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trol, smoking cessation, food and drug safety, substance abuse prevention, and other prevention-related biomedical and behavioral research.
INDIRECT COSTS Senator HARKIN. I appreciate that.
Last, and this will be the last one, I just want to cover an issue that keeps coming up and keeps bubbling to the surface, and it is something that has to be addressed. I do not know exactly how, but it has got to be addressed.
Your 1992 request for NIH includes $1.9 billion for indirect costs associated with the grant awards that NIH expects to make next year. The indirect cost rates range from 6.3 percent for the foundation at the New Jersey Institute of Technology to 155 percent for the Michigan Cancer Foundation.
You know indirect cost rates vary for a number of reasons. According to a study done by the inspector general in 1987, one of the reasons for indirect cost rate variance is the space used by facilities.
For example, in 1987, the University of California at San Francisco and the University of Washington had very comparable amounts of NIH research work. However, one university devoted 1,178,000 square feet to that research. The other devoted only 531,000 square feet to the research they did. The cost of the space in both cases was reimbursed through the indirect cost payment program.
I know you are aware of the problems that have been reported at Stanford University, where the cost of the university's yacht and flowers for the president's home have been charged to indirect costs.
Mr. Secretary, as you know, the Appropriations subcommittee for the Department of Agriculture, which is chaired by Senator Burdick, and I sit on that, imposed a 25-percent indirect cost rate cap in fiscal year 1990, and in 1991 that cap was reduced to 14 percent.
So I guess I am basically saying that we have got a problem out there, and could you—if not now, perhaps could you submit to us later on some suggestions for solving this?
Last, should we consider putting a cap on it, just as we did in agriculture?
Secretary SULLIVAN. Thank you, Mr. Chairman. I would like to get a more detailed response back to you.
[The information follows:]
INDIRECT COSTS Indirect costs are designed to reimburse grantees for legitimate, real costs of conducting research-utilities, administrative support, equipment and facilities maintenance. While an indirect cost cap may serve to reduce the costs of research in the short-term, an unreasonably low cap will also undermine seriously the ability of many institutions to conduct government-sponsored research. I also might add that the NIH's “market share" of research grants to universities across the country is considerably larger than that of the Department of Agriculture-more than forty times larger-consequently the affect of a cap on NIH indirect cost payments would be magnified considerably.
A cap is not the only way to contain or reduce indirect costs, and until we look at all the options available to us, I am unable to say yes or no. I do know that the new Director of the National Institutes of Health, Dr. Bernadine Healy, shares my view that we must assure that each of our research dollars is spent well, and that she has stated an interest in participating in the review of indirect costs.
INDIRECT COSTS Secretary SULLIVAN. I think that Stanford itself has indicated that they were in error with the charges for this yacht, and I believe they have withdrawn that request.
Senator HARKIN. Excuse me, I just wondered—you know, again, we want to cultivate a culture of character in our society. I just wonder if the individual responsible for listing that yacht as indirect costs got canned.
Secretary SULLIVAN. I do not know, Mr. Chairman.
Senator HARKIN. I would sure like to find out. Would you help me find out? (Laughter.]
Secretary SULLIVAN. This is a process that is still under review, but one of the things in the way these agreements are made is the question of which Federal agency has the lead for negotiating indirect costs. For Stanford it was the Office of Naval Research, and I think that is an issue that perhaps we want to review.
It was not individuals with HHS who negotiated those indirect costs rates in that case.
The issue of indirect costs certainly merits review and monitoring, because these are taxpayer dollars. They are very significant.
At the same time, I would be worried about establishing an arbitrary cap. We have built in this country over the last 50 years, a biomedical research enterprise that is the envy of all other nations. There is no question about the creativity and the innovations of our biomedical research enterprise. Note the number of Nobel Prizes awarded in the last 20 or 30 years. We have gotten an inordinate share of those.
Part of that has been because of the support that we have given for biomedical research, and part of that is the indirect cost rate, the purpose of which is to reimburse the universities or other institutions for the costs of doing the research.
The judgment was made by the Congress back in the 1940's and 1950's that this represented an investment in the Nation's interest, and the universities contribute to the Nation's interest by carrying out their research.
We all benefit from the research that is carried out. If we were to impose an arbitrary cap, that might very readily increase the cost of research to the universities so much that we would end up eliminating or decreasing the amount of work that is done. We want to do everything we can to foster the research.
One of the other reasons for the tremendous disparity in indirect costs is that on training grants the indirect cost rates are very low because the cost of administering a grant like that, involving personnel support, is low.
When you have biomedical research, the cost of laboratories, the cost of equipment of all of the utilities, et cetera, gets to be much greater. It also takes into account that in a city like San Francisco, space is much more expensive than in Seattle or elsewhere. We try to take those things into account.
Having said all of that, I come back to my original point. I think that these costs need to be reviewed carefully to be sure that they are appropriate and that we are getting value for our dollars, but I also believe that, overall, it has worked very well so far.
When I was a medical student, I treated patients with paralytic polio. At the same time, back in the mid-1950's, that I was doing that in Boston, Thomas Endes had a grant from NIH for around $150,000 which he used to learn how to grow this virus in the laboratory on slices of monkey kidney tissue. That brings in another thing, the animal research issue, and is one of the reasons I have been outspoken against those who are arguing against animal research.
Because of that investment of $150,000, where we learned how to grow this virus which was then used to make a vaccine by killing the virus, or altering it, last year in the United States we had no reported cases of paralytic polio. We still have some cases around the world, but we are now talking tentatively, but I think very definitely, about possibly eradicating polio from the world. This is a disease that cost us hundreds of thousands of dollars and changed the lives of people who were infected by it.
That is just one example of the benefit of research-dollars saved, lives preserved. People are able to continue to be independent, productive citizens, as opposed to being in an iron lung or in a wheelchair, undergoing tendon transplants attempting to retain some mobility.
As we look at this issue, we should try to make adjustments in ways that do not compromise our biomedical research effort, because it has been so productive over the years.
INDIRECT COSTS Senator HARKIN. I appreciate that, and I have used that example myself in the past, but there is a problem out there and it has got to be looked at, and just because we both support biomedical research—and I happen to be one of the strongest supporters of NIH and what they are doing. I think my record shows that—that does not mean that we can say well, whatever the indirect costs are we will pick up the tab.
We have got to have some accounting principles in there. We have got to find out how we can perhaps reduce this increase. $1.9 billion is quite a bit for indirect costs, and staff just informed me that a 1-percent reduction of the average would save $30 millionjust 1 percent. What is the average? Forty-seven percent. It could be a lot of money we could save.
So again, when we are looking at places to save money, and we are looking at maternal and child health care programs and things like that, I think maybe there is something here that we have got to take a look at. But you are right, we have to be careful, because we cannot shut off the biomedical research.
Well, you have been very generous with your time. We really appreciate your being here. It was a good session, and as I said, hopefully not confrontational at all but trying to answer these questions in the best way that we can achieve the goals that we both want to see.
So again, Mr. Secretary, thank you. We look forward to working with you this year on a whole broad range of issues, and perhaps we can start the process toward meeting those health objectives in 2000 and get something worked out that will work with this infant mortality initiative.
Secretary SULLIVAN. Thank you, Mr. Chairman. I look forward to working with you.
QUESTIONS SUBMITTED BY THE SUBCOMMITTEE Senator HARKIN. There will be some additional questions from various Senators which we will submit to you for your response.
[The following questions were not asked at the hearing, but were submitted to the Department for response subsequent to the hearing:)
QUESTIONS SUBMITTED BY THE SUBCOMMITTEE
TRANSPORTATION TECHNICAL ASSISTANCE
Question. In 1989 it came to the attention of the Committee that the Department of Health and Human Services spends up to $1 billion for transportation. HHS funds are used for transporting Head Start children, the elderly and persons with disabilities. The non-profit organizations which provide this service in rural areas are often the only source of public transportation in their communities.
these organizations are not eligible to receive technical assistance provided through the Department of Transportation.
To alleviate this problem, the Committee provided approximately $250,000 in the Fiscal 1990 bill for a technical assistance program for rural and special transportation providers funded by Hus, along with a study of ways to improve coordination between federal DOT and HHS. This project was implemented through an inter-agency agreement with DOT.
The Committee provided funds in the Fiscal Year 1991 bill to continue this effort. The House report concurred with the Senate regarding the use of Fiscal 1991 funds.
What is the status of the current program? Have you been satisfied with the work of the technical assistance contractor? Do you intend to comply with the conference report on the Fiscal 1991 [funds) and continue the current technical assistance program and contractor?
Answer. As a result of the FY 1990 appropriation,
As a part of this project, CTAA recently conducted