"Basic research is healthy in America," says John Adler, a Stanford University professor who invented the CyberKnife, a robotic device that treats cancer with precise, high doses of radiation. "But patients aren't benefiting. Our understanding of diseases is greater than ever. But academics think, 'We had three papers in Science or Nature, so that must have been [NIH] money well spent.'?"

More and more policymakers and patients are therefore asking, where are the cures? The answer is that potential cures, or at least treatments, are stuck in the chasm between a scientific discovery and the doctor's office: what's been called the valley of death.

The barriers to exploiting fundamental discoveries begin with science labs themselves. In academia and the NIH, the system of honors, grants, and tenure rewards basic discoveries (a gene for Parkinson's! a molecule that halts metastasis!), not the grunt work that turns such breakthroughs into drugs. "Colleagues tell me they're very successful getting NIH grants because their experiments are elegant and likely to yield fundamental discoveries, even if they have no prospect of producing something that helps human diseases," says cancer biologist Raymond Hohl of the University of Iowa.

In this paper, we estimate the impact of receiving an NIH grant on subsequent publications and citations. Our sample consists of all applications (unsuccessful as well as successful) to the NIH from 1980 to 2000 for postdoctoral training grants (F32s) and standard research grants (R01s). Both OLS and regression discontinuity estimates show that receipt of either an NIH postdoctoral fellowship or research grant leads to about one additional publication over the next five years. The estimates represent about 20 and 7 percent increases in research productivity for F32 and R01 recipients respectively. The limited research impact of NIH grants may be explained in part by a model in which the market for research funding is competitive, so that the loss of an NIH grant simply causes researchers to shift to another source of funding.