SBIR Exemption from NIH Stimulus Funding Mobilizes Small Business Community

March 6, 2009

The small business technology community has united to fight a stealthy move by the top federal health care research agency to exempt itself from a requirement that all major research agencies allocate a share of their stimulus windfall to R&D by small businesses.

Under the 25-year-old Small Business Innovation Act, the National Institutes of Health (NIH) and ten other federal agencies must allot 2.5 percent of their R&D budgets to the Small Business Innovation Program (SBIR), a highly-successful and much-praised competitive innovation program.

SBIR accounts for over half of all the federal R&D awards that small companies receive, despite the fact that small companies employ more scientists and engineers that universities or large businesses. And a recent independent study calculated that the SBIR Program delivers about one-fourth of the most important technological innovations -- including health care innovations -- in the U.S. each year.

Yet very late in Congressional consideration of the economic stimulus legislation, a hidden provision was added that exempted NIH from the requirement to support SBIR. It seems that having 97.5 percent of a $7.2 billion windfall was not enough for the agency.

Thus $185 million in support for health care innovations by small companies was cut from the bill -- and in effect reallocated to the big businesses and universities that will already receive the rest of the $7.2 billion.

This midnight maneuver has generated a huge protest by small companies involved in health care R&D. Even firms that have disagreed with one another in the the long-running dispute about role of venture capital in the SBIR Program have united in opposition to this raid on small business.

For example, a group of Maryland biotech companies that are centered around the main NIH campus in Bethesda, Maryland have sent a strongly-worded letter to the Maryland Congressional delegation, with whom they are also meeting.

SBTC urges all small companies involved in heath care innovations to follow the lead of the Maryland companies and contact Congress to protest this unfair and unwise move by NIH.

Click here to read the letter from the Maryland Biotech Companies.