Innovation Under Siege: NIH to Cut Billions in Research Funding

American science stands at a precipice. In a surprising announcement Friday morning, the National Institutes of Health (NIH) disclosed that it would cut grants for “indirect costs” (IDCs), depriving research institutions across the country of billions of dollars of important funding.

While the NIH’s move is part of a larger effort from President Trump’s administration to reduce federal spending, it jeopardizes the long-term standing of the United States as a global leader in medical research.

The NIH’s cuts on indirect costs pose a critical threat to United States research infrastructure, as these funds go toward expenditures that are vital for supporting discoveries. Indirect costs, comprising payments towards “facilities” and administration” (or F&A costs, as defined by the NIH), cover important expenses that enable research institutions to thrive. In its statement explaining the new policy, the agency stated it would limit funding for IDCs, capped at 15% for grants.

NIH Notice NOT-OD-25-068:

“It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative [expenses]. NIH is accordingly imposing a standard indirect cost rate on all grants of 15% pursuant to its 45 C.F.R. 75.414(c) authority.“

Background

Part of a broader cost-saving measure from the federal government, many scientists believe the move will stifle advancement and progress in the United States. The NIH estimates the cut in funding will save approximately $4 billion, costs that the Department of Government Efficiency’s leader Elon Musk believes are being misused to pay for administrative expenses by universities with over “tens of billions in endowments”.

In 1994, President Clinton proposed capping indirect cost reimbursements in the FY 1995 budget request. However, Congress did not approve and instead published a 33-page report on IDCs. And in his first term, President Trump proposed cutting IDC rate payments made by NIH to award recipients to 10% of the total grant value/total research costs to align more closely with rates accepted from private funders, but was stopped by the House Science Committee.

This year’s move was included in Project 2025, a proposed list of conservative priorities that argued that this “market-based reform would help reduce federal taxpayer subsidization of leftist agendas”.

Contesting The Policies

Lawyers familiar with the matter say it’s only a matter of time before grantee institutions file suit to stop the new policy from taking effect, and expect it to be litigated heavily in court. Federal laws permit the NIH to, in certain cases, reimburse direct costs at different rates from that negotiated for individual grants or classes of grants. However, the new policy is believed to violate congressional provisions that are meant to prevent the NIH from taking such drastic measures, and as such, is likely to be contested in court.

The research community is in an uproar, with universities warning of devastating budget cuts and researchers expressing fears about the future of their projects and the impact on their fields. While the NIH defends its position, many question the wisdom and legality of this dramatic shift. The long-term effects of this policy remain uncertain. Will the NIH reconsider its approach? Will Congress intervene? One thing is clear: this is a pivotal moment for American science, and the decisions we make today will determine whether we continue to lead the world in research and innovation.

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