Funding News Edition: June 01, 2022 See more articles in this edition
How expensive is conducting biomedical research? NIH invests more than $40 billion annually in health research for the American people, but the volume of scientific studies NIH funding can support depends in part on the cost of labor, equipment, and supplies needed to perform research projects.
Those costs can fluctuate from year to year, generally but not precisely matching inflation or deflation across the broader economy. Since recent economic data indicate higher-than-usual inflation, you may be wondering what impact NIH anticipates on its budget and expenditures.
NIH’s Annual Assessment
Each year, the Department of Commerce's Bureau of Economic Analysis (BEA) works with NIH’s Division of Statistical Analysis and Reporting (DSAR) to calculate the Biomedical Research and Development Price Index (BRDPI). In general terms, the BRDPI indicates how much money is needed to purchase the same amount of biomedical research as the year before. More specifically:
The BRDPI measures changes in the weighted average of the prices of all the inputs (e.g., personnel services, various supplies, and equipment) purchased with the NIH budget to support research. The weights used to construct the index reflect the actual pattern, or proportions, of total NIH expenditures on each of the types of inputs purchased. Theoretically, the annual change in the BRDPI indicates how much NIH expenditures would need to increase, without regard to efficiency gains or changes in government priorities, to maintain NIH-funded research activity at the previous year’s level.
For example, in fiscal year (FY) 2015, the increase in BRDPI was 2.0 percent, which outpaced inflation in the broader economy, as reflected by the Gross Domestic Product (GDP) Price Index reading of 1.1 percent for FY 2015. Given that annual percentage change, NIH could assume that to fund the same research accomplished by a project with $300,000 total costs in FY 2014, it would need to spend $306,000 total costs in FY 2015.
DSAR also makes projections for future years, based on forecasts from the BEA for medium-term inflation (or deflation). Besides budget planning, NIH uses these estimates to justify to Congress the cost of research and support activities we anticipate funding with the next year’s appropriations.
Check the Results for FY 2021
The BRDPI Overview of Annual Update shares a summary and analysis of recent inflationary conditions that impact NIH’s budgeted activities. The key takeaway is: “For FY 2021, the preliminary estimate of growth of the BRDPI is 2.1 percent.”
Given the context of inflation within the broader economy at 3.1 percent for FY 2021 (as indicated by the GDP Price Index), last fiscal year biomedical researchers experienced slightly less inflationary pressure than did the economy as a whole.
Looking ahead, the Overview anticipates the BRDPI will increase to 3.1 percent for FY 2022, then 2.6 percent in FY 2023, before leveling off at 2.3 percent in FY 2024 onward. The Overview’s authors note these estimates rely on Office of Management and Budget data released in December 2021 and allow that revised economic data could shift BDRPI forecasts. Further, they acknowledge “the continued impacts of the COVID-19 pandemic, and the recent rise in the general inflation rate due to fuel price changes, supply chain constraints, [war in Ukraine], etc., make such projections volatile.”
Read the Overview for a detailed breakdown of how NIH calculates the BRDPI, e.g., computing changes in academic salaries and wages.
What’s the Upshot?
The impact of small annual increases in the cost of biomedical research becomes obvious when viewed from a decade-long perspective. Compared to FY 2010, the BRDPI finds that the same research cost 23.5 percent more to perform in FY 2020. Famously, NIH’s budget struggled to keep pace with inflation throughout the 1980s and 1990s, which partly led Congress to double the NIH budget from FY 1999 to FY 2003.
This same dynamic explains why the NIH Data Book chart for R01-Equivalent Grants: Average Size shows a significant increase in the average annual total costs for R01 awards over the past two decades but a comparatively flat trend line when costs are converted into constant dollars.
Still, inflation is incredibly difficult to predict. Four years into the future, how will the cost of a particular industrial chemical compare to its current price? To what extent will wages have changed?
For this reason, NIAID does not allow grant applicants to factor price rises into budget requests. Even if grantees could forecast such values methodically, peer reviewers would be ill-equipped to judge the appropriateness of requests—better instead to rely on current, verifiable costs. Thus, any direct cost escalations in your application’s budget section must be well-justified based on your project’s Research Plan and Specific Aims. For significant, unanticipated price increases that occur during your grant’s project period, above and beyond any inflationary cost increases, you may request an administrative supplement.