Going Beyond Z: The Challenge Grant -- Joint Ventures in Biomedicine and Biotechnology Program.

Abstract

Product development, matching funds, milestones...these key words and phrases describe the new Challenge Grant -- Joint Ventures in Biomedicine and Biotechnology Program. This new initiative intends to promote joint ventures between the National Institutes of Health (NIH) and the biotechnology, pharmaceutical and medical device industries.

It will involve 1:1 matching, performance-based grants and milestones for federal dollars by qualified entities to facilitate rapid implementation of R&D activities in biomedical research or biotechnology. The commercialization potential is great for accomplishing research in promising therapies.

The National Institute of Allergy and Infectious Diseases (NIAID) was chosen to implement this new initiative and identified five areas where successful product R&D, combined with existing infrastructures and Challenge funding, could impact a major health or medical problem, within three years. NIAID seeks to stimulate progress in these research areas: medicines for malaria and tuberculosis; vaccines for influenza and emerging and resistant infections; and therapeutics for emerging and resistant infections.

NIAID wisely decided to implement the program with a new cooperative agreement activity (UC1). The following paper presents an overview of the process involved in developing this new initiative.

Introduction

Every now and again in NIH Grants Management there is an experience that captures the temper of the times, and this moment may have come this budget season.

The impetus for Congress to promote this new style of NIH grant program, aside from a period of fiscal plenty, is not apparent but it clearly supports joint product development in areas of high need and high risk. Whatever the congressional intent, the new initiative is exciting to career grant managers.

The last time NIAID grants management came so tantalizingly close to developing a totally new grant program may have been the AIDS program and development of AIDS clinical trials in the 1980s. The Challenge Grant is something innovative and the questions it raises present administrative challenge.

It was clear from the beginning that conceiving and implementing a $20 million program in nine months was not going to be easy. This was venturing into new territory with 1:1 matching within performance-based grants. Matching funds on research grants at NIH was unheard of - even for many of the 'old timers' in grants management. A performance-based grant program is another area that breaks new ground. This would need the development of definition of a domestic organization for the NIH Grants Policy Statement.

Unusual Features

The project broke ground by investigating those with experience who could guide the team through inquiries. These contacts ranged from pharmaceutical company attorneys, to lieutenant colonels from the Department of Defense. Staff was interviewed from the National Endowment of the Humanities (the legislation mentions them as a model for this program) and individuals of familiarity with matching funds on construction grants. Participants developed close working relationships with the NIH Legal Advisor and the NIAID Office of Technology Transfer. In addition, we reviewed the General Administrative Requirements under 45 CFR (Code of Federal Regulations) Parts 74.23; 92.24; HHS Grants Policy Directive 3.02; and HHS Transmittal 99.02. All of these chapters address the policies for matching or cost sharing, pre- and post-award requirements.

Working on this project turned Out to be a watershed experience in understanding grants management policy in its purest legalistic sense. As one division director said, "we'll all be attorneys before this is over."

Performance-Based Applications and Milestones

Challenge Grants are performance-based, unlike traditional research grants that are based on a principal investigator's (P1) continued scientific progress. Challenge applicants must identify a final product(s), including the stage of development to be completed during the period of the grant, in this case, three years. Questions asked were similar to what venture capitalists might ask entrepreneurs: How will we measure how well this is working at various stages? How will we know if it's not working? From these questions, milestones were developed.

A milestone is defined as a specific area of research to be completed before engaging in additional or continued research endeavors. Grant funds are released initially for funds needed to meet the first milestone. With the achievement of that first milestone, funds are then released to meet the next milestone. There is no particular starting point with milestones.

A PI may begin their research project in any one particular place (with simply the identification of targeted or candidate project or further along in R&D with advanced clinical studies), but must demonstrate that they are moving toward product development. Examples of milestones might include completion of the prototype of a diagnostic tool, submission of an Investigational New Drug (IND) to FDA or initiation of a Phase 3 clinical trial. A milestone can be as short as three months or as long as 20 months. Milestones have replaced the traditional 12-month budget period.

Matching Funds

Another key component of the Challenge Grant Program is matching 1:1 of federal dollars to those matched equally by industry. Matching, it is hoped, would benefit public health and have a commercial potential that would otherwise not be attainable without matching funds.

Matching is generally used to refer to a statutorily specified percentage of program or project costs that must be contributed by a grantee to be eligible for federal funding. This requirement may either be stated as a specified or minimum non-federal percentage to total allowable costs, or a maximum federal percentage of participation in such costs. [1]

Under DHHS grants administration regulations, funds, services and property may be used by the grantee as matching. The challenge was how to advise applicants on these issues. Mary Kirker, Chief Grants Management Officer at NIAID, summed it up nicely by referring to one of the core principles and reminding the team that matching funds (even if the match is from non-federal sources) must at least equal the funds requested and, more importantly, may not be used for unallowable costs, i.e., salary support for federal employees.

Ms. Kirker knew that Challenge Grant applicants would be seeking scientists from NIAID. Questions began on having federal researchers on these grants. Yes, federal employees are eligible to participate in research activities on federal grants -- with several stipulations. Federal employees with DHHS or it's 'sister' agencies (CDC or FDA) versus other federal agencies may participate in a research project, but may not receive any compensation for their activities. They must also have authorization that participating in the federal grant is part of their official duties.

Another area that required the sage advice of the Office of Technology Development was how the Cooperative Research and Development Agreement (CRADA) mechanism may be used to transfer a company's funds or materials for purposes of matching under this program. CRADA's are defined as a mechanism by which NIH investigators can collaborate with colleagues from industry and academics to pursue common research goals.

Each party contributes unique resources to the effort, such as expertise or hard-to-get research materials. The CRADA mechanism also generally permits agencies to accept company funds and supplies in support of the research being conducted by the government investigator. Under the CRADA, the outside company is given the option to license inventions developed within the project's research scope.

Without fail, the question was raised as to whether a grantee's contribution to a federal agency collaborator through a CRADA could be used as the grantee's match. It was determined that this would not be considered an allowable cost and thus would not be an eligible match, unless the CRADA contribution was made to carry out the funded project through a federal agency other than the DHHS, such as the Department of Defense. [2]

Again, the Office of the General Counsel and Ms. Kirker reiterated the overriding principles for all matching funds. According to 46 CFR 74.23(a), paragraph four: "To be accepted, all cost sharing or match contributions, including cash, and third party in-kind, shall meet all of the following criteria;" and number four is: "Are allowable under the applicable cost principals."

Defining a Domestic Organization

A few weeks later came a question from one of the potential applicants: "What is NIH's definition of a domestic organization?" This may seem to be a straightforward question, since the phrase 'domestic organization' appears frequentiy in the NIH Grants Policy Statement (GPS). In fact, there is no definition in the GPS for a domestic organization.

On the other hand, the question posed by the applicant wasn't so straightforward either. Their question was: Is a for-profit organization, as an entity, formed and organized under the laws of the state of Delaware, eligible for a Challenge Grant under the condition that at the time the grant would be awarded, the majority ownership of the for-profit will be held by a limited liability company formed in a foreign country? Without having a definition in hand, there was only speculation on the answer. General counsel was sought for advice.

It was decided that the definition of "domestic organization" to be developed should be more broadly applicable to the use of the terms in the NIH Grants Policy Statement. A definition is being drafted considering the existing definition of "foreign organization" in the NIH Grants Policy Statement and this will be presented to the NIH Grants Management Advisory Committee and the Office of the General Counsel for review.

Conclusion

End of story? Not exactly. This has progressed more than halfway through the process of implementing the Challenge Grant Program for fiscal year 2000. The study continues to break new ground by furthering the understanding of federal grant law, nurturing the spirit and the intent of this new program, as well as interpreting grant policy beyond the letter Z.

While this program continues to develop, will we find ourselves longing for the good old days of 1999? In an established 'business' like federal grants administration, one of the hardest things to do is to keep one foot in the old world while trying to step bravely into the new.

The changes that grant managers and administrators will be facing in the future will happen erratically -- not all at once, but the cumulative impact will be immense. Through this process of change we will continue to address the complex social, workplace and scientific issues of our day, one step at a time.

As the saying goes, change happens. This is simply a fact of life. Such is the certainty that grants management will change, too. In order to navigate through change and to go beyond Z, it will be our values and strong foundation in grants policy that will lead to the foreseeable future.

So you see

There's no end

To the things you might know

Depending how far

Beyond Z you go! [3]

Annette Hanopole, CRA, ("Going Beyond Z: The Challenge Grant -- Joint Ventures in Biomedical and Biotechnology Program") has been a Division Coordinator with the Grants Administration Branch at the National Institutes of Allergy and Infectious Diseases/NIH for the past two years. She is a member of SRA, NCURA and the Staff Training in Extramural Programs (STEP) at NIH. Previously, Annette was a Grants Management Specialist and a Budget Analyst at the National Institute of General Medical Sciences for many years.

(1.) DHHS Grants Policy Directive, Part 3.02: Post-Award -- Matching and Cost Sharing.

(2.) PHS Technology Transfer Manual Chapter 400: PHS CRADA Policy, 01/25/1996 (see http://www.nih.gov/od/ott/policy.htm)

(3.) On Beyond Zebra, Dr. Seuss Enterprises, L.P. 1955. All rights reserved, Used by permission.