Lawlessly Cutting Biomedical Research Funding
Implementing Project 2025 as if Congress didn't exist.
On February 7, the National Institutes of Health (NIH) issued a quiet memo that set off a nuclear-level explosion in the biomedical research community. The new “Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates” uniformly cut the “indirect costs” portion of all NIH awards to 15% for awards granted to institutions of higher education. Indirect costs cover costs that have been determined to be non-itemizable on individual grants, like shared building space or shared administrative staff.
Obviously, the implications for biomedical research are first to come to mind, but let’s first focus on another: this memo is yet another instance of the Executive unilaterally taking power from Congress. Even Project 2025 acknowledges that Congress should be the branch that caps these costs:
Cap indirect costs at universities. Currently, the federal government pays a portion of the overhead expenses associated with university-based research. Known as “indirect costs,” these reimbursements cross-subsidize leftist agendas and the research of billion-dollar organizations such as Google and the Ford Foundation. Universities also use this influx of cash to pay for Diversity, Equity, and Inclusion (DEI) efforts. To correct course,
Congress should cap the indirect cost rate paid to universities so that it does not exceed the lowest rate a university accepts from
a private organization to fund research efforts. This market-based reform would help reduce federal taxpayer subsidization of leftist agendas (Project 2025’s Mandate for Leadership, pg. 355).
With this memo, the Trump Administration has forced NIH to bypass the law. It’s an even darker manifestation of the recommendations in Project 2015.
Federal regulations mandate that indirect costs are be paid at the rates that are individually negotiated with each institution: “Negotiated indirect cost rates must be accepted by all Federal agencies” (2 CFR § 200.414). There are very limited exceptions to this rule, and none include a uniform change. The rule could be changed, but rule changes must follow the Administrative Procedure Act, which requires public notice and comment periods.
In addition, Congress has explicitly protected indirect costs in its recent appropriations bills. After the first Trump Administration threatened to reduce the indirect cost rate to 10%, Congress included a rider in its appropriations bill that required the indirect cost allowance to remain as written in the existing regulations; that is, the indirect cost rate would continued to be negotiated by institutions and accepted by all federal agencies. That requirement has been maintained and is included in the current appropriations bill. The Senate appropriations proposal for 2025, introduced by Sen. Tammy Baldwin (D-WI), includes the same provision. The House appropriations proposal for 2025, introduced by Rep. Robert Aderholt (R-AL-4), does not, and instead limits indirect (facilities and administration) costs to 30% for universities.
On February 10, three court cases were filed against the reduction of the indirect cost rates, all arguing that the move is unlawful. One was from several national associations of medical institutions, another by the American Association of Universities on behalf of several universities, and yet another by the Commonwealth of Massachusetts on behalf of several states. A temporary restraining order has been issued on behalf of the states in the MA case, as well as a nationwide temporary restraining order in response to the case by the national associations.
What are indirect costs?
Indirect costs are often referred to as “Facilities and Administration” costs or “F&A”, which is a much better descriptor. The specific categories of expenses allowed generally fall under these two umbrellas. Allowable facilities costs are facilities depreciation/capital improvements, capital debt interest, and operations and maintenance. Allowable administrative costs are general (i.e., institution-level) administration, departmental-level administration, sponsored projects administration (i.e., to fulfill administrative grant requirements), and student administration. Administrative costs have been capped at 26% since 1991, so administrative bloat due to indirect cost allowances is limited. Indirect costs also allow for library expenses.
The actual amount of funding directed to indirect costs can be confusing—a 50% indirect cost rate does not mean that 50% of the grant goes to indirect costs and 50% to actual research. It means that 50% of the research cost will be added to generate the total cost of the grant. For example, if the research costs are $100,000, an indirect cost rate of 50% means that the total grant will be $150,000. In this case, one-third of the grant is for indirect costs, not half.
Is there merit to decreasing the allowed indirect cost rate and making it uniform across institutions? The February 7 NIH memo provides some reasoning behind the cut. It notes that institutions are paid different rates, some much higher than others, and that many private grantors limit their indirect cost rates to 10-15%.
There are potential arguments for reforming the way indirect costs are awarded to universities. While there are strict rules regarding how indirect costs are negotiated, independently negotiated indirect cost rates can still compound inequity across institutions. Why the federal government should direct as much—or more—indirect support to universities with large endowments rather than providing additional support to universities with smaller endowments is a fair question. Rates for private institutions or non-core campus activities can be particularly high.
That said, negotiated indirect cost rates for major research universities tend to be pretty similar, which suggests that they are negotiated fairly. Most universities provide their indirect costs agreement on their administrative research websites. Here is a list of some current negotiated indirect cost rates for core campus research activities at a variety of research universities:
MIT: 59%
University of Florida: 52.5%
Stanford University: 54%
Ohio State University: 57.5%
Johns Hopkins University: 55.0%
University of Notre Dame: 56.5%
This is a somewhat haphazardly sampled list of rates from very high research activity universities in the U.S. There is definitely variation, and it is reasonable to question that variation. But it’s clear that universities across the U.S.—both public and private, in red states and in blue states—feel they need indirect cost support on federal grants that is significantly above 15%. Research activity at all of these universities will take a major hit if this NIH memo is enforced.
What about the low rates allowed by private grants, as mentioned by the NIH memo? Private grants with lower indirect cost reimbursements are either subsidized by universities or renegotiated to allow more administrative and facilities costs under the direct costs—something that is not allowed for federal grants.
Regardless of your opinion on indirect costs or even biomedical research funding more generally, the issuance of this NIH memo by the Trump Administration is an attempt to strip any of us of the right to discuss and deliberate the matter through our elected representatives and through the regulation process. It’s yet another crack in a crumbling democracy.