NIH caps indirect cost payment rate

Last Friday, NIH Acting Director Matthew Memoli announced that the agency would cap the indirect cost payment rate for all new and existing grants at 15%. Previously, organizations had negotiated indirect cost rates with the federal government, with rates generally averaging between 27% and 28%.

"The United States should have the best medical research in the world," NIH said in an announcement about the change. "It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead."

According to a Modern Healthcare analysis of NIH data, the cap could reduce indirect funding payments distributed to 149 U.S. medical schools in 2024 by as much as $3.3 billion. Indirect funds are used to maintain buildings, pay for utilities, comply with legal and regulatory requirements, and hire administrative staff.

In a news release, executives from the Association of American Medical Colleges (AAMC) said that limits on federal grant funding would negatively impact lab operations and maintenance, data processing and storage, and daily operations of critical research infrastructure.

NIH funding cuts could also delay ongoing clinical trials and lead to postponed treatment and sunk costs. Researchers and staff could also lose their jobs. 

Without funding, some healthcare organizations will have to cut back on research or focus on more practical endeavors instead of ambitious research efforts.

Several lawsuits filed over NIH funding cuts

In response to NIH's funding cap, 22 states, including California, Massachusetts, and North Carolina, filed a lawsuit against HHS and NIH, arguing that NIH does not have the authority to implement such cuts. Attorneys general for the states also argued that the research funding cuts could harm the health of their citizens.

"Effectively halting research to cure and treat human disease will directly impact the well-being of the Plaintiff states' citizens, who are the beneficiaries of research creating treatments, such as modern gene editing, vaccines such as flu vaccines, and cures for diseases like cancer, infectious diseases, and addiction," the attorneys general said.

Two other lawsuits have also been filed against NIH and HHS for the funding cuts. The second lawsuit was filed by associations that represent U.S. medical, pharmacy, and public health schools, as well as hospitals in the Boston and New York City areas. The third lawsuit was filed by organizations that represent private and public universities, the University of California (UC) system, and 12 private universities.

Some lawmakers have also spoken out against NIH's funding cuts.

"I oppose the poorly conceived directive imposing an arbitrary cap on the indirect costs that are part of NIH grants and negotiated between the grant recipient and NIH," said Sen. Susan Collins (R-Maine), adding that several research institutions in her state said that the cuts "would be devastating," stop critical research, and cost jobs.

Similarly, Sen. Bill Cassidy (R-La.) said that he's "heard loud and clear from my people in Louisiana is that Louisiana will suffer from these cuts. And research that benefits people in Louisiana may not be done."

However, Cassidy added that he's open to reforming NIH's payment policy. "I do not want all the NIH money to be going to Massachusetts and California," he said. "I want it to as well come to Louisiana. So that said, there might be some areas to reform."