Previously I wrote a post about Medical research-why it is important and how funding cuts will not be in your best interest. A lot has happened since I wrote that and things have progressed and gotten more dire. The Trump administration has implemented a drastic cut in the indirect costs rate (IDC) for all NIH grants for medical research, capping it at a flat rate of 15% regardless of the institution. Twenty-two states sued the NIH over the proposed 15% cap on indirect cost rates (IDC) for all NIH grants and won a temporary restraining order (TRO) until the case could be heard in court on February 21, 2025. Read the complaint here
I realize that most of you have no idea what that is or what that means. It is a little inside baseball for those of us who understand grant funding and how it is administered. I am going to get down in the weeds to simplify and explain things so you can see why this will be detrimental to all medical research. If these cuts succeed, the research enterprise at most large universities will be basically shut down.
Let’s start with the basics
Grants are individual awards given to faculty who wrote a proposal asking for funding for an idea or project. They are awarded for a specific amount of time, typically 4-5 years. Each year a progress report is turned in to the NIH and the subsequent years funding is then awarded. The grant funding is not disbursed in one lump sum as many people assume, and are typically cost reimbursable, where the federal government reimburses expenses as they occur (monthly).
Grants are awarded with the following categories.
Direct costs (DC) – expenses directly attributable to the research, experiments or scientific personnel-salaries, supplies, regents, animals, experiments, etc. All expenses are attributable to the project in the grant.
Indirect Costs (IDC) – expenses for the support of a project that are NOT directly attributable to the research, experiments or scientific staff. All separate projects at the university share in the same support staff and offices.
Indirect costs, also known as Facilities and Administrative (F&A) costs, are expenses that are not specific for a particular research project, but are necessary for the general operation of an institution and the conduct of research activities. The concept of indirect costs was introduced to ensure that research institutions could recover the FULL COST of conducting federally funded research, not just the direct expenses associated with a specific project. source
Keep in mind these large research institutions are not for profit. If the federal government only covers part of the project (the DC), who will cover the overhead (the IDC)? The Universities are not involved in research as an investment. There is no return on the dollar. The academic budgets for students, athletics, and patient care are all separate and can’t be used for research. While some donors may donate funds for specific projects every now and then, donors could never replace all the IDC funding that will be lost with the proposed cut. The support infrastructure will have to close down resulting in less research, leading to fewer discoveries, treatments, and cures. The Universities will not be able to support most of the research projects without the indirect costs being part of the budget..
All universities negotiate their indirect cost rates (IDC) with the federal government. For most state-of-the-art Universities the rate is over 50%, with a few in the 60%s. This IDC rate is negotiated on behalf of the institution and used for all grant applications coming out of that institution. Go here to see the negotiated rates for all the institutions in the FDP Expanded Clearinghouse.
DIRECT COSTS + INDIRECT COSTS = TOTAL COSTS
DC and IDC come as a PACKAGE in research funding.
What does IDC cover?
Every university/institution negotiates their rate with the federal government. They have to justify why they are asking for a specific rate. Where the university is located, how many grants are awarded to it, the extensive research infrastructure all play a role in how the rate is calculated. For example, the cost of living in an area causes salaries to be higher and can result in a higher IDC rate for the university. No two universities are the same. IDC typically covers:
- Buildings -Rent, building maintenance, utilities, custodians
- Library Services
- Administrative staff
- IRB Boards
- Procurement
- Grant Management – pre award, post award, contracts staff
- Mandatory reporting for all grants – computer system and personnel
- Computers/IT infrastructure – all types
- Data storage systems and high speed data processing
- OSHA– personnel, chemical waste, radiation safety, certifications
- Animal facilities -personnel and facility upkeep and certification
- Large expensive scientific equipment
- State-of-the-art scientific core labs – these are core labs that have large pieces of expensive equipment that the researchers sign out to use by the hour. The equipment is too expensive for an investigator to purchase with their direct costs on their grant. It is an economies of scale benefit to have the entire university share the equipment and not purchase separately.(e.g., Microscope core with $100K fluorescent or confocal microscopes)
The scientific core labs are too numerous to list here. The larger (and more state of the art) the university, the more core labs are available. Like it or not, many types of research (e.g., Cancer) need to use this expensive equipment. These state-pf-the-art labs takes years to establish. Universities with low IDC rates typically don’t have as many support services or perform as extensive research.
The naysayers
I hear many people complain that the high IDC rates pay for too many administrators, but that is misleading. When you hear the word administrator, who do you think of? Higher up types of managers, right? But the word administrator covers all non-research employees. They don’t mean CEO type administrators, they mean STAFF. They mean thousands of staff who keep the place running (non-researchers). It takes a lot of people to run a large research enterprise. It takes a lot of highly skilled staff to run the cores, staff the animal facility, process the grants, handle the reporting, enforce compliance, etc.
Others say that Foundations and other smaller non-profit granting agencies give funding with a much lower 10-15% IDC rate to the University, so why can’t the NIH use the same rate? There are 2 main reasons:
1. the smaller granting foundations and non-profits give much less DC funding overall. Non-profits have a lower IDC rate because they piggy back off the infrastructure that was built for the NIH funding. The NIH is not overcharging, the nonprofits get a deal.
2. Most of the grants from these smaller agencies are for training junior researchers. They are for much smaller projects . Some are only for salaries for trainees. They are not for multi-year, in-depth projects.
Lets compare to something you know
Now I am going to walk you through a simple example to show you that IDC is part of a package that can’t be separated. It is not supposed to compare the IDC rate for research to a fixed overhead in a business. Hopefully, you can see why the DC + IDC =TC come as a package
You go to the mechanic to get your car fixed. The DIRECT costs pay for the mechanic’s time, simple tools, and fluids for the car. The INDIRECT costs would pay for the garage (rent), utilities, lift/large equipment, front desk personnel, billing, purchasing, supplies, computers, compliance, etc.
The business can’t function without those INDIRECT costs. All the indirect costs are necessary for the business to produce the repair of your car. The mechanic alone cannot do it. The mechanic could try and fix your car in their driveway without all the large equipment and can handle all the paperwork himself. But that would limit the repairs he is able to perform and take up more of the mechanic’s hands on time with the billing, leading to less time actually performing repairs and losing revenue.. The process would be delayed, be mush slower with less output.
That is what will happen if the IDC rate is cut for all NIH grants. Researchers will be stuck in their driveways (labs) doing more with less. The process will take longer, and there will be much less output (knowledge) for a smaller range of repairs.(experiments)
To sum up
Remember, companies are for profit, Universities are not. Companies invest in research to produce products, Universities perform research on behalf of society,not for profit, and to produce knowledge. They do not invest in research to get a return on the dollar like a company does. They are producing knowledge so that cures, treatments, and drugs can be produced by others (and sometimes them). Universities cannot function without receiving the full cost of a project. Do you really want to give up on future cures for disease that you or loved one might have? Allow the IDC rate to be capped at 15% and that is exactly what you will be supporting.
-MOTL
“The most exciting phrase to hear in science, the one that heralds new discoveries, is not ‘Eureka!’ but ‘That’s funny…’” – Isaac Asimov.