How can we at NIH compare a $1 million investment in research today with the same $1 million investment twenty years ago, ten years ago, or even five years into the future?
You might be familiar with the Consumer Price Index (CPI), which measures inflation experienced by consumers in their day-to-day living expenses, or the Gross Domestic Product (GDP) Price Index, which measures general inflation across the nation’s economy. But as readers with an active interest in biomedical research, you might be interested in how these numbers ‘translate’ into the research world. Naturally, so are we, and this is where the Biomedical Research and Development Price Index, or BRDPI, comes in. Every year, NIH engages the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) to calculate and model the estimated changes in the costs of NIH-funded biomedical research. The BEA uses data from extramural institutions as well as the NIH intramural program to assess changes in the cost of items including personnel services, various supplies, and equipment involved in biomedical research. This information is used to calculate BRDPI as described in the annual BRDPI memo.
Actual and estimated inflation rates are posted on the NIH Office of Budget website, and these data were recently updated for 2013. I thought it would be interesting to share how both the BRDPI and GDP Price Index have changed from 1980 to the present, as well as price index projections for future years.
You can see that the preliminary estimate for FY 2013 is 1.9 percent, up from 1.3 percent in FY 2012, meaning that to purchase the same level of research in FY 2013 as we did in FY 2012, NIH would have needed to increase its budget by 1.9 percent. The 2013 BRDPI is an estimate because it will be updated next year as global price indexes and other factors used to estimate the BRDPI are updated. You might also notice that in FY2012, BRDPI reached its lowest since 1980, which was primarily driven by the reduction in the salary cap for principal investigators.
Tracking this price index is important because it allows us to measure changes to the purchasing power of the NIH dollar over time, and make projections for future fiscal years. As described in the annual BRDPI memo, forecasting a future path of price changes is an inherently imprecise exercise; however, these forecasts are beneficial to our agency’s overall planning efforts by allowing us to consider the future value of a dollar specific to the goods and services used to support NIH research and development.