NIH’s 15% Indirect Cost Cap Could Cripple Research, Scientists Say
Scientists warn that the NIH’s 15% indirect costs cap could threaten research funding and stall biomedical innovation.
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On February 7, the National Institutes of Health (NIH) issued supplemental guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates. The guidance declared that the indirect cost rate would be capped at 15% for all NIH grants from February 10.
A temporary restraining order (TRO) blocking the cuts was issued by US District Judge, Angel Kelley, on February 11, which has since been extended.
Here, we explore the difference between direct and indirect costs, their significance and why the scientific community is deeply concerned about the cap.
What is a research grant?
For discoveries to be made, research must be conducted.
Though some research projects of a smaller scale might be completed internally, running larger, high-impact research studies typically requires financial support.
A research grant is a financial sum that is awarded to a researcher, team, lab or institute in response to a successful research grant application. The funds ensure that the research project outlined in the grant application can be conducted.
Who awards research grants?
A research grant could be awarded by one or more of the following sources:
- Charities
- Research councils
- Research associations
- Federal organizations
- Internal funding schemes within an academic organization
- Industry and private companies.
The NIH – the United States’ medical research agency – is the world’s largest public funder of biomedical research. It spent over $35 billion on almost 50,000 competitive grants in 2023’s Fiscal Year (FY); funds that were distributed to over 300,000 researchers at over 2,500 universities.
“Federal funding for scientific research has helped make the United States a magnet for outstanding talent, a springboard for ambitious ideas, and a wellspring of rapid and accelerating progress, manifested in an ever-growing list of life-saving treatments for heart disease, cancer and genetic diseases, along with technological innovations that have strengthened our economy,” said the President of Harvard University, Alan Garber.
What are direct and indirect costs?
Most research grants awarded by funding bodies, such as the NIH, contain two “pots” of funding: direct and indirect costs.
Direct costs
Those that – as the name suggests – are directly associated with the research project.
Indirect costs
These are also known as facilities and administration, or F&A, costs.
Eric Verdin, MD, president and CEO of the Buck Institute for Research on Aging, California, explained what indirect costs might help pay for at a research facility: “These costs cover everything from shared lab equipment, cloud computing, hazardous waste disposal and maintenance of high-tech equipment to hiring, grants administration and janitorial services, as well as essentials like electricity, air conditioning and heat.”
Verdin also said that the term “indirect costs” is somewhat of a misnomer. He believes that “science would be impossible without these elements”.
The impact
The proposed 15% cap for indirect costs is almost half the average NIH indirect cost rate reported over recent years, which was 27–29%, but extended beyond 50% for some institutes. The variation here accounts for the fact that different research institutes of different sizes and different scopes have varying funding needs.
In the supplementary guidance, the NIH explained how “vital” it is to ensure that as many funds as possible go towards direct scientific research costs. It included a table of the maximum indirect cost caps imposed by private organizations, such as the Gates Foundation (10%) and the Rockefeller Foundation (15%), seemingly to justify its own 15% cap by drawing comparisons.
However, private foundation funding typically accounts for a much smaller proportion of total research than federal funding, according to data from the National Science Foundation. Many have also argued that private foundation grants permit some costs to be included as direct that would not be allowed by federal grants.
According to a NIH post on X, the cap will save $4 billion per year – but at what cost?
Scientific community responds to the 15% cap
The NIH’s proposed cap on indirect costs has sparked widespread concern across the scientific community and beyond. Researchers and institutions are warning of severe financial shortfalls that could hinder scientific progress.
Evolutionary biologist and author, Dr. Carl Bergstrom, said that the NIH’s move means “cutting one of the most important sources of university funding nationwide by 75% or more.”
“The policy does not just affect funding going forward. All existing NIH grants will have their indirect rates cut to 15%,” he continued. “For a large university, this creates a sudden and catastrophic shortfall of hundreds of millions of dollars against already budgeted funds.”
Dr. Mark Dingfield, vice president for finance and treasurer at Penn State University, explained that when Penn receives NIH funding for indirect costs, this money is used to reimburse costs that have already been incurred. “In FY25, we’re expecting to receive approximately $370 million in indirect cost recovery, in total, from all sources,” he said. “If we had to support the expenses that are being covered off of that, it would be devastating to the operating budgets of the schools, who receive nearly 90% of the indirect cost recovery, but also to our long-term ability to continue sponsored research at the same levels.”
A reduction in the NIH cost rate would be “the end of business as usual at Buck,” Verdin said. The Buck Institute for Research on Aging’s mission is to end the threat of age-related disease for current and future generations. In 2022, it opened a dedicated Clinical Research Unit, which has several ongoing trials exploring the effects of interventions such as lifestyle modifications on aging. “There would be program reductions, layoffs and, inevitably, just as research on aging is translating discoveries into therapeutics, a dramatic slowdown in getting potentially lifesaving drugs to patients,” he continued.
Massachusetts Institute of Technology (MIT) President, Dr. Sally Kornbluth, said that a 15% cap would result in cuts of $30–$35 million per year for the institute, an amount that would “undercut” its ability to conduct research as a “top-tier” scientific enterprise: “At MIT alone, NIH funding supports world-leading research and innovation focused on treatments and cures for diseases that cause immense human suffering: cancer, Alzheimer’s, Parkinson’s, Lyme disease, autism and many more.”
“This vital work requires staffing, equipping and maintaining some of the most sophisticated scientific facilities in the world. NIH-supported research also supports training of the next generation of life science researchers who make life-saving discoveries possible,” Kornbluth continued.
At Harvard University, Garber said that a 15% cap on indirect support would “slash funding” and cut research activity at the institute. “The discovery of new treatments would slow, opportunities to train the next generation of scientific leaders would shrink and our nation’s science and engineering prowess would be severely compromised,” he added.
A lasting impact on the future of science
With the TRO in place, the fate of the proposed cap remains uncertain. One thing is clear, however: the outcome of this policy decision will have lasting implications for the future of biomedical research, the next generation of young scientists and the United States’ position as a global leader in research.
