[From the Archives] How the Trump Administration is Endangering Medical Research and Innovation
[This was one of my first posts on my blogger website. Sadly all of this is still true. Indeed, the attack on Science has gotten even worse.]
For decades, the U.S. has been an innovator in scientific research, including medical research. The United States has led in world in developing new therapeutics for cancer, chronic illness and infectious disease. While much of the work was done by drug companies, the basic research behind this innovation has largely been done by U.S. universities funded by the National Institutes of Health.
This innovation is now under threat. The National Institutes of Health issued a new policy providing that NIH would immediately cap payment of "indirect costs" at 15%--even for existing grants.. This was a huge change, because the indirect cost rate for many universities exceeds 60%. This means that many large research universities are facing massive cuts in research support. The Washington Post today reported that the impact on research universities is significant:
In court documents challenging NIH rate cuts, university leaders forecast stark consequences if they were implemented: At Morehouse College in Atlanta, the medical school’s president and chief executive said in court documents that if the cuts go through, it would need to lay off 66 research and clinical staff members, cut salaries 2 percent across the school, freeze hiring and consider rescinding offers made to new faculty. Beth Israel Deaconess Medical Center in Boston said the cuts would force it to terminate leases for labs and lay off hundreds of employees. Tulane University in New Orleans predicted cuts to faculty, postdoctoral researchers and staff. The University of Pittsburgh said the rate cut would amount to a loss of reimbursement this year of $168 million, perhaps halting clinical trials — which, if interrupted, could jeopardize scientific discoveries and patients’ lives.
In explaining this new cap, the Administration explained that they wanted U.S. research dollars to be spent directly on science and not "administrative overhead."
The NIH cap has been temporarily stopped by a federal judge, and the universities have strong legal arguments against the cap. The first Trump Administration had also proposed a cap, but Congress put an end to the cap in a provision in the Appropriations Bill that has been included in every appropriations bill since. In addition, grants are issued under contracts with the NIH, and the contracts include the negotiated indirect rate as part of the contract. Generally, the federal government cannot simply unilaterally change the terms of the contract.
But is this sound policy? Isn't the Trump Administration correct that the federal government should only support direct science and not administrative bloat? While the argument sounds appealing, the issue is far more complex.
It is important to understand what is included in "indirect costs." This is not just reimbursement for administrative expenses. Indirect costs are generally related to research, and include expenses such as equipment and facilities maintenance, environmental and health regulatory compliance and IT services. In other words, it includes the costs of the very lab facilities and equipment used to do the science. While the indirect rates are set as a percentage of the direct science expenses (direct costs such as the materials used in experiments and the salaries of employees), there is generally a detailed justification of the indirect costs and a close examination by the government. Each university must periodically justify the indirect rate with actual data that is audited by the government. The university and government than negotiate a rate.
Why are the indirect costs so high? For many research efforts, the expense of purchasing the lab equipment and facilities (shared across all grants) is large in comparison to the costs of the salaries and materials for the particular research project. For example, most genetic research relies on very expensive sequencing equipment that is generally not part of the direct expenses of the project. This equipment must be funded someway and the use of indirect cost reimbursement is the way the costs of the equipment can be shared across all the funders of the research using the equipment--both government and nongovernment.
The use of indirect rate reimbursement reflects a policy decision by the federal government over many decades to ensure that the U.S. has state of the art research facilities.
This is not to say that the current indirect cost rates should be set in stone. Some appear very high and may include administrative expenses of the university as a whole that should be excluded. But an abrupt reduction of the indirect rate to 15% overnight is unreasonable and a real harm to the U.S. research infrastructure.
Some more resources on this issue:
Thanks Chuck. I understand that “overhead” costs are about 50% less in Europe. If true, is there room for reasonable cuts?