The Allocation of Public Funds for Biomedical R&D

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Public investment in R&D for health amounts to more than $10 billion annually in the United States. How much has that investment reduced mortality and morbidity? How many potential life-years are being saved? To what extent has public funding of R&D for health alleviated the burden of disease on society, and for which groups–nonwhites, rich, poor, young, old?

Those are among the questions Frank Lichtenberg considers in developing his model of how the government has allocated funds for biomedical R&D. He uses the records of research projects supported by the Public Health Service to calculate by disease the distributions of public money for biomedical research, and he presents empirical evidence about the determinants of allocation and the relationship of public research expenditure to the benefits of achieving scientific advances against disease.

Lichtenberg contends that allocation should take account both of research productivity (that is, of the cost of achieving research advances) and of the public health need to relieve the social and economic burden of disease and chronic conditions that severely limit people’s activities. The implications of his theoretical model are consistent with descriptions of the allocation process by government officials.

Frank R. Lichtenberg is the Courtney C. Brown Professor of Business at the Columbia University Graduate School of Business and a research associate of the National Bureau of Economic Research.