New NIH ‘Indirect Costs’ Funding Cuts Threaten Universities, Science

Is this the end of the world as universities and similar research institutions in the U.S. know it? Well, they probably don’t feel fine after the National Institutes of Health announced on Friday massive and unprecedented cuts in research funding that are sure to disturb the REM sleep of many. The NIH will immediately drop its rate of funding so-called indirect costs of research all the way down to 15% for everyone. Now, most people not in the game of getting research funding from federal agencies like the NIH may not be familiar with what direct and indirect costs are. But this change in indirect cost policy under President Donald Trump’s administration is going to have massive wide-ranging direct and indirect effects on universities, education, students, science, scientists and society across America.

What The NIH Does May Greatly Affect Your Health

Yes, regardless of who you may be, all of this will end up affecting you in some way, assuming that you are a human and not a ficus plant. You know all that stuff that you do and use on a daily basis? That’s the result of science. And why do you have a greater life expectancy now to do more of that stuff than the 57-to-60 year life expectancy you would have had a century ago? Thank biomedical research for all the public health advances, vaccines, cancer treatments, surgeries, heart and diabetes medications, nutrition insights and other stuff that have been developed to help extend and improve people’s lives. A big chunk of such developments can be linked in some way to federally-funded especially NIH-funded research. I’ve covered previously in Forbes how what NIH does and supports can greatly affect many, many people’s health. Plus, universities around the country have played major roles in launching the careers of so many people. So what happens in universities doesn’t stay in universities. Then there’s the whole facts and maintaining democracy and warding off totalitarianism thing that I will describe later.

NIH Grant Funding Has Supported The Direct Costs Of Scientists Doing Research

In order to appreciate the huge impact that this abrupt change in NIH policy will have, you have to understand how the wild and wacky world of scientific research funding has worked and not worked for years in the U.S. A former colleague of mine at the University of Pittsburgh once described being a university professor who does biomedical scientific research as being a “small business owner.” That’s because a big part of being such a professor is having to constantly hunt for and bring in money from external sources to support yourself and your research operations.

Conducting scientific research requires moolah (the technical term for money) to support the salaries and benefits of members of your research team like your research assistants, programmers and post-docs, your equipment like computers, autoclaves and test tubes, materials used like paper, chemicals and post-it notes (yes, few are going to give you free post-it notes) and your travel to meetings, conferences and other activities. In many cases, you even need funding to support your own salary and benefits because many medical schools and schools of public health no longer pay for such things for their faculty. All of these are considered “direct costs” because grant funding for such costs should all go directly to you as the scientific researcher and what you need to do your research.

If you do research in the biomedical, health or public health space, the NIH has probably been a big, if not the biggest, source of such funding. Your applications for such grants will usually include a detailed budget listing out everything needed to conduct your research for the scientific project that you are proposing. It’s super competitive to get such grants since there hasn’t really been major boosts in NIH funding since the 1990’s and such funding hasn’t really kept up with inflation over the past two decades. These days, typically, less than one out of every ten grant proposals to the NIH will end up getting funded. Odds in many situation can be worse than trying-to-get-a-ticket-to-see-Taylor-Swift odds, depending on the concert and how well you know Swift.

NIH Grant Funding Has Also Supported The Indirect Costs Of Scientists Doing Research

Then there are so-called “indirect costs” that funding from the NIH and other federal agencies have covered also historically. These are the costs of what universities or similar research institutions are supposed to provide you to help support your research activities such as your office and lab space, the heat and electricity that goes to that space, waste disposal for standard trash and stuff like hazardous materials that you wouldn’t simply put in a garbage can and administrative services like human resources.

They are called “indirect” because it’s hard to directly assign each of these costs to specific aspects of a given research project. No can really say, “Oh the toilet flushing action and accompanying water that the university provided to the bathroom that you used on Thursday helped you relieve yourself enough to come up with the idea to do that specific part of your experiment.” It is clear, though, that such indirect costs are essential parts of doing research. Sitting in the dark and repeatedly soiling yourself won’t allow you to do good science. You can see how without both direct and indirect costs supported, scientists around the country would be bleep out of luck.

Cuts to indirect costs would affect a much wider range of people on university campuses than just scientists. After all, few scientific researchers have their own bathrooms like George Costanza did in that episode of Seinfeld. Students and staff share many of the resources that scientists have access to on campus. Plus, who knows how administrators’ salaries and resources are supported by indirect cost funding as well.

How Indirect Cost Rates With The NIH Have Historically Worked

Every grant application that a scientist prepares and then submits to the NIH through a university or similar research institution will include a proposed budget. As mentioned earlier, that budget will list out the each direct cost. The university or similar research institution where the scientist is based will then add to this budget an indirect cost amount that is calculated as a fixed percentage or rate of the direct costs. So the higher the direct costs, the more indirect cost funding the university can claim. The university doesn’t have to list out for the NIH what specifically the researcher will get for this indirect costs.

Since not all universities may provide the same things to a given researcher and the costs of things like space and electricity may vary by location, each university and research institution historically has negotiated what its indirect cost rate would be for the NIH and other federal funding agencies. And as with all negotiations the resulting rates have depended heavily on the bargaining power of the given institutions. For example, it’s not unusual for an elite institution to have negotiated an indirect rate of 65 percent or higher. That means that for every dollar that a scientist gets to do a research project, the institution will get 65 cents. The average indirect rates for academic institutions around the country have hovered around 30 percent.

This has made scientists who have track records of doing good science and getting NIH funding quite attractive to universities. The universities know that such scientists will bring them considerable amounts of funding for indirect costs. This has motivated universities to keep supporting science and allow faculty scientists to function relatively independently and autonomously. This balance has been important to guard against undue political influence of science and research.

Now again, since universities have not had to tell anyone where specifically each dollar for these indirect costs goes, a lot of this money could go to many other things the universities do, ranging from education to administrative to who-knows-what-else activities. So, many scientists have wondered how much of this indirect cost actually goes back to helping science and have called for more transparency. Nevertheless, any significant cut to indirect cost rates could have significant ripple effects across university campuses.

The NIH’s Claimed Justification For Cutting Indirect Cost Rates To 15%

Suddenly dropping all such indirect cost rates down to 15%, regardless of where the university is located and what it may be providing for the scientist, kind of sort of constitutes a significant, let’s say drastic cut. Why 15%? Well, the NIH announcement claimed that it is line with the indirect cost rate that philanthropic organizations tend to offer. The announcement specifically listed a 10% indirect costs rate for the Gates Foundation and Smith Richardson Foundation, a 12% rate for the Gordon and Betty Moore Foundation and Robert Wood Johnson Foundation and a 15% rate for the Carnegie Corporation of New York, Chan Zuckerberg Initiative, John Templeton Foundation, Packard Foundation and Rockefeller Foundation for institutions of higher education.

However, such justification would be simplistic at best. Philanthropic organizations are not the federal government. They do not have the resources and broad mandate of the federal government. The projects supported by such organizations tend to be much smaller or more focused on the particular interests of the donors. Often the projects are based on existing previous work that has already been done with federal funding. In fact, many of these philanthropic organizations encourage scientists to work with federal agencies to get larger projects jointly funded.

Therefore, this cut in NIH indirect cost rates will likely put more pressure on philanthropic organizations and make it more difficult for them to accomplish what they want to accomplish.

The NIH Change May Affect The Independence Of Science And Scientists

A major function of the NIH and other federal agencies has been to promote the independence of scientists and scientific research. Typically, a grant proposal to the NIH will go first through review by a panel of other scientists who are independent of the NIH and can in theory offer less agenda-driven scientific assessments of the proposal’s merits and weaknesses. These reviews, which are well-documented, then help determine whether the NIH should award funding to the researchers who proposed the project. Once the project is awarded the NIH program officers are not allowed to have undue influence on the nature and orientation of the project. This again is to prevent any political influence on the scientist and the project.

Such procedures frequently aren’t in place for other non-federal funding sources, especially when it comes to private organizations, businesses like pharmaceutical companies or certain “think tanks.” These funding sources are more able to push certain agendas because after all it’s their money that they are providing rather than taxpayer money.

The concern is that the loss of NIH and other federal funding will push universities and scientists to seek other sources of less transparent funding to continue their work and in many cases frankly survive. So you may see even more studies supported by pharmaceutical companies or advocacy groups with political and business agendas. This could lead to more biased research where you don’t know what kind of pressure was applied on researchers to say something that doesn’t necessarily follow the facts and science.

The NIH Change Leaves Great Uncertainty For Scientists, Science, Education And Society In General

There’s little question that indirect costs account for a large amount of the funding that the NIH and federal agencies provide. Therefore, it is reasonable to take a closer look at where such funding is actually going and how much of it is actually benefiting scientists and science versus unrelated activities. But the policy change that NIH just announced may not be quite the best way to do that.

These indirect costs funding cuts came swiftly from the NIH without giving universities and scientists any time to adjust and prepare. They will apply to existing grants and any that may be awarded in the future. That will likely lead to many WTFs from everyone who has worked so hard to submit grant proposals to date–with the “F” here not standing for the word “fruitcake.” The announcement came late on a Friday, which is probably making for a delightful weekend for scientists, students and university leaders and staff around the country, no matter how many avocados they’ll engulf during the Super Bowl.

Even though they may not get the fame, attention and likes on social media that celebrities and politicians do, scientists help form the bedrock of society. Real scientists help grow society and keep things real. They are the ones whose breakthroughs help design new products and services. They are the ones who provide the evidence and facts to counter questionable claims made by certain politicians, celebrities, business folks and other influencers. History has shown how scientists can help keep countries from falling into totalitarianism, which is why rising dictators have often tried to take out scientists.

The Union of Concerned Scientists have described how science and democracy are closely interlinked. Many of the founding fathers of the U.S. were scientists like Benjamin Franklin. Federal investment into science like the NIH and National Science Foundation after World War II is what helped the U.S. experience enormous growth in the 1950s and 1960s and boosted America to the forefront of the world. Typically, countries that have already taken care of basic needs and want to grow will invest heavily in science. When you hear of companies like Tesla and Apple, the executives may get the press, but they would not been able to design and produce their products without proper scientists in the background. Heck, if you ever watched the TV series Gilligan’s Island, you’ll realize that the Professor was the most important of the castaways.

Speaking of being marooned on an island, with all the changes that the Trump Administration and DOGE (not the coin but the so-called Department of Government Efficiency led by Elon Musk), science and scientists in the U.S. face so much uncertainty. It’s not clear what’s happening with all of the major federal scientific agencies like the NIH, NSF and CDC. Practically everyone in such agencies I have talked to over the past week have been worried about their jobs, futures and potential retaliation for revealing what is currently going on within these agencies.

At the same time, practically all academic researchers whom I have talked to are deeply concerned about science and the uncertain future. They have expressed worries about being forced the bear the brunt of these indirect cost cuts and losing their autonomy and independence as scientists. Many even question the viability of being a scientist in the U.S. going forward. Who knows how many will end up abandoning their scientific careers or moving to another country, which could lead to a further brain drain from the U.S.? That in turn will severely hurt America’s leadership and competitiveness in the world. One thing’s for sure, it’s the end of the research world that most universities and scientists in America have known for the past several decades.