering. That shift has raised the question of whether the federal research portfolio has become “imbalanced.” The paper analyzes the shifts in funding of research fields, compares them with nonfederal trends, and discusses the implications of the reductions in funding during the 1990s of many fields in the physical sciences, engineering, and geosciences.

Part II examines funding of core fields, biological and medical science in the case of health and computer science and electrical engineering in the case of IT. Part III looks at federal funding of research and development (R&D) in health and IT in a national context; that is, how federal funding relates to nonfederal funding. Part IV is an analysis of recent trends in the funding of other fields of research, including those that also contribute to progress in health and IT. In the conclusion (Part V), the question of whether recent shifts in funding—toward the biological, medical, and computer sciences and away from most fields in the physical sciences and engineering—have given rise to an unbalanced federal research portfolio is discussed. To some extent, where one stands on the imbalance question depends on where one sits, but several broader approaches to resolving the question are presented.



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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies Recent Trends in the Federal Funding of Research and Development Related to Health and Information Technology Michael McGeary McGeary and Smith INTRODUCTION This paper documents recent trends in federal funding of research related to health and information technology (IT). It shows especially the impact of the halt in growth of federal funding for several years in the mid-1990s, which resulted in a substantial shift in the composition of the federal research portfolio. In broad terms, federal investment in biomedical research has expanded relative to federal investment in most fields of the physical sciences and engineering. That shift has raised the question of whether the federal research portfolio has become “imbalanced.” The paper analyzes the shifts in funding of research fields, compares them with nonfederal trends, and discusses the implications of the reductions in funding during the 1990s of many fields in the physical sciences, engineering, and geosciences. Part II examines funding of core fields, biological and medical science in the case of health and computer science and electrical engineering in the case of IT. Part III looks at federal funding of research and development (R&D) in health and IT in a national context; that is, how federal funding relates to nonfederal funding. Part IV is an analysis of recent trends in the funding of other fields of research, including those that also contribute to progress in health and IT. In the conclusion (Part V), the question of whether recent shifts in funding—toward the biological, medical, and computer sciences and away from most fields in the physical sciences and engineering—have given rise to an unbalanced federal research portfolio is discussed. To some extent, where one stands on the imbalance question depends on where one sits, but several broader approaches to resolving the question are presented.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies RECENT TRENDS IN FEDERAL FUNDING OF LIFE SCIENCES AND INFORMATION TECHNOLOGY RESEARCH Historically, federal funding of R&D associated with advances in health and the development of computer-related products and services has been substantial and important. This is particularly the case for support of fundamental long-range research where industry investment is often missing.1 Federal investment in the life sciences2 and IT3 increased many-fold from the 1950s to the 1990s. In the 1990s, however, efforts to reduce the federal budget deficit and the post-Cold War reductions in the defense budget affected federal R&D funding in terms of both amount—where funding was reduced for several years—and composition—where some research fields expanded greatly relative to others. Budget authority for federal R&D funding peaked in FY 1992 in real terms. By 1996, it had fallen by 9 percent. Real growth in the R&D budget resumed in 1997, but the federal investment in R&D did not equal the 1992 level until the FY 2000 budget. Research was less affected.4 Federal research funding went flat in 1993 and began to increase again in 1997 (see Figure 1). As we will see in more detail in Part IV, the pattern of funding by field in the area of science and engineering changed substantially during the period from 1993 to 1997. During this period, overall federal funding for research was flat in real terms.5 The Administration and Congress, however, continued to increase the budget of the National Institutes of Health (NIH), which provides more than 80 percent of the federal support for the life sciences, including the biological and medical sciences.6 At the same time, they responded to the end of the Cold 1   For a recent review of the importance of the federal role in computing research and advances in computer-related technology (including networking), see National Research Council, Funding a Revolution: Government Support for Computing Research, Washington, D.C.: National Academy Press, 1999. For the impact of federally funded research in the pharmaceuticals and biotechnology industry, see I. Cockburn, et al. “Pharmaceuticals and Biotechnology,” U.S. Industry in 2000: Studies in Competitive Performance, Washington, D.C.: National Academy Press, 1999. 2   This includes the biological, environmental, agricultural, and medical sciences. 3   This is composed of computer science and electrical engineering. 4   R&D consists of basic research, applied research, and development. The focus in this paper is research (basic and applied), which can be classified by field of science and engineering. R&D is used to compare federal and nonfederal funding in Part III, because the data on funding of research by academia and industry cannot easily be broken out. Section IV looks at funding of basic research. 5   See Stephen A.Merrill and Michael McGeary, “Who is balancing the federal research portfolio and how?” Science 285, (September 10, 1999): 1979, p. 1680. 6   Unless otherwise indicated, all budget amounts and changes are expressed in constant 1999 dollars, using the fiscal year GDP deflators published in the President’s 2002 budget request (OMB, 2001: Table 10.1). Except for R&D in Table II–1, the numbers are obligations rather than budget authority or outlays. Obligations are “the amounts for orders placed, contracts placed, services received, and similar transactions during a given period, regardless of when the funds were appropriated and when future payment of money is required” (NSF, 2001). In this paper, the words funding, support, and investment will be used interchangeably with the term obligations.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 1 Federal funding of research and development, FY 1980–2000. SOURCE: AAAS (2001) and NSF (2001). aPreliminary War by cutting the research budgets of the Department of Defense (DOD) and, to a lesser extent, the Department of Energy (DOE). Historically, those two agencies have provided the majority of federal funding for research in electrical engineering, mechanical engineering, materials engineering, physics, and computer science. These trends in agency funding of research have affected, in turn, research related to life sciences and IT. Funding of life sciences research has increased while funding for most fields in engineering and the physical sciences has fallen.7 Nearly all the departments and agencies that support R&D have increased their funding of research since 1997 (see Figure 2). As we show in Part IV, however, the reallocation of funding among fields of science and engineering that occurred in the mid-1990s has not changed. Researchers in the biological and medical sciences have been favored by the budget success of NIH, their main source of federal support. However, support of the biological sciences and the medical sciences differs by degree (see Figure 3). Federal obligations for medical sciences increased more than that for biological sciences, especially in the first half of the decade. The decline in DOD’s budget, including its research budget after 1993, has put heavy downward pressure on the fields that rely on it for most of their 7   Life sciences fields include biological, medical, environmental biology, and agricultural. Physical sciences include the fields of astronomy, chemistry, and physics. Engineering fields include aeronautical, astronautical, chemical, civil, electrical, mechanical, and metallurgy and materials.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 2 Federal funding of research, by selected agencies, FY 1990–2000. SOURCE: Appendix Table 2. aPreliminary FIGURE 3 Federal funding of selected fields, FY 1990–2000. SOURCE: Appendix Table 3.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 4 Federal funding of biological sciences research, FY 1990–1999. SOURCE: Appendix Table 4. federal funding. DOD funding of nearly all fields of engineering, including electrical engineering, was down substantially from 1993 to 1999. Because other agencies did not step up their support substantially, federal funding of electrical engineering declined after 1993. DOD, however, did increase its funding of particular fields of research, including computer science. Several other agencies sharply increased their investment in computers sciences research, and that field had substantially more federal support in 1999 than in 1990. Biological Sciences Federal obligations for biological research increased by 28 percent from 1990 to 1999 in real terms, from $5.0 billion to $6.5 billion (see Figure 4). That increase was driven by NIH’s steady budget growth in the 1990s of 67 percent. NIH provides more than 80 percent of all federal funding of biological research8 and accounted for all of the net increase in federal funding of the field from 1990 to 1999. The emphasis on basic research and university performers is high in federally supported biological research. The ratio of basic to applied research funding remained at about 2 to 1 during the period. The share conducted at universities and colleges increased from 58 percent in 1990 to 66 percent in 1999. 8   NSF, DOE, and DOD provide another 10 percent of the federal support.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 5 Federal funding of medical sciences research, FY 1990–1999. SOURCE: Appendix Table 5. Medical Sciences Federal funding of medical sciences increased by 65 percent from 1990 to 1999, from $4.1 billion to $6.8 billion (see Figure 5). NIH accounted for 82 percent of federal funding of the medical sciences in 1999,9 up from 75 percent in 1990, and NIH’s steady budget growth during those years has permitted the agency to make such a large increase in funding. Funds allocated to basic research and university-based research in the medical sciences are less than those allocated to biological research. Funding shifted a bit toward basic research but away from universities during the 1990s. The ratio of basic to applied research increased from 1.2 to 1 in 1990 to 1.4 to 1 in 1999. Universities and colleges received 46 percent of the funding in 1999, down from 51 percent in 1990. Computer Science As in biological and medical sciences research, federal support of research in computer science increased substantially during the 1990s (see Figure 6). Obligations increased by 121 percent from 1990–1999, from $685 million to $1.5 billion. In 1990, DOD provided 63 percent of the federal funding—in the 9   Other agencies of the Department of Health and Human Services provide another 8 percent, and the Department of Veterans Affairs, DOD, and NASA account for 9 percent.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 6 Federal funding of computers sciences research, FY 1990–1999. SOURCE: Appendix Table 6. amount of $433 million—with NSF a distant second at 19 percent. Despite a cut of 25 percent from 1993 to 1999 in overall research funding, DOD managed to provide $538 million for computer science in 1999, compared with $528 million in 1993. Meanwhile, other agencies substantially increased funding from 1993 to 1999—NSF by 110 percent (from $142 million to $297 million), DOE by 339 percent (from $115 million to $506 million), and NIH by 209 percent (from $20 million to $62 million). In 1999, DOD accounted for 35 percent of the federal funding, DOE for 33 percent, NSF for 20 percent, and NIH for 4 percent. The ratio of basic to applied research in computer science was 1 to 2.5 in 1999 and this was down from 1 to 1.5 in 1990. Although federal funding of computer science research more than doubled during the 1990s, funding for basic research and university research increased much less, by 60 percent and 47 percent, respectively. The share of federal funding going to basic research fell from 40 percent in 1990 to 29 percent in 1999. In 1999, universities were receiving one-third of all federal funding for computer science, compared with half in 1990. The trends toward more applied research and research done outside the universities are consistent with the federal cross-agency initiative on applied computing and network research that was in effect during most of the 1990s. It is also consistent with the fact that much of the DOE program is conducted in federal laboratories rather than universities. In addition to scientific opportunities and technological ripeness, the increase in federal funding of computer science research (and research in related fields) was driven by the high priority accorded it by successive administrations.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies The effort began as a special interagency initiative in the FY 1992 budget. This initiative was called the High-Performance Computing and Communications (HPCC) Program. HPCC, which was initiated by the Federal Coordinating Council for Science, Engineering, and Technology under President George Bush, was later taken up by the National Science and Technology Council under President Clinton. In the FY 2002 budget, the effort is continued as the Networking and Information Technology R&D Program. Actual budget authority for the interagency initiative tracks the increase in spending on computer science research (Table 1). TABLE 1 Funding of Interagency Networking and Computing Initiative, FY 1992–2002 (in millions of 1999 dollars) Fiscal Year Requested Enacted 1992 729 749 1993 896 806 1994 1,096 1,025 1995 1,234 1,172 1996 1,255 1,073 1997 1,080 1,054 1998 1,144   1999   1,301 2000 1,462 1,473 2001 2,315 1,853 2002 1,853 Pending SOURCE: Annual budget requests. NOTE: Current dollars were converted to constant 1999 dollars using GDP deflators in OMB (2001): Table 10.1. Electrical Engineering Federal funding of research in electrical engineering increased from $780 million in 1990 to $984 million in 1993 (26 percent), then fell to $640 million in 1997 (35 percent), before increasing again to $699 million in 1999 (see Figure 7). The field had 10 percent less funding in 1999 than in 1990 (29 percent less than its high point in 1993).10 In 1990, most federal funding for electrical engineering (84 percent) came from DOD. Unlike in the case of computer science, DOD did not try to sustain or increase its level of support of electrical engineering. DOD sharply reduced 10   Historically, federal funding of electrical engineering peaked in 1987–1989 at just over $1 billion a year (in 1999 dollars).

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 7 Federal funding of electrical engineering research, FY 1990–1999. SOURCE: Appendix Table 7. its support from 1993 to 1997. In 1999, the field had 31 percent less funding from DOD than in 1993 and 15 percent less than in 1990. Also unlike the computer science case, other agencies did not increase the amount of support enough to offset much of the DOD cut.11 The Department of Commerce increased its support by $26 million from 1990 to 1999. DOE and NASA each provided about $5 million more in funding in 1999 than in 1990, but the 1999 levels constituted cuts from 1993 levels. NSF cut funding by $17 million from 1990 to 1999 (22 percent). Within a shrinking budget, federal agencies increased their emphasis on basic research and research conducted at universities on electrical engineering, but most of the funding still went to applied research and research conducted in non-university settings. The ratio of basic to applied research increased from 1 to 3.4 in 1990 to 1 to 2.7 in 1999. Although federal obligations for electrical engineering declined by 10 percent from 1990 to 1999, funding for basic and university research increased, by 4 percent and 14 percent, respectively, indicating that the cuts were made in applied research and performers other than academic institutions.12 Basic research rose from 23 percent of total federal funding 11   Compare Appendix Table 7 with Appendix Table 6. 12   For example, federal intramural laboratories, national laboratories, and industrial laboratories.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies in 1990 to 27 percent in 1999. Universities accounted for 22 percent in 1990, compared with 28 percent in 1999. NATIONAL TRENDS IN SUPPORT OF R&D RELATED TO LIFE SCIENCES AND IT The impact of federal funding of research is affected by trends in funding by other institutions. These include industry, universities, and other organizations such as nonprofit research institutes, state and local governments, and foreign research institutions. The federal government was the largest source of R&D funds from World War II until 1980 and continued to be the largest source of research funds until 1995, in real terms (see Figure 8). Industry provides 51 percent of total research funding and the federal government provides 34 percent, but the roles are reversed for basic research. The federal government provides the largest portion of basic research support, 49 percent, and industry provides 34 percent (see Figure 9). The federal government may not need to continue funding research in areas where industry is investing its own funds. However, there may be areas that should receive more emphasis in federal research priorities despite increased investment by industry. These areas require attention because they are still too risky for industry to fund or are at a stage of research where companies cannot be FIGURE 8 National sources of funding for science and engineering research, calendar year 1980–1999. SOURCE: Appendix Table 8.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 9 Industry and federal roles in funding basic and applied research, FY 2000. SOURCE: Appendix Table 9. sure of recouping their investment. Industry typically spends most of its research funding on development and short-term, applied research rather than on the long-term, fundamental research needed to generate new technologies in the future. This section looks at the relative roles of the federal, industry, academic, and nonprofit sectors in funding health and IT research. We will approach this issue somewhat indirectly. There is no consistent database of information across sectors on the field of research that is being funded, such as biotechnology or information technology, or on the stage of research (basic or applied). The analysis in Part II used the annual NSF survey of federal funds for R&D. This survey collects information from federal agencies on the fields of research they fund and on whether the research is basic or applied. Another NSF survey—the annual survey of academic R&D expenditures—collects information from colleges and universities on how much federally and non-federally funded R&D they perform. The academic survey uses a set of fields very similar to the classification of fields used in the federal funds survey, but the inclusion of development with research makes the results non-comparable with the data collected in the federal funds survey. A third NSF survey—the annual survey of industrial R&D expenditures—classifies research of each company by a single industrial classification (SIC) code, such as “drugs and medicines” (SIC-283) and “office, computing, and accounting machines” (SIC-357), rather than by field of research, such as chemistry, computer science, and mathematics. The survey greatly expanded coverage of the service sector a few years ago, so data on new categories of R&D such as software R&D only go back a few years.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 15 Trends in federal funding of basic research in engineering, FY 1990–1999. SOURCE: Appendix Table 13. Engineering Trends in federal obligations for basic research in engineering varied by field (see Figure 15). Metallurgy/materials engineering experienced substantial growth, especially from 1993 to 1996. From 1990 to 1999, funding for the field increased from $317 million to $481 million, or 52 percent. Several other fields increased their funding for basic research for the first few years of the 1990s, then received less funding through 1999. Electrical engineering increased from $179 million in 1990 to $227 million in 1993, then declined to $186 million in 1999, 18 percent less than its high point in 1993. Chemical engineering increased from $92 million in 1990 to $120 million in 1992, dropped to $81 million in 1993, and steadily shrank to $55 million in 1999; it was down 40 percent for the decade (54 percent from its high point in 1992). Astronautical engineering rose from $76 million in 1990 to $108 million in 1992, then fell to between $60 million and $70 million from 1993 to 1999. Funding levels for the other two fields were down for most of the decade but recovered in 1999. Aeronautical engineering had its two best years at the beginning and end. Funding for basic research in that field was $329 million in 1990 and $332 million in 1999, but it fluctuated between $275 million and $300 million during that period. Civil engineering was down from its high of $70 million in 1991 for most of the decade, jumping from $36 million in 1998 to $69 million in 1999.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 16 Trends in federal funding of basic research in the physical sciences, FY 1990–1999. SOURCE: Appendix Table 13. Physical Sciences The general trend for funding of basic research in the physical sciences was downward in the 1990s, at least after the first year or two (see Figure 16). Funding for physics peaked in 1991 at $1.9 billion, dropped to about $1.6 billion from 1994 to 1998, and was at $1.7 billion in 1999. Physics was down by 6 percent for the decade (by 12 percent from the 1991 high point). Similarly, chemistry was funded at $612 million in 1990, $636 million in 1992, and $555 million in 1999. Funding for astronomy also peaked early (at $834 million in 1992) but ended the decade about where it started (at $717 million compared with $707 million in 1990). Computer Science/Mathematics The general trend for computer science was up, except in 1994 (see Figure 17). Basic research funding was $274 million in 1990 and $483 million in 1999, an increase of 60 percent. Applied research funding was up even more—by 163 percent. The picture for mathematics was more mixed. Funding for basic research generally increased from 1990 to 1994, then dropped for several years before recovering in 1997. The funding level was $215 million in 1990 and $271 million in 1994. In 1995 and 1996, it dropped about $100 million, then jumped to about $250 million in 1997, 1998, and 1999. Thus, funding for basic research

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies FIGURE 17 Trends in federal funding of basic research in computer science and mathematics, FY 1990–1999. SOURCE: Appendix Table 13. in mathematics increased by 14 percent from 1990 to 1999, but the 1999 level was 6 percent lower than it was in 1994. CONCLUSION Federal and nonfederal funding of research related to the core fields of health (biological sciences and medical sciences) and IT (computer science and electrical engineering) increased substantially in the 1990s. It must be kept in mind, though, that federal funding plays a much larger role in the health sector. This contributes to a much greater emphasis on basic research in the health than in the IT sector. The growth in federal funding stems from strong congressional interest in biomedical research and the high priority that successive administrations have given to a cross-agency initiative in high-performance computing and networking dating from 1992. This growth will continue and even accelerate because of the campaign, begun in 1999, to double the NIH budget in 5 years. A similar acceleration of growth may occur in IT in response to 1998 and 1999 reports of the PITAC, which recommended a near tripling of federal investment in IT R&D by 2004.31 31   See, for example, PITAC (1999). President Bush just extended PITAC until June 2003. See Executive Order of May 31, 2001, at http://www.whitehouse.gov/news/releases/2001/06/200106016.html.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies Federal funding of research in a number of other fields—important to long-term progress in the health and IT sectors—has either not increased as much or, in the case of most fields in the physical sciences and engineering, has suffered cuts during the 1990s. This situation has given rise to a growing chorus of concerns about a possible “imbalance” in the federal portfolio of research. Funding Trends in the Core Fields of Health and IT R&D Federal funding has been moving into the hot fields central to health and IT R&D. For example, funding of biological sciences and medical sciences increased 28 percent and 65 percent, respectively, in real terms, from 1990 to 1999. Federal funding of computer science research increased 121 percent during the same period. Electrical engineering, however, experienced 10 percent less federal support. Nonfederal funding patterns differ in health and IT R&D. It is impossible to know how nonfederal funding is distributed by field of research (e.g., computer science or biology), because industry R&D data are not collected by field. In this paper, we have attempted rough estimates of national R&D by including R&D funded by health and IT industries and nonfederal funds spent by academic institutions on R&D in the relevant fields, along with federal R&D funding. In health, for example, R&D funding in two industries—drugs and medicines and food—is counted, along with nonfederal expenditures on life sciences and bioengineering R&D by academic institutions. The industries representing IT are electrical equipment; office, computing, and accounting machines; and, beginning in 1995, computer and data processing services, which are included along with academic nonfederal spending on mathematics, computer science, and electrical engineering. Nonfederal (primarily industry) funding of R&D related to health has apparently increased at a faster rate than federal funding. Federal health R&D, which is almost all research, accounted for 43 percent of the national investment in 1998 despite the strong buildup in industry funding. In IT, nonfederal funding of R&D appears to have increased at a rate slightly less than that for federal funding of computer science and electrical engineering, but federal funding still only constitutes a small part of IT R&D—less than 7 percent (5 percent if the software industry is included).32 Although R&D is up overall in both cases, the picture is more mixed in IT than in health R&D. The strong increase in federally funded research in computer science has been offset to some extent by the decline in funding for electrical engineering, down by 29 percent since 1993 (basic research by 18 percent). 32   If data for software R&D funded by industry were available back to 1990, it is possible that nonfederal funding grew at a faster rate than federal funding.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies Company funding of computer R&D is also down, although funding of computer peripherals, networking products, and software is probably up (these are not measured directly except, since 1995, software R&D). The greater extent of federal support of R&D in health than in IT helps account for the larger share of basic research in health R&D. Drugs and medicines firms also devote a larger share of their R&D funding to basic research than electrical equipment and computer firms do—17 percent vs. less than 5 percent on average. As a result, basic research constitutes roughly one third of national R&D related to health, compared with less than one tenth of national R&D related to IT. Trends in Federal Funding of Other Fields Contributing to Progress in Health and IT Most other fields of research, including those that have been or promise to be important in health and IT in the long run, have received a shrinking share of federal investment during most of the 1990s. In some cases, they are receiving less in absolute terms than earlier in the decade. Fields increasing at a rate less than the biological, medical, and computer sciences since 1993 include environmental biology, agriculture, materials engineering, mathematics, atmospheric science, psychology, and the social sciences. Fields whose level of funding has fallen absolutely since 1993 include chemical engineering, electrical engineering, chemistry, physics, and geology (all but chemistry by 25 percent or more). Most of the shift in the composition of federal funding of research occurred during the period from 1993, when federal funding stopped growing, and 1997, when growth resumed. The increases in biomedical and computer research were deliberate efforts on the part of Congress and the Administration, respectively. The cuts, however, were not the result of a high-level plan or policy. They were the byproduct of priority setting by the departments in light of their individual missions. Many of the fields with reduced funding (physics, chemical engineering, and electrical engineering) were primarily supported by DOD and DOE in the early 1990s, agencies that cut their research budgets substantially in the 1993–1996 period (by 22 and 8 percent, respectively).33 The shift in federal funding among fields was not a planned one in response to a formal assessment of national needs or research opportunities. It was a “resultant,” that is, it is what happened after each federal agency and its committees in Congress set priorities without regard to national-level considerations. But what levels are optimal for each agency, taken one by one, may not be 33   Similarly, geology, another field that experienced greatly reduced funding, is primarily funded by the Department of the Interior (U.S. Geological Survey), which cut its research budget by 12 percent from 1993 to 1996.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies optimal overall, especially as the rationale for research in the physical sciences and engineering shifts from Cold War exigencies to economic growth and competitiveness. Industry’s need for a flow of research results in the physical sciences and engineering, and for physical scientists and engineers trained in academic institutions conducting the research, may exceed the future needs DOD has for research and talent in those areas, but there is no mechanism for making the adjustment. Balance in the Federal Portfolio The federal budget process should provide adequate and steady support for a diverse portfolio of research activities that reflects scientific opportunities and national needs and also provides for a healthy infrastructure of facilities and talented, well-trained personnel. At present, however, there is no well-accepted methodology for setting priorities across fields of science and engineering. It is difficult to achieve agreement within a field on the appropriate balance among funding current research projects, a state-of-the-art infrastructure of research facilities and equipment, and the training of new researchers for the future. The absence of clear guidance in the form of policy priorities, or of a process for analyzing the overall federal research budget, makes it difficult to balance funding among complementary fields of research. In such circumstances, one person’s idea of research portfolio imbalance can well be another’s notion of what constitutes a healthy investment in a “hot” area of research—though both may honestly seek to meet major national goals through their respective proposals. In the case at hand, some core fields in health and IT research are expanding rapidly and are accounting for most of the increase in federal funding in recent years (three fields—the biological, medical, and computer sciences—received more than two-thirds of the net increase in federal funding of research from 1990 to 1999). And that trend has no doubt continued since 1999, the last year for which there are data on actual funding by field, and will continue at least through 2003, the final year of the 5-year effort to double the NIH budget. But is this disparity in rates of growth among fields’ funding leading to an imbalance among fields? There are several approaches to answering this question. One approach is to treat research funding as an investment portfolio in which uncertainty and risk are minimized through diversification.34 This approach is based on the uncertainty inherent in research.35 It is not possible to predict where and when break- 34   See M.McGeary and P.M.Smith, “The R&D Portfolio: A Concept for Allocating Science and Technology Funds,” Science, 274, 1996, pp. 1484–1485. 35   See R.E.Gomery, “An Unpredictability Principle for Basic Research,” in A.H.Teich, S.D. Nelson, and C.McEnaney, eds., AAAS Science and Technology Policy Yearbook: 1995. Washington, D.C.: American Association for the Advancement of Science.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies throughs will occur, and the payoffs may come years later, perhaps in another field. Who knew in 1945, when nuclear magnetic resonance was discovered in condensed matter, that that basic research finding would lead to the development of magnetic resonance imaging (MRI) technology for improved health care and research 30 years later?36 This approach would ask if all fields were being adequately funded, including those that are not necessarily identified with popular goals of research, because advances in any field may lead to a breakthrough in another. The increase in interdisciplinary research adds to the prudence of investing in a broad range of fields. A second approach is to see where the United States stands in comparison with research in other countries in each field and make adjustments to ensure not only that the nation is preeminent in certain fields and among the world leaders in the other fields.37 International benchmarking avoids the problem of setting priorities across fields. This approach would ask if the reduced funding in fields such as physics, chemistry, geology, and some fields of engineering is putting the United States way behind the performance of other countries in those fields. A third approach is to examine carefully the degree to which progress in high-priority fields might depend on advances in other fields. In this case, because of the sequencing of the human and other genomes, advances in computing are clearly going to contribute to health research and enable new applications; at the same time, computing advances may well be based on biological systems (see workshop proceedings in this volume). But advances in both areas—IT and health—have and almost certainly will continue to rely on contributions from other fields, including chemistry, physics, mathematics, various engineering fields, and the social and behavioral sciences. In this approach, for example, the federal research portfolio is out of balance to the extent that progress in health research depends on fields other than the biological and medical sciences that are not receiving funding commensurate with their role. This situation came about because decision-making on health research historically has assumed that funding for the other important disciplines would be provided by other agencies (for example, chemistry, physics, and chemical engineering). To a large extent it was, until the end of the Cold War, reinforced by the federal budget deficit, caused DOD and DOE to reduce their research budgets. The trend toward interdisciplinary work makes it more prudent to invest in a broad portfolio of research and not concentrate funding in a few fields. The editorial in Science by Donald Kennedy quoted earlier takes this approach in noting that progress in a number of hot fields—for example, nanotechnology, 36   See National Research Council, Trends in Federal Support of Research and Graduate Education, Washington, D.C.: National Academy Press, 2001. 37   See National Research Council, Science, Technology, and the Federal Government: National Goals for a New Era, Committee on Science, Engineering, and Public Policy, Washington, D.C.: National Academy Press, 1993.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies global climate change research, genomics, and energy supply—depend on advances in a number of other fields. He concludes that capturing interdisciplinary complementarities requires a balanced portfolio. A fourth and perhaps simplest way to approach the issue is not to ask if biomedical research or any other field is receiving too large a share of federal research funding. Instead, ask if there are fields that are underfunded with respect to scientific opportunities, including their contributions to other fields, especially fields central to the achievement of national goals such as better health, economic competitiveness, and environmental protection. International comparisons are useful here. This approach is also consistent with the reality that balance in the federal research portfolio cannot easily be achieved by reallocating funding from one agency to another. The R&D budget, including funding for research, is never considered as an integrated whole, especially in Congress. Each R&D program competes with other programs in its agency and the other agencies under the jurisdiction of its appropriations subcommittee, not with other R&D budgets in other appropriations subcommittees. Thus the argument shifts from saying, say, NIH gets too much to saying, say, physics does not get enough, in part because of its role in improving health among many other worthy applications such as computing and other information technologies. Each of the approaches to assessing the federal research portfolio outlined above would examine the magnitude of the shift among fields that took place in the mid-1990s, focus on fields that stopped growing or began shrinking, examine their importance to the nation’s leadership in science and technology, and ask if the decentralized decision-making that led to no or negative funding growth makes sense from an overall point of view. The answer may well be yes, given changes in scientific opportunity or national goals or both, but currently there is no mechanism for addressing the question in the first place. In the early 1970s, when DOD, NASA, and the Atomic Energy Commission cut research funding and federal support of the physical sciences and engineering dropped sharply, NSF received a 20 percent increase, half designated for support of important research being dropped by the mission agencies.38 In the late 1970s, the Office of Management and Budget held funding in reserve for R&D program expansions and additions deemed advisable from the President’s point of view after review of the agency requests (Smith, 2001).39 There has been no similar plan to adjust the impact of shifts in agency priorities. Proponents of diminishing fields must make their best case to agencies and congressional committees with juris- 38   See M.Lomask, A Minor Miracle: The Informal History of the National Science Foundation, NSF 76–18, Washington, D.C.: National Science Foundation, 1976, pp. 239–240. 39   See P.M.Smith, “Science and Technology in the Carter Presidency,” Paper presented at the Office of Science, Technology, and Public Policy 25th Anniversary Symposium, Massachusetts Institute of Technology, Cambridge, MA, May 1.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies diction over their programs except perhaps to convince the House and Senate budget committees to give larger allocations to the relevant appropriations subcommittees. REFERENCES Ad Hoc Group for Medical Research Funding. 2001. “Ad Hoc Group for Medical Research Funding—FY 2002 Proposal,” January. At: http://www.aamc.org/research/adhocgp/fy2002.doc. AIP (American Institute of Physics). 2001. “The Office of Management and Budget on Science and Technology.” FYI, The American Institute of Physics Bulletin of Science Policy News. No. 28(March 9). Cockburn, I, R.Henderson, L.Orsenigo, and G.P.Pisano. 1999. “Pharmaceuticals and Biotechnology,” pp. 363–398 in National Research Council, U.S. Industry in 2000: Studies in Competitive Performance. Washington, D.C.: National Academy Press. Gomery, R.E. 1995. “An Unpredictability Principle for Basic Research,” pp. 5–17 in A.H.Teich, S.D.Nelson, and C.McEnaney, eds., AAAS Science and Technology Policy Yearbook: 1995. Washington, D.C.: American Association for the Advancement of Science. House Committee on Science. 2001. “Views and Estimates of the Committee on Science for Fiscal Year 2002.” March 16. Kennedy, D. 2001. “A Budget Out of Balance.” Science. 291(March 23): 2337. Lomask, M. 1976. A Minor Miracle: An Informal History of the National Science Foundation. NSF 76–18. Washington, D.C.: National Science Foundation. Merrill, S.A., and M.McGeary. 1999. “Who’s Balancing the Federal Research Portfolio and How?” Science. 285(September 10): 1679–1680. McGeary, M., and S.A.Merrill. 1999. “Recent Trends in Federal Spending on Scientific and Engineering Research: Impacts on Research Fields and Graduate Training,” Appendix A in National Research Council, Securing America’s Industrial Strength. Washington, D.C.: National Academy Press. McGeary, M., and P.M.Smith. 1996. “The R&D Portfolio: A Concept for Allocating Science and Technology Funds.” Science. 274(29 November): 1484–1485. National Academy of Sciences. 2001. A Life-Saving Window on the Mind and Body: The Development of Magnetic Resonance Imaging. Washington, D.C.: National Academy of Sciences, March 2001. At: www/beyonddiscovery.org/beyond/BeyondDiscovery.nsf/files/PDFMRI.pdf/$file/MRIPDF.pdf. National Research Council. 1993. Science, Technology, and the Federal Government: National Goals for a New Era. Committee on Science, Engineering, and Public Policy. Washington, D.C.: National Academy Press National Research Council. 1999. Funding a Revolution: Government Support for Computing Research. Computer Science and Telecommunications Board. Washington, D.C.: National Academy Press National Research Council. 1999. Securing America’s Industrial Strength. Board on Science, Technology, and Economic Policy. Washington, D.C.: National Academy Press National Research Council. 2001. Trends in Federal Support of Research and Graduate Education. Washington, D.C.: National Academy Press National Science Board. 2000. Science and Engineering Indicators—2000. Arlington, VA: National Science Foundation (NSB 00–01). National Science Foundation. 2000. Research and Development in Industry: 1998. Arlington, VA: National Science Foundation (NSF 01–305). Office of Management and Budget. 2001. Historical Tables, Budget of the United States Government, Fiscal Year 2002. Washington, D.C.: U.S. Government Printing Office.

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Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies President’s Information Technology Advisory Committee (PITAC). 1999. Information Technology Research: Investing in Our Future. Report to the President. Arlington, VA: National Coordinating Office for Computing, Information, and Communications. Smith, P.M., 2001. “Science and Technology in the Carter Presidency.” Paper presented at the Office of Science and Technology Policy 25th Anniversary Symposium, Massachusetts Institute of Technology, Cambridge MA, May 1. Forthcoming in symposium volume. Cambridge, MA: MIT Press. Varmus, H. 1999. “The Impact of Physics on Biology and Medicine.” Plenary Talk, Centennial Meeting of the American Physical Society, Atlanta, March 22. At: www.mskcc.org/medicalprofessionals/presidentspages/speeches/theimpactofphysicsonbiologyandmedicine.html. Wladawsky-Berger, I. 1999. “Information Technology: Transforming Our Society,” presentation at the seventh meeting of the President’s Information Technology Advisory Committee, February 17. See “Transformations” PDF at: www.ccic.gov/ac/agenda-17feb99.html.

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