The Cost and Value of Research

Direct and indirect returns for the university and society

David S. Stephens

Stephen W Schwarzmann Distinguished Professor of Medicine and Vice President for Research, Woodruff Health Sciences Center

On March 1, 2013, President Obama issued an order canceling $85 billion in spending across the federal government for fiscal year 2013, which ends on September 30. For research, this sequester translates into a 5 percent reduction in federal grants, which last year totaled $351 million at Emory. Emory will lose an estimated $17.5 million in research funding, with additional impact on federal work-study and Supplemental Educational Opportunity Grants. But this may be just the beginning. Without a congressional agreement to stop the sequester, the federal government will need to cut $1.2 trillion in the next decade, and our loss of research grants and support will magnify many fold. 

This is a chilling message to our country, our institution, and our mission. 

Sustained federal funding to support innovative research has been a cornerstone of our national success and our success as a university. As a member of the Association of American Universities (AAU), an association of 62 leading public and private research universities in the United States and Canada, we are dedicated to “high quality programs of academic research and scholarship and undergraduate, graduate, and professional education in a number of fields, with the general recognition that “a university is outstanding”—and its reputation built—“by reason of the excellence of its research and education programs,” programs that are often interwoven and inextricably linked.

Nineteen or more high-paying jobs are generated per $1 million in research funding.

The federal budget crisis, continued declines in real purchasing power of research dollars, sequestration, declines in the return on endowments, pressures on other revenue streams, and competing unit priorities threaten to cut support and derail Emory’s research mission. In this difficult environment it is important to rearticulate both the cost and the immense return on investment of research for Emory and our country. 

Research is the foundation and fundamental driver of the creation of new knowledge. Research requires investment, ongoing operational costs, continual strategic thinking, and a firm appreciation of its value. Excellence in research is a pillar of Emory’s mission and a stated strategic goal of all units. Indirect cost recovery from grant awards does not cover all the costs of funded research (the gap is 25 to 36 percent). Additional institutional dollars support unfunded research, scholarship, and education. The increasing stress to find these institutional dollars to support research can lead, as we see with Washington’s extreme partisanship, to short-sighted decisions. Critical to this discussion is an understanding our investment in research and the direct and indirect returns on this investment for our university and our community through the following multipliers of value.

1. Intellectual Capital and Institutional Distinction.

The very real and most valuable assets generated by research and scholarship are the creation and growth of intellectual capital (such as outstanding faculty, graduates, students, and trainees), national and international prestige, and Emory’s distinction as a global “destination” institution. Our institutional commitment to research now places Emory in an elite status among academic institutions and is a major criterion of external rankings. After a remarkable climb over more than three decades, Emory ranks among the top 20 U.S. universities and among the world’s top 50 research universities, has more than 85,000 documents in the Web of Science database, and has 1.8 million citations with an institutional “h” index of 370 (meaning that 370 Emory publications have been cited more than 370 times). Research is the major force behind quality faculty recruitment and retention, and excellence in research is the major attraction for the brightest and best students and trainees to our education programs. Research provides the foundation for our future by creating the environment for the education and training of the next generation of scholars, investigators, and other academic leaders.

2. Economic Impact.

Now let’s turn to the research dollars generated. The value of research funding extends beyond the ability to foster new discoveries. Research funds ripple through the economy. The more than $500 million in 2010, 2011, and 2012 in total research awards to Emory creates a dynamic economic engine for our community, city, region, and state. The funds related to research provide direct faculty, student, trainees, staff, and other salaries. Every research dollar has roughly a 2.0 multiplier (2.21 for Georgia) on local and state economics. Nineteen or more high-paying jobs are generated per $1 million in research funding. 

One component of research dollars, indirect cost recovery (IDC), may be the most misunderstood of institutional research funds. IDC is not a revenue stream but is cost recovery from sponsors for support of the research work performed. IDC dollars are not generated until direct research expenditures occur. IDC consists of two pools: facilities and administration. Emory’s current IDC rate of 56 percent on campus-sponsored federal laboratory research provides reimbursement of facilities costs for buildings, equipment, interest, operations, maintenance, library, and utility costs. These reimbursements represent 30 percent of the 56 percent, while reimbursements that support administrative infrastructure and regulatory compliance are capped at 26 percent. More than $125 million per year in IDC were awarded Emory in 2010, 2011, and 2012 based on funded research, but again, these dollars do not cover the costs of supporting this research. After the remarkable increases in research dollars and IDC sustained for more than two decades at Emory, we now face a decline in IDC awards and recovery for expenditures. Maximizing the use of these dollars through greater efficiencies in research administration and infrastructure is key to navigating these challenging waters. Nevertheless, IDC is vital to the research mission and contributes to the multipliers of research economic impact. But economic impact represents only a component of the research value iceberg.

3. Clinical Competitive Advantage.

As the driver of innovation and new knowledge, research is a clear competitive advantage for Emory Healthcare and our affiliates. Our clinical service mission is also interwoven and linked to our research mission. The NIH designation of Winship Cancer Institute by the National Cancer Institute is one example. Partnerships with Grady, the Atlanta Veterans Affairs Medical Center, and Children’s Health Care of Atlanta are others. Also, our ability to negotiate the best clinical reimbursements is based on Emory’s distinction as a place of cutting edge innovation, new discovery, and quality. 

4. Philanthropy.

 Research success is a major foundation for philanthropic support and vice-versa. Of the $1.69 billion raised in the recent Campaign Emory, some 28 percent was direct individual or foundation support for research. This does not include philanthropy for new research buildings, endowed chairs, or fellows. For example, Atlantans Sarah and Jim Kennedy and their family foundations gave $5 million to Emory for innovative projects to address Alzheimer’s disease. It is no surprise that the top American research universities hold most of the top 20 endowments. 

5. Direct Institutional Investment.

Emory has attracted significant direct investment by state and local governments and local and national foundations due to our strong research enterprise. The Georgia Research Alliance (GRA) has invested well over $250 million in Emory since 1991 because of excellence in research and to build impactful programs for Georgia, bringing fourteen GRA Eminent Scholars to our campus. The Bill and Melinda Gates Foundation has invested more than $55 million in Emory’s work in global health.

6. Intellectual Property and Translational Research.

Emory research discoveries lead to commercial applications, drug and device development, and new startup companies that improve and save lives. Emory has 1125 active technologies and 306 active licenses and has received $820 million in license revenue since 2000. Emory is ranked the fourth largest contributor in the nation to the discovery of new drugs and vaccines by research institutions including federally funded universities, research hospitals, and federal laboratories, according to a 2011 report in the New England Journal of Medicine. Drugs for HIV/AIDS discovered at Emory, with the help of federal funding, are used by more than 90 percent of U.S. patients under treatment and by thousands more around the world. The licensure of the HIV/AIDS drug FTC alone brought $540 million to Emory as a single success of intellectual property and served as a major resource for the development of Emory’s strategic themes. GeoVax, Inc., which was founded by Emory, has produced a leading HIV/AIDS vaccine candidate. Biomedical discoveries at Emory and Georgia Tech have resulted in 78 startup companies and the introduction of more than 64 new products into the development pipeline. The potential for return from intellectual property is robust at Emory, with an excellent product pipeline based on key discoveries generated by research. 

Although it is under financial seige, research remains the foundation of excellent scholarship and the fundamental driver of the creation of new knowledge, which distinguishes the really great from the good universities. As a critical competitive advantage of Emory University and Emory Healthcare, research must be zealously defended. It is an economic engine that gives our nation a competitive advantage through global leadership and ultimately improves the human condition. The six multipliers of the value of research noted above illustrate both our past successes and the great promise of research for the betterment of our community, the U.S., and global communities.