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INTRODUCTION AND SUMMARY The proposal in the President's F.Y. 1986 Budget (submitted in February of F.Y. 1985) to eliminate retroactively the increases in the number of new and other competing research projects* provided by the Congress in the F.Y. 1985 appropriations for the National Institutes of Health (NIH) and the Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA) provoked a loud outcry from scientists and strong criticism in Congress. At issue was the five-year- old policy of attempting to stabilize the financial support of investigator- initiated projects by these agencies and how this policy should be interpreted and applied. The conflict over the F.Y. 1985 budget has ended in a compromise between the Executive Branch and Congress, but the future course on a stabilization policy remains uncertain. me Institute of Medicine (IOM) considered how it might make a constructive contribution on this issue and decided that the appropriate action was to develop a staff paper that would provide scientists and the general public with useful information about events that led up to the F.Y. 1985 budget controversy and identify the problems and policy questions that might be worth further study and deliberation. The paper on the following pages draws heavily on data provided by NIH and ADAMHA and a number of interviews with officials involved in the decision-making process on this subject (who are listed at the end of the text). Its findings are summarized below and discussed in some detail in Parts I through IV, and some subjects for possible further exploration are listed in Part V. Summary I. The Origins of the Stabilization Policy The stabilization policy, which became an acute budget issue in F.Y. 1985, had its origins in a 1979-80 health research planning effort, undertaken by the Department of Health, Education, and Welfare at the request of its secretary, to develop a five-year health research plan in the context of tightening budget constraints. A department committee, headed by the NIH director, was formed to direct this task. In its 1979 and 1980 reports the committee - -- recognized that stabilization could be defined in various ways--with growth, no growth, or even a gradual decrease--but emphasized the overriding need of a predictable market for the ideas and skills competing for research support; -- determined that the stabilization of support for investigator-initiated research projects should be the number one priority (as it had been for some years before) while also recognizing the importance of stabilizing the support of other elements of the science base, including research training and research centers; -- proposed, against a background of fluctuations in funded NIH research projects during the last half of the 1970s ranging from 3,800 to 5,900, that the targets for F.Y. 1981 be the funding of new and other competing research projects totaling 5,000 for NIH and 569 for ADAMHA; and - described these figures as "long-term floors", not ceilings, and included projections beyond F.Y. 1981 for *"Other competing projects" are competing continuation and supplemental projects. 1

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"moderate" and minimal" growth, as well as none, in its first report, but omitted growth projections from its second report. Although there were some concerns expressed by sources both in and outside the department about some aspects of the stabilization initiative, the NIH figure of approximately S,OOO projects was made operational in the President's F.Y. 1981 budget. However, the ADAMHA figure of 569 was cut by the then new administration to 284 in a revised version of that budget, primarily to eliminate federal support of social research not deemed to be relevant to ADAMHA's mission. II. The Budget History Through F.Y. 1984, both the executive and legislative branches substantially adhered to a policy of stabilizing the support of competing NIH research projects at about 5,000 a year (which, because of rising costs, required significant funding increases each year) and of steadily raising the funding of ADAMHA competing research projects from 284 to 500. The increases voted by Congress for F.Y. 1985--from 5,000 projects for NIH and 500 projects for ADAMHA in the President's budget to 6,526 and 583, respectively-- were explained in the House and Senate reports largely by pointing out that significant declines had occurred in award rates and paylines. The President's F.Y. 1986 budget undertook to negate these increases by requiring that the funding increases appropriated by Congress for F.Y. 1985 be used for multi-year (forward) funding of 646 projects through F.Y. 1986 and 1987 and that the program levels of 5,000 for NIH and 500 for ADAMHA be continued for both F.Y. 1985 and F.Y. 1986 . However, -- the multi-year funding aspect of this proposal was subsequently found by the Comptroller General of the United States to lack legal authority; -- a compromise was reached in Congress on program levels of 6,200 and 550 competing projects for F.Y. 1985; and -- the President accepted this compromise for F.Y. 1985 but expressed reservations that cast some doubt on the outcome of appropriations action for F.Y. 1986 (at this writing still pending in Congress). III. The Program Indicators A. NIH The often-cited declines in award rates and paylines# since the 1970s were caused primarily by substantial increases in the volume of applications (including amended applications) submitted to NIH. However, these declines were also caused in part by the fact that study sections have been approving steadily increasing percentages of the applications (to approximately 90 percent at present from 74 percent only 10 years ago) and assigning increasingly higher (lower numbered) priority scores. *The established practice has been to fund NIH and ADAMEA research grants, averaging slightly over 3 years in length, for one year at a time. It is understood that there is a "moral commitment" to fund grants for their approved full length, but this requires appropriations each year for their "continuation" beyond the initial year. #The award rate is the funded percentage of eligible (approved) applications; the payline is the point on the priority scoring scale at which funds are exhausted. 2

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Much of the increase in the percentage of the applications approved and of the elevation of priority scores (often referred to as "study section creep") is attributed by NIH to improvements in the quality of the applications but some of it is considered to be a product of changes in the behavior of the study sections, caused by the apparent influence on their decisions of funding considerations. These changes in study section behavior cast doubt on the validity of using the number of "approved but unfunded projects" as a criterion for judging the adequacy of budget or appropriation actions. Consideration is being given to the possibility of replacing the award rate (the percentage of approved applications that are funded) with a "success rate" (the percentage of all applications that are funded) This would make it evident that the downward shift from the 1970s was not as large as might be inferred from changes in the award rates and paylines, but it also would ignore the factor of improved quality. me approval by Congress and the President of a compromise figure of 6,200 NIH competing projects for F.Y. 1985 will enable NIH to achieve a success rate in that year at a level above where it was in F.Y. 1984. If the present upward trend in applications were to continue in future years, the question arises as to whether the NIH could depend on continued funding increases in the future to keep pace with that upward trend. The President's Office of Management and Budget (OMB) would undoubtedly resist any effort to build automatic program increases into future budgets and Congress might also object to it. At present (August 1985), NIH is uncertain of its future course on the stabilization concept and the method for implementing it. B. ADAMHA The award rates and paylines for the ADAMHA programs, as for NIH, have declined since the 1970s, but the reasons are different. The ADAMHA declines were due largely to swings in funding--sharply down in F.Y. 1981 (to eliminate certain types of social research projects) and gradually upward thereafter, combined with some escalation in the priority scores assigned by the review groups. Contrary to the NIH experience, the volume of applications submitted to ADAMHA has not risen appreciably since 1979, and the approval rates for ADAMHA applications are well below those for the programs of NIH. In all probability, ADAMHA will follow NIH's lead on the question of future stabilization policy. IV. Other Program Aspects of Concern The award rates and paylines among the NIH's individual institutes vary widely. NIH takes account of these differences in distributing budget increases but, because of the structure of individual institute appropriations and other factors, the agency has held the view that only small changes can be made from year to year in the comparative award rates and paylines of the institutes. The HHS 1980 planning document emphasized that, if there were any indications that the stabilization policy was having an adverse effect on the support of young investigators, appropriate actions should be taken to arrest that trend. me latest available figures (through 1982-83) suggest somewhat of a downward trend emerging in the early 1980s with respect to the numbers of applications submitted by new principal investigators and the number and percentage of awards made to such investigators, but more recent data would be needed to ascertain any definitive trends. NIH recently established a new category of awards for investigators with meritorious ideas but little experience; some institutes have responded positively to this initiative, but others are not convinced of its necessity. NIH has been studying several important policy alternatives for its extramural programs, including the 3

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possibility of making new-investigator research awards more attractive by extending their typical length from three to five years and also of taking measures to improve the stability of support for mid-career and well- established investigators. Obviously, these would involve important budget trade-offs. - Another concern initially expressed about the stabilization of support for investigator-initiated research projects was its possible deleterious effects on other elements of the science base. There have been steady increases in the percentages of NIH appropriations allocated to research projects, but these resulted from a policy of preferential treatment that started well before the initiation of the stabilization policy. The increases in research project grants have occurred mainly at the expense of research contracts and were accomplished in part by reclassifying certain types of projects from contracts to grants. The support of research training (through NIH fellowship awards and training grants) has remained more or less constant in the 1980s. Although there is little evidence that the initiation in 1980 of the stabilization strategy for support of research projects has been harmful to other program components of the science base, there remains the question of whether a continued commitment to such a strategy might unduly limit the agency's flexibility to determine future priorities among its various program components. These findings are discussed at some length in the following pages. 4