WASHINGTON - The National Institutes of Health announced on Friday that it would be capping an important type of funding for medical research at hospitals, universities, medical schools and other scientific institutions in an effort to save billions of dollars for the federal government.
The NIH says they have brought down the amount of funding they provide for overhead costs, known as "indirect costs," that institutions can charge the government to support the administrative needs associated with their research.
By the numbers:
According to the NIH, the maximum amount institutions can charge the government for indirect costs is being capped at 15 percent — above what many major foundations allow, they say, but significantly lower than the 60 percent or more that the NIH says some institutions were charging. The NIH says this will save the government more than $4 billion.
The NIH says it spent more than $35 billion in Fiscal Year 2023 on almost 50,000 grants given to more than 300,000 researchers at more than 2,500 universities, medical schools, and other research institutions. Of this funding, approximately $26 billion went to direct costs for research, while $9 billion was allocated to overhead through NIH’s indirect cost rate.
The backstory:
The NIH used Harvard, Yale and Johns Hopkins — some of the most prestigious research universities in the nation — as examples in their social media post. They cited that Harvard operates at an allowed 69% rate for indirect costs, Yale at 67.5% and Johns Hopkins at 63.7%. NIH officials say the change is similar to what private institutions pay to fund research.
"Most private foundations that fund research provide substantially lower indirect costs than the federal government, and universities readily accept grants from these foundations," the NIH said in Friday's announcement.
"Although cognizant that grant recipients, particularly ‘new or inexperienced organizations,’ use grant funds to cover indirect costs like overhead…NIH is obligated to carefully steward grant awards to ensure taxpayer dollars are used in ways that benefit the American people and improve their quality of life. Indirect costs are, by their very nature, ‘not readily assignable to the cost objectives specifically benefitted’ and are therefore difficult for NIH to oversee," it went on to say.
The NIH says the change will apply to both current and future grants and suggests that the changes could even be applied retroactively.
"The United States should have the best medical research in the world. It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead," the NIH said.
It's the latest step taken under the Trump administration to slash federal funding impacting the scientific community. It has caused concern among some scientists and academics, who say cutting funding for administrative staff, infrastructure, building maintenance and equipment for research facilities could have devastating consequences — endangering patients, costing thousands of jobs and threatening America’s standing as a world leader in science and innovation, the Associated Press reports.
"It’s my life’s work, it’s the life’s work of my team, the promises we have made to the hundreds of patients that I care for," Dr. Nandakumar Narayanan, a University of Iowa neurologist who treats Parkinson’s patients while also researching treatments for the incurable disease, told the AP.
Narayanan said that his university and its hospital — one of Iowa’s top employers — will lose "tens of millions of dollars, people will have to lose their jobs, the research enterprise will grind to a halt."
What are ‘indirect costs?'
Big picture view:
According to the NIH, indirect costs are defined as "facilities" and "administration."
The "facilities" category is "defined as depreciation on buildings, equipment and capital improvements, interest on debt associated with certain buildings, equipment and capital improvements, and operations and maintenance expenses."
The "administration" category is defined as "general administration and general expenses such as the director’s office, accounting, personnel and all other types of expenditures not listed specifically." This could include allocations from other pools.
The money comes in the form of reimbursements, meaning the facilities spend the money and then receive a distribution from the federal government later. Indirect cost reimbursements are based on each institution’s unique needs and are negotiated with the federal government through a "carefully regulated process," the lawsuit filed against the NIH reads.
Institutions conducting medical research often rely on this funding for building and facility maintenance, infrastructure and utility costs, debt service interest, medical equipment and back-office support like clerical staff, IT support, cybersecurity and data repositories.
"Imagine you’re funding a concert. Direct costs would be like paying for the musicians and their instruments. Indirect costs would be the venue, the sound system, the people who manage the event — all essential, but often invisible to the audience," said Dr. Harlan Krumholz of Yale University, speaking to the AP. He added that if the cut stands, "it threatens to undermine the U.S.'s longstanding leadership in global medical research at a time when we should be accelerating progress, not slowing it down."
Trump Administration responds
What they're saying:
The Washington Post was among the first media outlets to publish the NIH announcement. President Donald Trump quickly responded to the Post's story, saying it was a "misleading lie" and a "dishonest article."
Here is what the White House said Saturday, word-for-word:
"The Washington Post is lying to its readers.
In a Saturday article, the Post wrote: "The Trump administration is cutting billions of dollars in biomedical research funding."
This is a misleading lie. The NIH did not announce any cuts to actual research. Will the Washington Post correct its lie?
NIH announced a new indirect costs policy that is in line with what research institutions receive from private foundations. The indirect cost rate is intended to cover overhead and the federal government has been paying an exorbitantly high rate.
NIH: "The average indirect cost rate reported by NIH has averaged between 27% and 28% over time. And many organizations are much higher—charging indirect rates of over 50% and in some cases over 60%. Most private foundations that fund research provide substantially lower indirect costs than the federal government, and universities readily accept grants from these foundations. For example, a recent study found that the most common rate of indirect rate reimbursement by foundations was 0%, meaning many foundations do not fund indirect costs whatsoever.
In addition, many of the nation’s largest funders of research—such as the Bill and Melinda Gates Foundation—have a maximum indirect rate of 15%. And in the case of the Gates Foundation, the maximum indirect costs rate is 10% for institutions of higher education."
As the NIH wrote: "The United States should have the best medical research in the world. It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead. NIH is accordingly imposing a standard indirect cost rate on all grants of 15%"
The Washington Post’s dishonest article also claims that opposition to high indirect costs is a partisan issue.
The Post wrote, "These are the administrative requirements, facilities and other operations that many scientists say are essential but that some Republicans have claimed are superfluous."
That is shameful and dishonest framing from the Post. Dr. Vinay Prasad, a Professor of Epidemiology and Biostatistics and Medicine at the University of California, San Francisco, praised NIH's announcement.
Dr. Prasad wrote: "Cutting indirects might even mean more science. Less money spent on the administration is more money to give out to actual scientists."
The Trump Administration will continue implementing policies to make America great again while the failing legacy media appears determined to continue to lie and lose the trust of the public."
22 states sue NIH
Judge Blocks Funding Cut:
On Monday, Feb. 10, Massachusetts Attorney Andrea Joy Campbell announced that she, along with 21 other attorneys general were suing the Trump Administration, the Department of Health and Human Services, and the National Institutes of Health (NIH) for "unlawfully cutting funds that support cutting-edge medical and public health research at universities and research institutions across the country."
The suit alleges that the expediency of the funding cut violates the Administrative Procedure Act which, among other things, requires publishing notices of proposed and final rules in the Federal Register and requires most rules proposed by federal agencies to have a 30-day delayed effective date.
The plaintiffs claim that announcing the new regulation on Friday, Feb. 7 and putting it into effect on the following business day, Monday, Feb. 10, is "arbitrary and capricious." They asked that the court declare the policy illegal and issue a temporary injunction preventing its implementation in their states.
"Without them, the lifesaving and life-changing medical research in which the United States — and Massachusetts, in particular — has long been a leader, could be compromised," a press release from Campbell's office reads.
Within hours, U.S. District Court Judge Angel Kelley issued the temporary restraining order halting the NIH policy within those 22 states. The pause will remain in place until otherwise ordered by the court. According to the order, the NIH has until Friday to respond. The attorneys general may then file a reply brief by Feb. 18. A hearing on the matter is set for Feb. 21.
Which States Are Suing?:
This lawsuit is being co-led by the attorneys general of Massachusetts, Illinois, and Michigan. Other states included in the lawsuit's coalition are attorneys general of Arizona, California, Connecticut, Colorado, Delaware, Hawaii, Maine, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington and Wisconsin.
Schools file additional lawsuit
What we know:
An additional lawsuit was filed against the NIH Monday afternoon.
The plaintiffs in the second suit include a coalition of associations representing the nation’s medical, pharmacy, and public health schools — the American Council on Education (ACE), the Association of Public and Land-Grant Universities (APLU), and the Association of American Universities (AAU) — the University of California school system and 12 private universities.
They are suing the NIH, the Department of Health and Human Services, and the acting heads of both agencies, Matthew Memoli and Dorothy Fink. D.C.'s George Washington University and Baltimore's Johns Hopkins University are both part of that suit.
"These abrupt and sweeping cuts in NIH funding pose an extraordinary challenge to the important and lifesaving work of our faculty, staff, and students at Johns Hopkins. They jeopardize the longstanding and remarkable research partnership that was forged between the federal government and higher education at the conclusion of WWII, and put at risk the future of the American research enterprise as a whole," JHU President Ron Daniels wrote in a letter to the university community.
"Given that these costs are an essential part of the research enterprise, dramatic cuts to the reimbursement formula cannot help but force corresponding cuts to research. It is that simple," the letter continued.
According to Johns Hopkins University, the school receives more NIH support than any other entity in the U.S.
They report that in fiscal year 2024, the university received a total of approximately $1,022,300,000 in research funding from NIH. Of that, $281,446,000 — 27.5% of their total grant — was reimbursement for indirect costs.
This is well below the 63.7% rate that NIH cited in the new indirect rate cost cap policy announcement:
Dr. Theodore Iwashyna is a critical care physician and health services researcher at Johns Hopkins University doing NIH-funded work focused on helping people recover and get back to work as quickly as possible after pneumonia.
Iwashyna told the AP that losing the indirect costs portion of his grant would "just utterly destroy" his research and that infrastructure.
"If we can't keep the computers plugged in, we can't do that work. We can't do it with pen and paper and elbow grease," he said, according to JHU. "If we lose the funding, it all stops. We're developing interventions to help people get back to work faster, to reduce insurance costs, and to make the country more productive. If we don't do that work, it means more people being sicker longer."
Iwashyna also told the AP that some of his trainees already have asked if they should look for other jobs.
"I say, ‘No, I think we can support you for now,’" he said. "But I’m just hoping. I don’t know for sure."
Both lawsuits rest on similar legal arguments but unlike the case filed by the attorneys general, the additional lawsuit seeks to block the NIH policy from taking effect nationwide.
The case for cuts
On The Other Side:
In its response to the Washington Post article, the Trump administration cited an article published by Dr. Vinay Prasad, a hematologist-oncologist and Professor in the Department of Epidemiology and Biostatistics at the University of California San Francisco.
Prasad supports the move, saying that many universities that would see these cuts have become "bloated bureaucracy." He says the overhead cap will reduce redundant administrative staff and administrative hurdles.
"This will force universities to fire many unessential personnel. We need to make less paperwork to open trials. This might even improve research, as we strive for efficiency," Prasad wrote in a post on his personal website a day after the funding cut was announced.
Prasad also claims that some of these funds are being used for "mandatory DEI training classes and modules and other programs of this nature" — a viewpoint that directly aligns with the Trump administration's efforts to eradicate DEI programs from all branches of the federal government. He also alleges that some of the indirect costs are for "alcohol at social events, business class international travel, and lavish retreats."
Overall, Prasad says cutting indirects might mean "more science," adding that "less money spent on the administration is more money to give out to actual scientists."
What does the National Institutes of Health do?
Why you should care:
The NIH is an agency within the Department of Health and Human Services and serves as the federal focal point for health research. NIH says its mission is to "seek fundamental knowledge about the nature and behavior of living systems" in order to enhance health, lengthen life, and reduce illness and disability."
The organization was founded in 1887, beginning as a one-room Laboratory of Hygiene. The NIH is now the primary source of federal funding for medical research in the United States. Most of this research is done outside federal institutions, including public and private universities, colleges, medical schools and hospitals.
"Medical research funding by NIH grants have led to innumerable scientific breakthroughs, including the discovery of treatment for cancers of all types and the first sequencing of DNA. Additionally, dozens of NIH-supported scientists have earned Nobel Prizes for their groundbreaking scientific work," the Massachusetts AG Campell says.
Who Is The NIH Funded By?:
The NIH is primarily funded by taxpayer dollars.
The Source: The National Institutes of Health, STAT, Office of the Massachusetts Attorney General, Complaint - Mass. v. NIH, White House Office of Communications, Environmental Protection Agency, The Associated Press, the American Council on Education, Johns Hopkins University