A Good Idea to Cut Public Funding for R&D? Doesn't Look Like It.

David Rotman has authored an excellent article titled, “How to Measure the Returns on R&D Spending: Forget the Glorious Successes of Past Breakthroughs—the Real Justification for Research Investment is What We Get for Our Money. Here’s What Economists Say” in the MIT Technology Review.  The article does a nice job explaining recent research concerning public funding of R&D and the return on investment to the public.  The article notes that many questions are not answered.  The article is available, here. 

Was the U.S. National Institutes of Health conflicted during the COVID-19 pandemic period?

Jon Cohen at Science has an interesting and informative article titled, “Accusers’ bad math: NIH researchers didn’t pocket $710 million inroyalties during pandemic,” published on June 5.  The article addresses allegations that government scientists made $710 million in royalties on COVID-19-related technologies.  Those allegations raise an interesting conflict of interest issue. 

The article is definitely worth a read to provide some clarity to the controversy.  The article does note that government researchers did receive around almost $37 million in royalties during a three-year period that were mostly related to COVID-19-related technologies.  The article also states that there is a significant limit on the amount of royalties an NIH researcher can receive a year: $150,000.  I guess the math adds up to around a maximum of $450,000 over a three period for an individual researcher.  How long will they receive those royalties?  Do we have an issue with this or is this type of system which provides an incentive for government researchers to try to invent useful and valuable inventions for the public a very good thing?  Does the yearly limit effectively eliminate the conflict of interest issue? 

Improving the Allocation of Resources: Artificial Intelligence to Predict Future Clinical Success of Basic Research

In a new paper published on October 10, 2019 titled, “Predicting Translational Progress in Biomedical Research,” authors B. Ian Hutchins, Matthew T. Davis, Rebecca A. Meseroll, and George M. Santangelo describe a new way to use artificial intelligence to measure and predict which basic research type findings are likely to be translated into clinical advances.  The abstract states: 

Fundamental scientific advances can take decades to translate into improvements in human health. Shortening this interval would increase the rate at which scientific discoveries lead to successful treatment of human disease. One way to accomplish this would be to identify which advances in knowledge are most likely to translate into clinical research. Toward that end, we built a machine learning system that detects whether a paper is likely to be cited by a future clinical trial or guideline. Despite the noisiness of citation dynamics, as little as 2 years of postpublication data yield accurate predictions about a paper’s eventual citation by a clinical article (accuracy = 84%, F1 score = 0.56; compared to 19% accuracy by chance). We found that distinct knowledge flow trajectories are linked to papers that either succeed or fail to influence clinical research. Translational progress in biomedicine can therefore be assessed and predicted in real time based on information conveyed by the scientific community’s early reaction to a paper.

The full paper is available, here.  This appears to have the promise of mitigating some significant investment risk.  

Heavily Taxing Billionaires to Promote Innovation

An important issue confronting the world concerns the high concentration of wealth and redistribution of that wealth through the tax system. Part of the problem is what to do with the wealth gained from additional taxation of billionaires (and what is a politically defensible use of that additional revenue). Democratic presidential candidates are starting to create a "dream list" of things to do with billionaires' money.  Well, why not use that money to invest in research and development which may lead to more jobs, innovation (even life saving innovation), and additional tax revenue.  

Professor Michael Simkovic from University of Southern California Gould School of Law takes on general claims that taxing billionaires may lead to less innovation in a short five page article titled, “Taxes, Spending and Innovation.”  Professor Simkovic points to studies concerning patents and Nobel Prize winners.  Professor Simkovic states:

Public policy can be used to promote innovation by raising taxes and extensively funding high quality science, math, and engineering education, or by encouraging immigration of people with those skills.

There has been a general decline in the amount of federal funding in terms of real dollars for some time for the National Institutes of Health.  Well, billionaires give to universities and other charities, right?  We don't need to heavily tax them as they choose to give their wealth to charitable organizations that innovate.  Professor Simkovic notes that voluntary gifts to charity, including to universities, is relatively small at “2% of GDP”—for gifts from all donors.  He concludes we should look to peer-reviewed empirical work to test claims and that, “Claims that we can drive more innovation and growth through a higher concentration of resources in the hands of a small number of billionaires—while providing fewer resources to middle and upper middle--‐class knowledge workers—are not empirically supported.”  [Hat Tip to Professor Paul Caron’s Tax Prof Blog]. 

Federal Funding for National Institutes of Health in the United States will likely Continue to Decline

The Trump Administration is seeking cuts to the budget of the National Institutes of Health (NIH) for Fiscal Year 2019.  In dollars adjusted for inflation, the decrease is from FY 2018 38.349 billion dollars to 34.767 billion dollars, as described by Judith Johnson’s Congressional Research Service NIH Funding FY1994-2019 report (CRS Report).  Trump also requested a decrease in the NIH’s budget in the FY 2018 budget; however, Congress increased the budget by 2 billion dollars.  Notably, the CRS Report outlines how in inflation adjusted dollars the budget for the NIH has decreased over the last 14 years from the 2003 budget high point of 43.198 billion inflation adjusted dollars.  From 2011 to 2018, the budget for the NIH has decreased in double-digits in inflation adjusted dollars from the 2003 high point.  The years 2013, 2014 and 2015 saw decreases from the 2003 high point of 21.7%, 21.2% and 22.4% respectively.  The Trump 2019 request would be a 19.5% decrease in inflation adjusted dollars from the 2003 high point. 

NIH and licensing startups

There's an interesting critique on the website of the Regulator Affairs Professional Society concerning the US National Institute of Health's policy of providing exclusive licenses to start up companies in a range of technologies. The author of the article refers to a lobbying group Knowledge Economy International who have complained about the lack of transparency in granting such licenses. Apparently, little is known about the terms and conditions under which the licenses are granted and some of the companies to which the licenses have been awarded appear to lack office space and indeed a website.

This blogger has only had limited dealings with the NIH over the years, but has dealt extensively with other technology transfer organisations. Most are only too glad to even find one company interested in taking a license to a technology developed with public funds. It's rare that several companies compete with each other to get access to the technology. In some cases it would be interesting to know more details about the final agreement, in order to compare it with other agreements, but there seems to be little benefit to be obtained when there is no other alternative.

The NIH system does have one safeguard to prevent abuse of the system. The institute is obliged to publish in the Federal Register details of the company applying for the exclusive license and other companies are invited to express their interest. It is apparently rare for any company to do so. On the other hand the time frame for expressing interest is a mere fifteen days and it would be a rare group that could put forward a detailed business plan in that short time frame.

There is always a concern that taxpayer's funds are not being used properly. The reality is, however, in technology transfer that there are a large number of potential opportunities for exploiting government-funded research, but few companies prepared to take on the risk. It would seem unproductive to suggest that a greater administrative burden be placed on those few companies prepared to take such risks.