NEW YORK – The life sciences sector is still reeling from the announcement last week that the US National Institutes of Health intends to limit indirect costs for research grants to 15 percent. The policy has those in the precision medicine space particularly worried about the effect this may have on the burgeoning field's ability to continue to develop advanced treatments like cell and gene therapies and maintain an expert workforce.
Typically, when the NIH awards funds for research, in addition to the award for the direct costs of the research to the grantee, it also provides funds for indirect costs or expenses related to, for instance, buildings housing labs, maintenance, operations activities, and personnel. NIH's payment rate for indirect costs is negotiated with the research organization, and according to the guidance, has averaged between 27 percent and 28 percent, but on the higher end of the spectrum, some organizations have negotiated a 60 percent payment rate.
In its Feb. 7 guidance, the NIH Office of the Director announced that those indirect funds would be capped at 15 percent.
In fiscal year 2023, NIH provided $35 billion to fund approximately 300,000 researchers at thousands of US institutions, $26 billion of which went to direct costs and $9 billion for indirect costs. In the guidance, the NIH director's office points out that large private organizations that fund research like the Gates Foundation and others fund indirect costs at rates ranging from 10 percent to 15 percent. In aligning the NIH's indirect cost rate to these foundations, the government expects to save $4 billion annually.
On Monday, a coalition of state attorneys general sued the NIH to stop implementation of these cuts in 22 states, calling the directive "unlawful" and asserting that the cuts will critically hobble biomedical research on treatments for ailments like cancer, Alzheimer's disease, and heart disease. The same day, a federal judge issued an order to halt implementation of the policy in those states and subsequently expanded the order nationwide in response to a separate lawsuit from university associations and research centers. However, ProPublica and others have reported that agencies are defying other court orders directing government agencies to resume disbursing research funds, which had been paused in response to executive orders issued by President Donald Trump.
A hearing has been scheduled for Feb. 21.
By and large, "devastating" is the word the life sciences community most often uses to describe the impact of this policy. "The impact would be devastating for research institutions that can't sustain research programs because they can't cover the costs of the facilities we work in," said Heidi Rehm, director of the genomic medicine unit at Massachusetts General Hospital's Center for Genomic Medicine.
Precision medicine worries
Howard McLeod, director of Utah Tech University's Center for Precision Medicine and Functional Genomics, said the decision to cap indirect costs at 15 percent threatens the future of individual investigator-run projects and large-scale initiatives like eMERGE, which since 2007 has spearheaded numerous projects focused on integrating genomics data into patients' electronic medical records so that information can better inform their care. But McLeod is most concerned about what this funding cut will mean for the "foundational elements" supported by the NIH that make precision medicine possible.
Such efforts include the Clinical Pharmacogenetics Implementation Consortium, which develops guidelines for dosing drugs impacted by genetic variants that patients harbor; the Pharmacogenomics Global Research Network, a driving force behind pharmacogenetics discoveries; and ClinGen, a publicly available, evolving archive of genes and variants relevant to precision medicine. These projects "are essential to the [precision medicine] field broadly and often cost more than the grant provides, which is partially made up by the indirect [payment]," McLeod said.
Rehm, who was one of the principal investigators to receive an NIH grant to expand ClinGen in 2021, was somewhat reassured Monday night to see that a judge had temporarily blocked the implementation of these cuts. If allowed to stand, however, Rehm believes this will have consequences for the entire life science research field, of which precision medicine is a part. "It would all be impacted," she said.
In precision medicine, scientists have been "making great inroads" in recent years, such as identifying the genetic underpinnings of rare diseases that pave the way for new treatments, said Amy Miller, president of the research funding nonprofit PhRMA Foundation. She worries that shrinking research funding could disrupt the momentum.
The cuts could also mean losses of critical research support staff and fewer research opportunities for students. "You need a large staff to do genomics and precision medicine research," said Miller, who prior to the PhRMA Foundation was executive VP at the advocacy organization Personalized Medicine Coalition, where she worked with academic, government, and industry players on scientific policies to advance precision care.
She noted that cuts to indirect costs could have a downstream effect on the scientific workforce at all levels, but also on whether personnel have the experience and expertise to conduct precision medicine research. And if research opportunities shrink for aspiring scientists at universities, some might choose other careers. "I'm concerned that we're going to miss a generation of scientists," she said.
Miller expects that other nongovernment funders of research, including the PhRMA Foundation, will receive even more applications if researchers can't lean as heavily on NIH support. The PhRMA Foundation was started in 1965 by the Pharmaceutical Research and Manufacturers of America (PhRMA), the trade group for drugmakers, to fund academic research on drug delivery, drug discovery, translational medicine, value assessment, and health outcomes. Although the nonprofit is supported by pharmaceutical companies, it operates independently. (PhRMA didn't reply to a request for comment for this article.)
According to Miller, the foundation already receives many "fantastic" applications but isn't able to fund all of them. For 2025, the foundation received about 555 applications — a record number — seeking funds for bench science, such as drug discovery, drug delivery, and translational medicine research. It awarded funding for 34 early career scientists' projects totaling $2.5 million, including predoctoral and postdoctoral fellowships as well as faculty starter grants.
Miller is expecting the number of applications for next year to break this year's record and said her team is meeting this week to figure out how to handle the increased volume. "We'll find a way to staff up temporarily and address a record number if we have them," she said. "I expect that to be true of all foundations."
Innovation impact
If, as many in the life sciences space fear, the cuts slow down basic research across institutions, that could have downstream negative consequences for drug discovery and development broadly, which, in turn, could affect precision medicine innovation. "To any extent that basic research that's helping move the body of science forward is slowed, that's certainly something that gives us concern," said John Stanford, executive director of Incubate, a nonprofit organization that engages in lobbying activities on behalf of the biotech investor community. "The US leads the world in biopharmaceutical development. One pillar of that is a strong basic research ecosystem. We are concerned [about] anything that would disrupt that."
Basic research, in Stanford's view, represents the top of the funnel that feeds drug development pipelines at biopharmaceutical companies. "There's no reason not to have that funnel as wide as it can possibly be," he said. "We need to find a resolution that keeps those scientists at the NIH or at their academic research partners working as robustly as possible." While Stanford was unsure whether cuts to indirect costs in NIH grants would affect ongoing clinical trials sponsored by industry with academic partners, he speculated that if research universities are helping offset some of the overhead costs of those trials, "it's logical to [imagine] that there would be consequences for those other programs."
However, there are those in the life sciences community, like the University of California, San Franciso's Vinay Prasad, who argue that there is "no evidence" that cutting NIH funds of indirect research costs will stifle biomedical discoveries. "Less money spent on the administration is more money to give out to actual scientists," Prasad, a professor of epidemiology, biostatistics, and medicine at UCSF and a hematologist-oncologist at San Francisco General Hospital, wrote on his website. "I am shocked to see researchers crying about how much money the university gets — it means more grants can be given per cycle."
The Trump administration has moved to aggressively reduce government spending, and Congress is actively working on a budget reconciliation legislation to further that goal. As the prior Trump administration repeatedly sought cuts to the NIH budget, similar requests are anticipated from the current administration. Prasad didn't reply by press time to an email asking for clarification on how cutting indirect costs of research would lead to more direct research funding if the overall NIH budget declines.
Others in the life sciences industry have been quick to offer up examples of medical innovations that wouldn't have been possible without NIH support for direct and indirect research costs.
In the genetic medicine space, for example, Vertex Pharmaceuticals and CRISPR Therapeutics' Casgevy (exagamglogene autotemcel) is the first CRISPR gene-editing drug to reach the market. This therapy for sickle cell disease and transfusion-dependent beta thalassemia couldn't have been made without NIH-funded academic research, noted Fyodor Urnov, director of technology and translation at the Innovative Genomics Institute, a joint effort of the University of California, Berkeley, and UCSF. Earlier work from the likes of Stuart Orkin at Boston Children's Hospital, who identified the BCL11A gene as a treatment target, and Jennifer Doudna at Berkeley, one of the discoverers of the gene-editing tool CRISPR, all laid the foundation for Casgevy's development.
"These advances were made in US-based research universities, hospitals, and laboratories," Urnov said. "Depriving the for-profit sector of the opportunity to leverage such academia-originated innovation and insight into the next generation of clinically and commercially impactful genetic medicines is not merely myopic — it will jeopardize US biopharmaceutical leadership in this sector for a generation to come and will deprive patients in the US of the opportunity to benefit from these life-saving medicines."
The American Society of Gene and Cell Therapy (ASGCT) in a statement characterized NIH funding for indirect research costs as neither "supplemental" nor "insignificant" but "critical" to advancing cutting-edge medicines and tools like CRISPR. If the total cost of funding a research project was a partially submerged iceberg, the ASGCT said the direct costs are represented only by the bit that's visible above water. The ice below the waterline, meanwhile, represents the many indirect costs necessary to perform the research, such as funding for buildings housing labs, for sophisticated equipment, and for personnel who ensure that clinical trials are complying with budget and safety rules. The ASGCT urged Congress to reaffirm continuation of the current indirect cost arrangement and for the Trump administration to abide by congressional actions.
Upheaval at universities
The NIH announcement has created upheaval at top research universities around the country, like the University of Pennsylvania and Yale University, both of which have pointed out that research is expensive. According to one estimate, at current indirect rates, for every dollar in direct and indirect NIH funding institutions receive, the cost of performing the research is around $1.50.
At UPenn's current indirect cost rate of 62.5 percent, NIH funding covers around half of its research infrastructure costs, according to a post by the university. Researchers there have done groundbreaking work on mRNA vaccines, CAR T-cell therapies, and gene editing with the help of federal dollars. Reducing the indirect rate down to 15 percent would eliminate NIH funding by $240 million, according to UPenn.
In a letter shared with Precision Medicine Online, Maurie McInnis, president of Yale University, said that NIH's indirect cost cap represents a 75 percent decrease from the current rate the university receives, which funds facilities and infrastructure supporting more than 2,000 clinical trials on new cancer therapies and mental health and heart disease care that all together involve more than 38,000 patients. "Yale does not profit from federal indirect cost reimbursements," McInnis wrote. "These negotiated rates reflect the true costs of maintaining a world-class research environment." She added that Yale invested $432 million in research in fiscal year 2024, which is more than double what the medical school received from indirect cost payments from the NIH.
Yale is among the more than 30 universities and university systems that have provided public declarations in support of the case by the attorneys general of nearly two dozen states to block NIH's implementation of the indirect rate cap. However, should the rate cut take effect, Yale School of Medicine will develop contingency plans to "prioritize [its] core missions," said Nancy Brown, dean of medicine, in a separate letter, including continuing support for early-career researchers, reducing inefficiencies, and providing bridge funding to investigators who might be affected by specific government policies.
UCSF's Prasad argued on his website that by reducing indirect cost payments, this policy will force universities to spend government dollars more judiciously. The NIH, in its guidance, noted that it is hard for the government to keep track of exactly how institutions are disbursing funds doled out for indirect research expenses. In implementing the cuts, the NIH director's office said it "is obligated to carefully steward grant awards to ensure taxpayer dollars are used in ways that benefit the American people and improve their quality of life."
Citing that, Prasad wrote that "the university has become a bloated bureaucracy," and that the cuts to the indirect cost rate "will force universities to fire many unessential personnel" and reduce administrative burdens, such as lessening the paperwork for clinical trials.
Many in the life sciences space take issue with the suggestion that institutions aren't appropriately using NIH money for indirect research expenses at a time when costs are increasing faster than available funds. "Indirect costs are not bonuses paid to academic institutions," said Peter O'Dwyer, group co-chair of the ECOG-ACRIN Cancer Research Group, a global network of 1,300 academic and community-based cancer centers and hospitals. "They are an accounting approach to managing research expenses more efficiently."
O'Dwyer further explained that indirect costs are a component of a grant award, that for efficiency's sake, are aggregated and divided proportionally to projects rather than explicitly charged to each project. By lowering indirect payments, institutions will have to build those unsupported expenses into direct costs in research grants through "cumbersome and complicated accounting calculations," which he said will increase administrative costs and take away funds that go directly for research.
According to the NIH, it spends around 80 percent of its $48 billion budget on funding medical research, but O'Dwyer noted that grants have been funded at less than 90 percent for about two years of flat funding for the agency. "With a further over 10 percent loss from inflation, research has already been compromised," he said.
ECOG-ACRIN conducts numerous government-supported cancer trials, including complex, biomarker-driven platform studies, like the National Cancer Institute's ComboMATCH and MyeloMATCH, which inform precision oncology strategies. As ECOG-ACRIN is already operating trials with funds below the market rate, O'Dwyer worries that a further cut in funds for indirect expenses will make ECOG-ACRIN's trials less competitive in attracting research staff and busy oncologists.
"With complex modern clinical trials that are highly regulated, research staff are already limited in the number of patients that they can actually manage," O'Dwyer said. "Since a decline in the numbers of research staff from decreasing the indirect rate is inevitable, it follows that fewer opportunities will be available for patients to participate and less progress against cancer."
Jeff Allen, CEO of the nonprofit Friends of Cancer Research, emphasized that universities and researchers should take this time, while a court has temporarily paused implementation of the cuts, to educate policymakers and the public on how indirect funds are used and how this policy will affect research. "These are complicated systems, [and] most people probably don't encounter the inner workings of a university or an academic research facility on a regular basis," said Allen.
Friends of Cancer Research brings academic, government, and industry groups together to address scientific, policy, and regulatory challenges that can limit access to cancer treatments and has spearheaded efforts to harmonize biomarker tests to better identify patients eligible for biomarker-targeted drugs and immunotherapies. "Maybe it's easy [for some] to say, 'This isn't going to jeopardize the costs associated with the actual experiments or the clinical trials,' but I don't think that's the complete picture here," he said. "This absolutely will have ramifications … on those clinical trials because the supporting infrastructure that goes into all of these institutions is critical to their success."
The 15 percent cap, representing "a double-digit reduction in spending power that's associated with NIH grants" is not sustainable for any institution, Allen added, predicting that public or midsize institutions may feel the immediate brunt of such a drastic change.
The University of Michigan, a public research institution, for example, conducted approximately $801 million in NIH-funded research in 2024 and has a 56 percent indirect cost rate. Reducing that rate to 15 percent will wipe approximately $181 million in funding and "leave gaping holes in budgets, immediately and needlessly constraining the university's ability to save lives through medical breakthroughs and drug discoveries, support national security through research in areas like computer science, data science and engineering, and create thousands of jobs in technology areas that are key to the economic strength of the state and the nation," Arthur Lupia, interim VP for research and innovation at UM, said in a statement.
Prasad opined on his website that the 15 percent cap serves as a starting point for debate, which research institutions may be able to negotiate up to "25 percent or something a little less immediately painful."
In McLeod's view, there are good reasons to evaluate how much NIH pays institutions for indirect costs, as well as how taxpayer funds are used. "In my experience, the money is used for many appropriate things but also has an element of flexible funds for a dean or such to invest in favored initiatives," he acknowledged, adding that while eliminating a layer or two of bureaucracy at a university may be welcomed it shouldn't come "at the cost of destroying what is an economic and humanitarian engine for the US."