Release Date:  November 7, 2000

PA NUMBER:  PA-01-013 (This PA has been reissued, see PA-05-111)

National Institute on Drug Abuse



This PA encourages research on the economics of drug abuse treatment and 
prevention services.  Drug abuse and dependency was estimated to generate an 
economic burden of $110 billion in 1995, driven by the twin epidemics of 
cocaine and HIV/AIDS infection.  The economic studies will be supported 
jointly by the Services Research Branch and the Prevention Research Branch of 
the Division of Epidemiology and Prevention Research as part of the 
Institute’s health services research program.

This PA replaces, in its entirety, PA-096-075, Economics of Drug Treatment 
Services, published in the NIH Guide for Grants and Contracts, Volume 25, 
Number 32, September 27, 1996.    


The Public Health Service (PHS) is committed to achieving the health 
promotion and disease prevention objectives of "Healthy People 2010," a PHS-
led national activity for setting priority areas.  This PA, Economics of Drug 
Abuse Treatment and Prevention Services, is related to one or more of the 
priority areas.  Potential applicants may obtain a copy of "Healthy People 
2010" at


Applicants may be submitted by domestic and foreign, for-profit and non-
profit organizations, such as universities, colleges, hospitals, 
laboratories, units of State and local governments, and eligible agencies of 
the Federal government.  Racial/ethnic minority individuals, women, and 
persons with disabilities are encouraged to apply as Principal Investigators.


The PA will use the National Institutes of Health (NIH) research project 
grant (R01), small grant (R03), center core grants (P30), and specialized 
center (P50).  Responsibility for the planning, direction, and execution of 
the proposed project will be solely that of the applicant.  The total project 
years for an application submitted in response to this PA may not exceed five 
years.  For the P30 and P50 mechanisms, applicants must follow the NIDA 
Guidelines for Center grants available at


Summary.  Research is sought on (1) financing of drug abuse treatment and 
prevention services, including health insurance and/or payment mechanisms, 
(2) alternative delivery systems and managed care, (3) cost-benefit, cost-
effectiveness, and cost-utility analysis, (4) cost and production of drug 
abuse treatment and prevention, and (5) methodological research.

Background.  Economic research on drug abuse treatment and prevention 
services informs decisions related to the allocation of resources and the 
desire to enhance efficiency and equity.  With social experimentation and 
institutional change, many natural experiments are available for the 
application of economic analysis.  In this environment, applied research on 
alternative payment systems, public and private financing systems, and the 
design of insurance must be grounded in sound microeconomic principles.  
Other economic research may build on treatment and prevention effectiveness 
studies or on randomized clinical trials.  Economic research on HIV/AIDS as 
it relates to treatment and prevention of drug use, abuse, and dependency 
continues as a high priority.  This PA calls for studies to fill the gap in 
knowledge about the economics of drug abuse services for treatment and 

Two resources may be found at the NIDA Web site:  First, there are separate 
bibliographies on the economics of drug abuse treatment and prevention 
services.  Second, there is a summary of a scientific meeting held April 7, 
1998, "Forging the Link: The Economics of Drug Abuse Prevention and Treatment 
Services," at which experts provided guidance on a health services research 

The economics of drug abuse services studies supply factors such as:  (1) 
price of drug abuse treatment and prevention, (2) technology, (3) prices of 
resource inputs, (4) prices of related goods, (5) market organization, and 
(6) special influences such as government subsidies, insurance arrangements, 
and risk sharing.

The economics of drug abuse services also studies demand factors such as:  
(1) price of drug abuse treatment and prevention, (2) average income of 
target populations, (3) population characteristics and the need for treatment 
and prevention, (4) prices of related goods, (5) preferences or tastes, and 
(6) special influences such as patient health, court interventions, family 
interventions, barriers to treatment, drug testing, insurance coverage, and 
benefit structures.

Financing of drug abuse services is derived from federal, state, and local 
government funds, as well as private sector funds from health insurance, 
consumer out-of-pocket expenditures, and charity.  The scientific inquiry 
into financing these services requires normative and positive economic 
analysis on allocation and distribution issues.  For example, because 
different levels of government are involved in public financing, fiscal 
federalism is a central issue.  Because indigent health status is a major 
concern, distributive issues must be addressed.  Analysis of both public and 
private provision of health insurance is essential.  The system of drug 
treatment and prevention service delivery is undergoing redesign, and studies 
about payment mechanisms are encouraged to examine implications and outcomes.

The history of medical and behavioral health care delivery systems 
demonstrates a move from traditional fee-for-service to managed care 
alternatives.  In the drug abuse treatment field, there has been the rise of 
behavioral health care organizations (BHOs).  Usually for profit, BHOs 
administer the mental health, alcohol, and drug abuse treatment and 
prevention benefits in private or public health plans.  BHOs employ managed 
care mechanisms to manage the quality, access, outcomes, and costs of drug 
services delivery.  Managed care systems require research on principal-agent 
relationships and design of incentives, contracts, and regulations for drug 
abuse services.

Cost-benefit, cost-effectiveness, and cost-utility analyses are collaborative 
activities by economic and drug abuse services researchers who investigate 
the effectiveness of innovative treatment therapies and prevention 
interventions, as well as effectiveness in real-world delivery systems.  
Methodological work is needed on outcomes, costs of services, as well as 
health and other non-health benefits.  Economic analysis also has a role in 
interpreting the results of outcome monitoring to improve the quality, 
allocation, and distribution of resources and interventions within delivery 

Costs have a spectrum reaching from direct and indirect treatment and 
prevention program costs to the broad sweep of social benefits and costs.  
Unfortunately, information on the unit services costs of drug abuse services 
has been rudimentary, which has hampered full cost pricing of service 
delivery for innovative and standard drug abuse services.  This is 
particularly a problem with respect to prevention, where services often 
involve costs embedded in other systems such as schools, law enforcement, 
community services, or employee assistance programs (EAPs). Treatment costs 
for other disease disorders can be increased if a drug disorder is present, 
and cost savings (or “cost-offsets”) are recognized as a consideration in 
integrated health care or community service networks.  Conceptualizing and 
measuring the relationships among accounting cost, marginal cost, average 
cost, and total cost in drug treatment and prevention programs and service 
delivery systems has received little attention.  Research in these areas is 
needed so that precise measurement of treatment and prevention costs can be 
established.  Economic research is sought in the cost and production function 
for drug treatment and prevention services.

Researchers are encouraged to develop rigorous designs for studies in the 
economics of drug abuse treatment and prevention services.  The following are 
illustrative of problem areas that may be addressed under this announcement.  
The examples are not exhaustive, and submissions of other studies are 

Financing of Drug Abuse Treatment and Prevention Services

Fundamental questions must be examined:  (1) What criteria should be applied 
in judging budget policies?  (2) What are the social, political, economic, 
and historical forces that have formed the present funding pattern and that 
will determine contemporary and future patterns? and (3) What are the 
interactions between the private and public drug services sectors as various 
funding plans are devised?  Financing issues are complex and besides 
analytical studies, these issues require descriptive studies to identify the 
sources of funding and their relationship to the organization and delivery of 
treatment and prevention services.  Research topics in this broad area may be 
further refined into two subtopic areas.

Health Insurance.  The provision of private and public health insurance for 
drug abuse treatment and prevention affects many participants in treatment 
and prevention service delivery systems.  Examples of research topics 

o  Incentives, structure, and behavior of private and public insurers, 
patients with insurance coverage, and patients without insurance coverage,

o  Analysis of market functioning, moral hazard, adverse selection, risk 
pools, and reinsurance,

o  Design of drug abuse treatment and prevention benefits in public and 
private health plans, and economic evaluation of benefit parity and state 

o  Analysis of the prevalence of drug treatment insurance coverage and types 
of coverage among the insured, underinsured, as well as studies about the 
uninsured in need of treatment, and

o  Insurance studies related to patients with HIV/AIDS or at high risk for 

Payment Mechanisms.  Payment mechanisms affect the delivery, access to 
services, utilization, and quality of drug abuse treatment and prevention 
services.   Examples of such studies include:

o  Federal and state health care reform:  prepayment, fee-for-services, 
capitation, and price regulation,

o  Risk adjustment methods (case-mix or severity) and reinsurance,

o  Reimbursement levels and service adjustments, and

o  Carve-outs, risk contracting, and performance contracting.

Alternative Delivery Systems and Managed Care

Studies of managed care and behavioral health care organizations on quality, 
access, outcomes, and costs of service delivery examine an area where much 
change is experienced.  Such studies include:

o  Economic evaluation of well-defined (public and private) managed cared 
systems on quality, access, outcomes, and costs of service delivery,

o  Economic evaluation of prevention programs under managed care,

o  Managed care effects on clinical decision making and on the structure and 
function of the treatment provider organization,

o  Organization of drug abuse treatment delivery that is either “carved-out” 
of or “integrated” into a managed care system,

o  Economic evaluation of HIV/AIDS services under managed care systems, and

o  Economic evaluation of employee assistance programs.

Cost-Benefit, Cost-Effectiveness, and Cost-Utility Analysis

The analysis of the economic costs and benefits of drug abuse treatment and 
prevention has usually been derived in conjunction with effectiveness 
studies.  Cost-effectiveness studies are useful in comparing novel treatment 
and prevention interventions to standard interventions.  Cost-utility studies 
have not been done in conjunction with substance abuse services.  Studies in 
this area include evaluations of:

o  Innovative treatment and prevention methods targeted at special 
populations of injection drug users--women, pregnant women, women with 
children, corrections’ populations, adolescents, patients with co-occurring 
disorders, and patients with or at high risk for HIIV/AIDS,

o  Prevention interventions in various community settings and delivery 

o  Utilization of new or alternative medications for treating drug disorders 
and other brain and behavioral disorders,

o  Service integration and linkages,

o  Drug abuse services within criminal justice settings, and

o  Benefits using willingness-to-pay methods.

Cost and Production of Drug Treatment and Prevention Services

A strong conceptualization and measurement of economic costs is needed to 
support economic evaluations of drug and prevention programs as well as 
studies of the economic costs to society of drug abuse and dependency.  
Production function studies are a key complement to drug treatment and 
prevention cost studies and have not been done.  Examples of such cost and 
production research include:

o  Estimation of the direct and indirect costs of drug abuse services, as 
well as cost of ancillary services,

o  Estimation of  component unit service costs and full costs of drug abuse 
services that comprise standard and innovative interventions, and

o  Studies of technology, elasticity of substitution, and returns to scale.

Methodological Research 

Research is encouraged that will develop and test the application of new 
methods of economic analysis in drug abuse services research.  Examples 

o  Advancing health insurance theory related to drug abuse services,

o  Improving assessment of alternative delivery systems and managed care,

o  Developing new statistical methods associated with economic analysis of 
drug abuse services,

o  Developing simulation models that advance analysis of drug abuse services 

o  Improving methodologies of cost-benefit, cost-effectiveness, and cost-
utility analysis,

o  Incorporating dynamic models of disease, prevention, and treatment 
progression into economic models, and

o  Transferring information from research to practice.

Updated August 2, 2000

It is the policy of the NIH that women and members of minority groups and 
their subpopulations must be included in all NIH supported biomedical and 
behavioral research projects involving human subjects unless a clear and 
compelling rationale and justification are provided that inclusion is 
inappropriate with respect to the health of the subjects or the purpose of 
the research.  This policy results from the NIH Revitalization Act of 1993 
(Section 492B of Public Law 103-43).

All investigators proposing research involving human subjects should read the 
UPDATED "NIH Guidelines for Inclusion of Women and Minorities as Subjects in 
Clinical Research," published in the NIH Guide for Grants and Contracts on 
August 2, 2000, 
( , 
a complete copy of the updated Guidelines is available at  The 
revisions relate to NIH defined Phase III clinical trials and require:  a) 
all applications or proposals and/or protocols to provide a description of 
plans to conduct analyses, as appropriate, to address differences by 
sex/gender and/or racial/ethnic groups, including subgroups if applicable, 
and b) all investigators to report accrual, and to conduct and report 
analyses, as appropriate, by sex/gender and/or racial/ethnic group 


It is the policy of NIH that children (i.e., individuals under the age of 21) 
must be included in all human subject research, conducted or supported by the 
NIH, unless there are scientific and/or ethical reasons not to include them.  
This policy applies to all initial (Type 1) applications submitted for 
receipt dates after October 1, 1998.  

All investigators proposing research involving human subjects should read the 
"NIH Policy and Guidelines on the Inclusion of Children as Participants in 
Research Involving Human Subjects" that was published in the NIH Guide for 
Grants and Contracts, March 6, 1998, and is available at the following URL 

Investigators also may obtain copies of these policies from the program staff 
listed under INQUIRIES.  Program staff may also provide additional relevant 
information concerning this policy.


The National Advisory Council on Drug Abuse recognizes the importance of 
research involving the administration of drugs to human subjects and has 
developed guidelines relevant to such research.  Potential applicants are 
encouraged to obtain and review the recommendations of the Council before 
submitting an application that will administer compounds to human subjects.  
The Guidelines are available on NIDA"s Home Page at 
under Funding or may be obtained by calling (301) 443-2755.


All applications and proposals for NIH funding must be self-contained within 
specified page limitations.  Unless otherwise specified in an NIH 
solicitation, internet addresses (URLs) should not be used to provide 
information necessary to the review because reviewers are under no obligation 
to view the Internet sites.  Reviewers are cautioned that their anonymity may 
be compromised when they directly access an Internet site.


Applications are to be submitted on the grant application form PHS 398 (rev. 
4/98) and will be accepted at the standard application deadlines as indicated 
in the application kit.  Application kits are available at most institutional 
offices of sponsored research and may be obtained from the Division of 
Extramural Outreach and Information Resources, National Institutes of Health, 
6701 Rockledge Drive, MSC 7910, Bethesda, MD 20892-7910, telephone (301) 710-0267, E-mail:  

Applicants planning to submit an investigator-initiated new (Type 1), 
competing continuation (Type 2), competing supplement, or any amended/revised 
version of the preceding grant application types requesting $500,000 or more 
in direct costs for any year are advised that he or she must contact the 
Institute or Center (IC) program staff before submitting the application, 
i.e., as plans for the study are developed.  Furthermore, the applicant must 
obtain agreement from the IC staff that the IC will accept the application 
for consideration for award.  Finally, the applicant must identity, in a 
cover letter sent with the application, the staff member and the Institute or 
Center who agreed to accept assignment of the application.

This policy requires an applicant to obtain agreement for acceptance of both 
any such application and any such subsequent amendment.  Refer to the NIH 
Guide for Grants and Contracts, March 20, 1998, at:



Modular Grant applications will request direct costs in $25,000 modules, up 
to a total direct cost request of $250,000 per year.  (Applications that 
request more than $250,000 direct costs in any year must follow the 
traditional PHS 398 application instructions.)  The total direct costs must 
be requested in accordance with the program guidelines and modifications made 
to the standard PHS 398 application instructions described below:

PHS 398

o  FACE PAGE - Items 7a and 7b should be completed, indicating Direct Costs 
(in $25,000 increments up to a maximum of $250,000) and Total Costs [Modular 
Total Direct plus Facilities and Administrative  (F&A) costs] for the initial 
budget period. Items 8a and 8b should be completed indicating the Direct and 
Total Costs for the entire proposed period of support.

4 of the PHS 398.  It is not required and will not be accepted with the 

categorical budget table on Form Page 5 of the PHS 398.  It is not required 
and will not be accepted with the application.

o  NARRATIVE BUDGET JUSTIFICATION - Prepare a Modular Grant Budget Narrative 
page. (See for 
sample pages.)  At the top of the page, enter the total Direct Costs 
requested for each year.  This is not a Form page.

o  Under Personnel, list all project personnel, including their names, 
percent of effort, and roles on the project.  No individual salary 
information should be provided.  However, the applicant should use the NIH 
appropriation language salary cap and the NIH policy for graduate student 
compensation in developing the budget request.

For Consortium/Contractual costs, provide an estimate of total costs (Direct 
plus F&A) for each year, each rounded to the nearest $1,000.  List the 
individuals/organizations with whom consortium or contractual arrangements 
have been made, the percent effort of all personnel, and the role on the 
project.  Indicate whether the collaborating institution is foreign or 
domestic.  The total cost for a consortium/contractual arrangement is 
included in the overall requested Modular Direct Cost amount.  Include the 
letter of intent to establish a consortium.

Provide an additional narrative budget justification for any variation in the 
number of modules requested.

o  BIOGRAPHICAL SKETCH - The Biographical Sketch provides information used by 
reviewers in the assessment of each individual"s qualifications for a 
specific role in the proposed project, as well as to evaluate the overall 
qualifications of the research team.  A biographical sketch is required for 
all key personnel, following the instructions below.  No more than three 
pages may be used for each person.  A sample biographical sketch may be 
viewed at:

- Complete the educational block at the top of the form page,
- List position(s) and any honors,
- Provide information, including overall goals and responsibilities, on 
research projects ongoing or completed during the last three years, and 
- List selected peer-reviewed publications with full citations.

o  CHECKLIST - This page should be completed and submitted with the 
application.  If the F&A rate agreement has been established, indicate the 
type of agreement and the date.  All appropriate exclusions must be applied 
in the calculation of the F&A costs for the initial budget period and all 
future budget years.

o  The applicant should provide the name and phone number of the individual 
to contact concerning fiscal and administrative issues if additional 
information is necessary following the initial review. 

The title and number of the PA must be typed on line 2 of the face page of 
the application form and the YES box must be marked.

Submit a signed, typewritten original of the application, including the 
checklist, and five signed photocopies in one package to:

6701 ROCKLEDGE DRIVE, ROOM 1040 – MSC 7710
BETHESDA, MD  20892-7710
BETHESDA, MD  20817 (for express/courier service)


Applications will be assigned on the basis of established PHS referral 
guidelines.  Applications will be evaluated for scientific and technical 
merit by an appropriate scientific review group convened in accordance with 
the standard NIH peer review procedures.  As part of the initial merit 
review, all applications will receive a written critique and undergo a 
process in which only those applications deemed to have the highest 
scientific merit, generally the top half of the applications under review, 
will be discussed, assigned a priority score and receive a second level 
review by the appropriate national advisory board or council. 

Review Criteria

The goals of NIH-supported research are to advance the understanding of 
biological systems, improve the control of disease, and enhance health.  In 
the written comments, reviewers will be asked to discuss the following 
aspects of the application in order to judge the likelihood that the proposed 
research will have a substantial impact on the pursuit of these goals.  Each 
of these criteria will be addressed and considered in assigning the overall 
score, weighting them as appropriate for each application.  Note that the 
application does not need to be strong in all categories to be judged likely 
to have major scientific impact and thus deserve a high priority score.  For 
example, an investigator may propose to carry out important work that by its 
nature is not innovative but is essential to move a field forward.

(1)  Significance:  Does this study address an important problem?  If the 
aims of the application are achieved, how will scientific knowledge be 
advanced?  What will be the effect of these studies on the concepts or 
methods that drive this field?

(2)  Approach:  Are the conceptual framework, design, methods, and analyses 
adequately developed, well integrated, and appropriate to the aims of the 
project?  Does the applicant acknowledge potential problem areas and consider 
alternative tactics?

(3)  Innovation:  Does the project employ novel concepts, approaches, or 
methods?  Are the aims original and innovative?  Does the project challenge 
existing paradigms or develop new methodologies or technologies?

(4)  Investigator:  Is the investigator appropriately trained and well suited 
to carry out this work?  Is the work proposed appropriate to the experience 
level of the principal investigator and other researchers (if any)?

(5)  Environment:  Does the scientific environment in which the work will be 
done contribute to the probability of success?  Do the proposed experiments 
take advantage of unique features of the scientific environment or employ 
useful collaborative arrangements?  Is there evidence of institutional 

In addition to the above criteria, in accordance with NIH policy, all 
applications will also be reviewed with respect to the following:

o  The adequacy of plans to include genders, minorities, and their subgroups, 
and children as appropriate for the scientific goals of the research.  Plans 
for the recruitment and retention of subjects will also be evaluated.

o  The reasonableness of the proposed budget and duration in relation to the 
proposed research.

o  The adequacy of the proposed protection for humans, animals, or the 
environment, to the extent they may be adversely affected by the project 
proposed in the application.


Applications will compete for available funds with all other recommended 
applications.  The following will be considered in making funding decisions:  
Quality of the proposed project as determined by peer review, availability of 
funds, and program priority.  


Inquiries are encouraged.  The opportunity to clarify issues or questions 
from potential applicants is welcomed.

Direct inquiries regarding programmatic issues to:

William S. Cartwright, Ph.D.
Division of Epidemiology, Services, and Prevention Research
National Institute on Drug Abuse
6001 Executive Blvd, Room 4222, MSC 9565
Bethesda, Maryland  20892-9565
Telephone:  (301) 443-4060
Fax:  (301) 443-6815

Direct inquiries regarding review issues to:  

Teresa Levitin, Ph.D.
Office of Extramural Affairs
National Institute on Drug Abuse
6001 Executive Boulevard, Room 3158, MSC 9547
Bethesda, MD  20892-9547
Telephone:  (301) 443-2755
FAX:  (301) 443-0538

Direct inquiries regarding fiscal matters to:

Gary Fleming, J.D., M.A.
Grants Management Branch
Office of Planning and Resource Management
National Institute on Drug Abuse
6001 Executive Boulevard, Room 3131, MSC 9541
Bethesda, MD  20892-9541
Telephone:  (301) 443-6710
FAX :  (301) 594-6847


This program is described in the Catalog of Federal Domestic Assistance No. 
93.279.  Awards are made under authorization of sections 301 and 405 of the 
Public Health Service Act as amended (42 USC 241 and 284) and administered 
under NIH grants policies and Federal Regulations 42 CFR 52 and 45 Parts 74 
and 92.  This program is not subject to the intergovernmental review 
requirement of Executive Order 12372 or Health Systems Agency review.

The Public Health Service (PHS) strongly encourages all grant recipients to 
provide a smoke-free workplace and promote the non-use of all tobacco 
products.  In addition, Public Law 103-227, the Pro-Children Act of 1994, 
prohibits smoking in certain facilities (or in some cases, any portion of a 
facility) in which regular or routine education, library, day care, health 
care or early childhood development services are provided to children.  This 
is consistent with the PHS mission to protect and advance the physical and 
mental health of the American people.

Weekly TOC for this Announcement
NIH Funding Opportunities and Notices

Office of Extramural Research (OER) - Home Page Office of Extramural
Research (OER)
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