The National Institutes of Health – the nation’s premier funder of biomedical research – announced last week that it was immediately slashing support for what are called “indirect costs.”
Universities and medical centers rely on this money to cover the basic operating expenses for medical research. Twenty-two states have filed a lawsuit against the NIH over the new 15% cap, arguing this change will cause life-saving research to “grind to a halt.”
Andrew Fieldhouse, a professor at the Texas A&M Mays Business School, said the NIH is actually a large network of different institutes that provide funding for biomedical research.
“The actual institutes themselves are things like the National Cancer Institute, National Institute of General Medicine, Medical Sciences, National Institute of Allergy and Infectious Diseases,” he said. “And all of these different institutes provide a lot of grant money to universities and teaching hospitals around the country, including Texas.”
Fieldhouse also noted that the views he expressed in his interview are his alone, and not those of Texas A&M.
The “indirect costs” affected by this policy change make up a big share of the money that it takes to conduct medical research, Fieldhouse said.
“If a university is awarded a $100,000 research grant, that would be the budget for their direct research costs,” he said. “And then the university might get 50% or 60% on top of that — so another $50,000 or $60,000 – in indirect costs funding. And these indirect costs support research by covering utilities and maintenance for research facilities and can cover equipment or equipment maintenance, biosafety, I.T., data security and administrative salaries.”
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Fieldhouse said with these cuts, the U.S. will likely see less research activity over time.
“You’re going to see a big hit to the budgets of universities and teaching hospitals around the country” he said. “You’re going to see less local employment in these areas, and over time, you’re going to see less biomedical innovation.
“Now, the costs aren’t going to materialize immediately. I’ve done a fair amount of research on the macroeconomic benefits and productivity pillars from federally funded R&D, and a lot of the benefits take seven, eight or more years to manifest. So we’re saving a little bit of money today, but it’s going to mean worse health outcomes, less biomedical innovation down the road.”
In Texas, Fieldhouse said, billions of dollars in research funding comes from the NIH.
“According to the latest data from the National Science Foundation, Texas brought in about $5.5 billion in federal research funding in fiscal year 2022, the seventh most of any state,” he said. “And about one-third of that federal research funding came just from the NIH.
“Texas received about $1.9 billion from the NIH last fiscal year. Now, that goes to universities like Texas A&M and UT Austin, but also it would affect hospital systems in Texas. Baylor School of Medicine, UT Southwestern Medical Center and MD Anderson Cancer Center collectively received over $800 million in NIH grant funding last year.”
If all those granted recipients lose access to a big part of their indirect funding, it’s going to mean fewer jobs, too.
“They’re going to lose hundreds of millions of dollars in NIH grant funding that’s going to help them keep the lights on for research labs,” Fieldhouse said. “And that’s going to mean less researcher activity and fewer local jobs.”
However, since this issue still needs to be fought out in the court system, Fieldhouse said the exact outcome is still up in the air.
“I think that there is going to be a fair amount of resistance to this. This has caused a lot of concern in the scientific research community. It’s caused a lot of concern for legislators at universities or huge employers,” he said. “The United States is often considered the crown jewel of biomedical research in the world, through this grant system of NIH funding being dispersed. No one wants to lose that or jeopardize it.
“This sounds like maybe a good deal for taxpayers, saving a little bit on administrative costs that are going to research. But these indirect costs are still supporting research, and U.S. research activity and innovation will take a hit if it’s abruptly slashed.”
