Repost: Estimating the Purchasing Power of the NIH Grant

A query on the Twitts today:
https://twitter.com/Dr24hours/status/412950836298272768
reminded me of this post. It originally went up 12 July, 2012.

This reality is echoed in personal anecdote. If I look across my grant submissions within a particular part of the lab over the years, I am more or less proposing the same scope of work in each R01. I started submitting grants within the first few years of the modular budgeting era and was matching my proposals to what could be accomplished within the $250K limit. Time marched on…but it took me a long time to cotton on to the purchasing power issue. I just squeezed and tried to compensate by proposing new projects. Because of the considerably reduced hit rate, I’ve taken to doing traditional budgeting lately. And, what do you know? It comes in at about $375K. Same scope as I used to fit within the $250 limit.

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You are probably aware, DearReader, of the concept of inflation. This means that the amount of money that you pay today for a good or service is higher than the amount of money that you paid yesterday.

On average.

So for example, this US inflation calculator tells me that the purchasing power of $12,000 in 1972 has the purchasing power of $65,975.60 in 2012. This is a convenient set of figures if, for example, you are shooting the breeze with a senior faculty member* who started his or her Assistant Professor appointment in the early 70s. You may want to grapple with pay on even terms. Naturally, not every good or service has the same inflation rate and this is just one model/estimator. Jeans may cost less and houses may cost more. etc.

Moving along, we come to the discussion of NIH Grants. In the past I’ve posted the analysis that shows that the doubling of the NIH budget was rapidly un-doubled and fell back on the historical trend line. [see update suggesting we are now defunding the NIH] That analysis depended on the Biomedical Research and Development Price Index or BRDPI. This brings us to an interest in the purchasing power of the full modular R01. “Modular” refers to the specification of the budget for most NIH grant types in units of $25,000 in direct costs. These are the “modules”.

There has been a cap of $250,000 per year in direct costs since the 6/1/1999 initiation of this structure, if I have that right. You can ask for more money per year but then you revert to a line-item type budget (called “traditional budgeting”). The modular cap has not changed and, I assert, this limit affects the vast majority of NIH R01 proposals since there is high motivation (or has been, I may have touched on reasons for future changes before) to adhere to the modular grant structure. Overall, I do like the notion of the modular budgeting procedures because it keeps reviewers from ticky-tacking a bunch of irrelevancies about grants when they should focus on the science.

However, the use of a limit like this brings up the unpleasant inevitability of inflation.

Comrade PhysioProf has been noting that the real purchasing power of the R01 has been dropping due to inflation in the context of postdoctoral fellow demands for ever increasing salaries. He’s not alone in noticing. I offer today, a graphical depiction pulled from data provided by the NIH Office of Budget on the BRDPI.
I”ve taken their table of yearly adjustments and used those to calculate the increase necessary to keep pace with inflation (black bars) and the decrement in purchasing power (red bars). The starting point was the 2001 fiscal year (and the BRDPI spreadsheet is older so the 2011 BRDPI adjustment is predicted, rather than actual). As you can see, a full modular $250,000 year in 2011 has 69% of the purchasing power of that same award in 2001.

For those looking at the increasing numbers of applications being submitted presented in the prior post, you must include some understanding of this inflationary pressure in your thinking.

The second thing we’ve found here is the target number to restore spending parity.

In simple terms, we should now be advocating for an increase to $350,000 as the new modular cap.

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*Particularly handy when said senior (or emeritized, retired) faculty members are members of one’s own family. just sayin.