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Free-riders?: U.S. research funding for diseases causes other countries to back out, new study finds

People think strategically all the time, from choosing an outfit in the morning to playing chess—and it turns out that governments funding medical research do too. 

A recent study out of Duke’s Fuqua School of Business found that for the United States—which provides about half of global funding for the 15 diseases the researchers considered—investing a dollar in medical research results in other countries pulling back about 25 cents of funding. 

“I think the major takeaway from our paper is that the government funders need to consider other governments’ reactions when making their own decisions,” wrote Su Zhang, a Ph.D. candidate in economics and a co-author of the study, in an email. “Otherwise the global funding support for neglected diseases would be sub-optimal.”

The effect observed in the study—which amounts to a two to three percent decrease in funding by other countries’ funding for each 10 percent the U.S. contributes—means that the net effect of each dollar the U.S. directs toward researching a disease only provides approximately 75 cents worth of impact because of a lack of international cooperation.

Researchers looked at funding data from Policy Cures and the World Health Organization for 15 neglected parasitic and infectious diseases—including HIV/AIDS, malaria, tuberculosis, leprosy and meningitis—from 2007 to 2014. The data showed that the U.S. funds over half of the world’s research for these diseases, with the next closest countries being the United Kingdom at just under five percent and France at almost three percent.

One explanation that the study offers for its observed effect is that medical research as a public good presents a free-rider problem. The other explanation is that other governments may simply be practicing “optimal reallocation”—moving those funds to help with other diseases once they see that the U.S. has jumped in. 

David Ridley, Dr. and Mrs. Frank A. Riddick professor of the practice of business and co-author of the study, noted that they are not currently able to rule out either option.

“The classic problem of research is that there is a free-rider problem—if I understand a disease, it benefits everybody—so I have a tendency to hope that you will figure it out and I can just share in the gains. That’s why we have patents, for example, to encourage private companies to do more,” he said. “But we don’t have enough of a mechanism among governments to encourage them to do more.”

Although the tradeoff may seem discouraging, one positive aspect of the study is that it shows the effect also works in reverse. 

“The good news is that it works in [the other] direction, too. So if the U.S. were to spend a dollar less, others would pick up the slack to some extent on the disease, but not fully,” Ridley said. “We certainly don’t want to advocate that, we don’t want to advocate the U.S. spending less because we are actually spending very little relative to our national income, and it has an enormous impact on health because these are such awful diseases that so many people suffer from.”

This international effect is particularly important considering the political nature of funding research in the U.S. The study notes that even though most of the country’s funding for medical research flows through the coffers of the National Institutes of Health, the NIH’s funding varies considerably based on the constituencies of Congress members on appropriations committees. If the committees are full of members who represent areas with research universities and entities that rely on NIH funding, then the allocations are higher.

Ridley’s previous work has produced real-world results—a 2006 paper advocating vouchers to encourage companies to invest in medical research resulted in a 2007 law incorporating his suggestion. He noted that one possible solution to the current international coordination problem is for countries to agree to allocate a percentage of their gross domestic product to medical research.

“It’s good news that you still have one dollar making a big impact because it’s still 75 cents, so that’s not too bad,” Ridley said. “But it’s not having the full impact of the dollar that we would like it too.”

The paper mentions that future research into whether the results are consistent when dealing with diseases that affect rich and poor people similarly—such as diabetes or cancer—could be interesting, and Zhang noted that one aspect that could use further exploration is distinguishing whether the free-rider effect or optimal reallocation is the culprit behind the imbalance.

“[Global health] has a profound effect on the well-being of our fellow humans, and so I think there is no more important topic,” Ridley said. “That’s why it’s helpful to quantify this.”

Bre Bradham

Bre is a senior political science major from South Carolina, and she is the current video editor, special projects editor and recruitment chair for The Chronicle. She is also an associate photography editor and an investigations editor. Previously, she was the editor-in-chief and local and national news department head. 

Twitter: @brebradham



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