NIH Reduces Indirect Costs, Claims Change Will Save Billions Annually

February 9, 2025 TruthUSA

The National Institutes of Health (NIH) has established a limit of 15 percent on the indirect costs research institutions can request from the government.

On February 7, the NIH reduced the allowable indirect cost rate to 15 percent for research institutions receiving federal funding. Indirect costs encompass expenses for utilities, facilities, personnel, and service contracts.

The NIH anticipates that this adjustment will result in annual savings exceeding $4 billion.

In 2024, of the $35 billion allocated for research, $9 billion was consumed by administrative overhead, commonly referred to as ‘indirect costs,’ as mentioned by the agency in a recent post on social media platform X.

“Historically, the reported average indirect cost rate by the NIH has ranged between 27 percent and 28 percent. Numerous organizations set even higher rates, exceeding 50 percent, and, in some instances, surpassing 60 percent,” the NIH remarked in its announcement.

The White House stated on Saturday that the new NIH policy aligns with the funding models used by private foundations.

According to the agency, “many of the largest research funders in the nation—such as the Bill and Melinda Gates Foundation—maintain a maximum indirect cost rate of 15 percent.”

At the same time, the Department of Government Efficiency (DOGE) announced the cancellation of 62 contracts valued at a total of $182 million by the Department of Health and Human Services.

Among the terminated contracts was a $168,000 agreement for an exhibit featuring Anthony Fauci at the NIH Museum.

“These contracts solely pertained to administrative costs—none were related to healthcare programs,” stated DOGE, which is led by Elon Musk, in a social media update on Friday.

The NIH has not yet responded to requests for comment.

This shift has raised concerns within the academic community.

Jeffrey Flier, a professor at Harvard University, expressed on X that cuts to NIH grant indirect funding would disrupt and harm biomedical research across hospitals, schools, and research institutions nationwide.

Senator Patty Murray (D-Wash.) deemed the policy illegal.

“Trump’s proposal is ILLEGAL & amounts to an indiscriminate funding reduction for research centers of all sizes, not just Ivy League schools. This will lead to lab closures across the nation, layoffs in both red and blue states, and setbacks in crucial research ranging from cancer to opioid addiction,” she stated in a message on X.

Conversely, some lawmakers have welcomed the funding reductions.

“Abolishing excessive ‘indirect costs’ will save American taxpayers tens of billions in overhead expenses,” Representative Andy Harris (R-Md.) wrote on X.

Harris, a physician, argued that the U.S. government spends significantly more than nonprofit organizations. He also refuted claims that these cuts would hinder research.

“The Trump administration did not slash funding for biomedical research. Paying excessive ‘indirect costs’ does not equate to funding the research itself,” Harris clarified.

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