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Mick Bhatia is scientific director at the Stem Cell and Cancer Research Institute at McMaster University.

Innovation is expected to be a major theme when the budget is tabled in Ottawa, but many biomedical researchers fear that proposed changes to how they get federal funding would weaken, even throttle health research in Canada.

The Canadian Institutes of Health Research, the arm's-length federal agency that funds labs at universities across the country, has proposed changes it says are designed to ease the strain on the overburdened peer review system, in which scientists work on committees to decide which grant applications merit financing.

Under the proposed new system, researchers with a solid track record who now have multiple grants could apply for one seven-year grant. But some top researchers with large labs are worried they would get significantly less money than they do under the current system, in which they apply separately for different projects. They fear the CIHR is planning to cap funding for individual scientists in a way that will make it difficult for them to compete to attract the best researchers in the world.

"Big labs tend to do bigger science and tend to be magnets for the country," said Mick Bhatia, a stem-cell scientist at McMaster University in Hamilton, Ont. "When magnets aren't charged, they can dissipate."

Michael Rudnicki of the University of Ottawa, Brenda Andrews of the University of Toronto, the University of Alberta's Richard Rachubinskiand others are also raising serious questions about the proposals.

Some scientists fear the CIHR would direct of funds away from the kind of basic, curiosity-driven research that can lead to important discoveries.

"Without basic research, you don't find new things to test in the clinic," Dr. Rudnicki said.

Adding to the anxiety are fears the CIHR will be cut when the federal government tables the budget on Thursday and Finance Minister Jim Flaherty lays out a plan to deal with a deficit for 2011-2012 that is expected to come in at about $25-billion.

The uncertainty over future funding is already affecting recruitment of top graduate and post-doctoral students, Dr. Bhatia said. He recently interviewed two young researchers, one from Italy, the other from Greece.

"They said, 'You do good work now, but what if I come here and you run out of money?' " Dr. Bhatia said. They had heard major changes were coming in Canada, he said, and took positions in the United States.

CIHR president Alain Beaudet said the system needs to be fixed because the process of applying for multiple grants is too onerous, both for the scientists writing the applications and those on peer review committees.

If the proposed funding system is implemented, he said, researchers will spend less time writing grant applications and more time on science.

Top researchers are accustomed to scrambling for funds. Dr. Bhatia, for example, has four different CIHR grants for multiple years of funding worth more than $3-million. They all run out this year. But like many top scientists, he also gets funds from other sources, including private donors.

Some researchers fear the amount they can get would be capped at $300,000, a figure mentioned as a "targeted average" in the discussion document from the CIHR that describes the proposed changes.

"That's a total misunderstanding," Dr. Beaudet said.

But many researchers remain concerned. Consultations are under way, but in a recent meeting at the University of Ottawa, scientists expressed anger and frustration that their voices are not being heard.

Christine Pratt, a breast cancer researcher, said not only the big labs could lose out. Researchers who run medium and small labs may also have more difficulty getting enough funds to continue basic research and to train up-and-coming scientists.

An entire generation of graduate students could be lost, Dr. Rudnicki said.

Michael Kramer, a Montreal researcher and former scientific director for the CIHR's Institute of Human Development, Child and Youth Health, said the system is already squeezed.

"The basic problem is there is not enough money. There are a lot of good applications that go unfunded. In my opinion, this realignment isn't going to solve it. There is not going to be more money. There may be less, and everyone is going to hurt. "

Of particular concern, many researchers say, is the historic shortfall in funding for operating grants for basic research. In 2011-2012, 21 per cent of operating and related grant applications were funded, compared with 33 per cent in 2005-2006.

More researchers are applying for operating grants because federal programs like the Canada Research Chairs have been successful in recruiting scientists to Canada.

But Science Minister Gary Goodyear has signalled his priority is not to increase funding for basic research.

"I believe that we have a very, very strong reputation in our basic pure sciences research. I don't see that changing. But what we need to change is the other end of the scale, which is getting those ideas and those discoveries … out of our laboratories and onto our factory floors," he told The Globe and Mail recently.

With money so tight, many researchers say this is the wrong time to overhaul a system that does a good job of making sure that government research dollars are spent wisely.

"The major issue, for all of us, is that public funds are properly reviewed and spent in the most effective manner," McGill University's John Bergeron said.