Private Foundations & Innovation

Private foundations have the same ability—in relation to government—to innovate in serving the public, as small nonprofits do in relation to large nonprofits; and in the field of medical research it can be dramatic, as reported by the Philanthropy Roundtable.

An excerpt.

“In the field of medical research, private philanthropy is a relatively small player. According to the Foundation Center, foundations spent less than $5 billion on medicine in 2007, and less than half of that went to research. Compare either number with the $40 billion that government agencies, primarily the National Institutes of Health (NIH), spend on biomedical research, as well as the $80 billion that private pharmaceutical and biotech firms invest in research and development each year.

“Even though the philanthropic sector’s resources are dwarfed by those of the public and for-profit sectors, private philanthropy still has one crucial advantage. Private donors do not answer to voters or shareholders, and they are not constrained by the peer-review protocols that dominate government funding. They are free to innovate, to experiment, to take risks, and to find and occupy their own distinctive niche.

“A Legacy of Leadership

“American medicine has long been a partnership between public resources and private philanthropy. The nation’s first hospital, established in the 1750s by that congenital organizer, Benjamin Franklin, was funded by both the state assembly and private donors in what is thought to be the earliest instance of a matching grant. In the decades that followed, several other medical institutions were funded by private philanthropy, including most notably the prestigious hospital, nursing school, and medical school underwritten by Johns Hopkins, and John D. Rockefeller’s creation in 1901 of the first American medical research institute.

“By the dawn of the 20th century, medicine in the United States was rapidly evolving from a craft and a vocation to a scientific profession. That transition was cemented—and modern medicine was in large part created—by interventions from the nation’s large philanthropic foundations in the early 20th century. The Rockefeller Foundation (and its predecessor entities) undertook a series of hugely ambitious campaigns to fight killer diseases around the globe: hookworm, yellow fever, malaria. And a scathing 1910 report commissioned by the Carnegie Foundation helped instigate a massive overhaul of American medical education. Abraham Flexner, the report’s author, argued that medical schools should be reformed along more scientific lines—and then worked assiduously, as a Rockefeller Foundation employee, to push for such reforms across the country.

“Although the federal government was involved in large-scale public health efforts during the first half of the 20th century, its investment in medical research was minimal. The experience of World War II, however, convinced Washington that government, industry, and science could collaborate successfully on projects of critical national importance. Federal spending on nearly every kind of science and technology rapidly rose in the postwar years—including medicine and health. Thanks in part to lobbying from the Albert and Mary Lasker Foundation, the NIH annual budget rose from about $3 million in 1945 to $30 million by the end of the 1940s, $300 million by the end of the 1950s, and $3 billion by the end of the 1970s. For fiscal year 2010, the NIH has requested a $31 billion budget.”