Why do most research universities in the USA lose money on research?

That is a question that comes up in numerous college, university and teaching hospital conference rooms. Deans, Department Chairs and essentially all administrators are asking that question. It is not because of the economy although the economy contributes to the very bad situation that we have right now. This issue is not unique to where I work either. I can assure you that many scientists around the country will have a similar story to tell.

As an academic researcher I can tell you very simply why my research is losing money for the University. “We are not allowed to make money.” My academic research is not allowed to make a profit is the reason research is not profitable. The best I can hope for is to break even. If for one second I do not break even and lose money, I am never allowed to recover that loss. Those are the rules. Said rules came about when colleges, universities and hospitals funded research because it was needed to educate the next generation of scientists. But with years of huge state and federal budget cuts funding for research has dried up. Therefore all researchers need to have grants to cover every penny of their research. This demand to cover all expenses is referred to as being more “business like” with research.

I fully agree and embrace the concept that the business of research is business. If you want me to run my lab that way, then let me run it like a business and let me control my funds, make personnel decisions and make a profit. But with the current rules, I cannot run my research like a business, so do not make me try. These rules are not my decision, so someone in the higher levels of academia needs to make a policy change. Research is either part of the University remit along with education, or it is a business. You cannot have it both ways. I cannot make my lab do both academic research supporting students and make a profit. Just choose and tell me what the rules are. Then it is up to me to sink or swim.

Let me give some simple examples of the confusion that occurs for researchers. If the federal government awards me with a grant and writes a $100,000 check to support one year’s worth of research, the University will take $46,000 of that check and keep it leaving me with $54,000. The University claims that the $46,000 is used to support facilities such as the library and pay electric bills. I have never been to the University’s library, but still have to pay those fees. The remaining $54,000 the University holds for me as I spend it to get the work done. The money is paid up front, so I spend it out of university held accounts. However, it does not earn interest for my research. If after the end of the grant I have spent $50,000 and completed the work proposed, I cannot (normally) keep the rest of the money. It needs to be spent. The extra $4000 cannot be banked and cannot be held for a rainy day. The philosophy is; use it or lose it. So I have to be revenue neutral; get a grant, spend it all and repeat.

Anyone who works in business will see that the problem is there is no profit margin and a waste of capital equity. If I were a business, I would put the initial funds in an interest earning bank account and re-invest the extra $4000 for the future or as cash reserves for a future short fall. In today’s system, that is not allowed. Yet, the leaders of many universities want me to run my research enterprise like a business but with rules where the business model is untenable.

Another way that the profitability of the University’s research enterprise is limited and thus not business like is that researchers are not allowed to work on their research if it is likely to make money. That is considered a conflict of interest. Again let me explain with a simple example. If I were to discover a drug that could treat patients with cancer and cure them of that disease I would have to stop all research on that drug the second it looked like that drug might work. As soon as a company starts considering doing drug trials to treat patients I would be forced to stop doing work on that drug because it might be perceived as a conflict of interest. Even if I spent my entire life and career trying to find such a drug as soon as I might be the least bit successful on that subject the University will say that I am conflicted and not allow me to work on that subject.

The result is a profitable funding opportunity is gone. I will have lost a revenue stream and again my research will no longer be generating money. This is absolutely unconscionable, but true. Therefore, many scientists do not want to commercialize their research or make products that could be useful because once a company sees that the research might be profitable that research opportunity is taken away.

As said above, someone in a position of power needs to make a decision as to if academic researchers should be business researchers or educational researchers. Tell me which one you want me to be and set the ground rules clearly. What is happening now is a slow disaster where the best and brightest are being prevented from being successful. The result is the best and brightest minds are leaving science and new people are not entering science.