The National Institute of Health (NIH) on Feb. 7 decreased the maximum indirect cost rate research institutions can charge the government to 15 percent. Indirect costs include utilities, facility, and personnel, and service contracts.
NIH predicts the change will save more than $4 billion a year.
In 2024, $9 billion of the $35 billion granted for research “was used for administrative overhead, what is known as ‘indirect costs,’” the agency said in a post on social media platform X on Friday.
“The average indirect cost rate reported by NIH has averaged between 27 percent and 28 percent over time. And many organizations are much higher—charging indirect rates of over 50 percent and in some cases over 60 percent,” the NIH said in its announcement.
The White House said in a statement Saturday that the new NIH policy is in line with what research institutions receive from private foundations.
The agency said “many of the nation’s largest funders of research—such as the Bill and Melinda Gates Foundation—have a maximum indirect rate of 15 percent.”
Meanwhile, the Department of Government Efficiency (DOGE) announced that the Department of Health and Human Services canceled 62 contracts worth a total of $182 million.
One of the terminated contracts was a $168,000 contract for an Anthony Fauci exhibit at the NIH Museum.
“These contracts were entirely for administrative expenses – none touched any healthcare programs,” stated DOGE, the new cost-cutting agency headed by Elon Musk, in a social media post on Friday.
The NIH has not returned a request for comment.
The changes have raised concerns by some in academia.
Jeffrey Flier, a Harvard University professor, wrote on X that cutting NIH grant indirect funding would cause chaos and harm biomedical research in hospitals, schools, and institutes around the country.
Sen. Patty Murray (D-Wash.) called the move illegal.
“Trump’s proposal is ILLEGAL & amounts to an indiscriminate funding cut for research centers of all sizes, NOT just Ivies. It will mean shuttering labs across the country, layoffs in red & blue states, & derailing lifesaving research on everything from cancer to opioid addiction,” she said in a statement on X.
Some lawmakers welcomed the cuts.
“Eliminating excessive ‘indirect costs’ will save the American taxpayer tens of billions of dollars in overhead expenses,” Rep. Andy Harris (R-Md.) wrote on X.
Harris, who is also a physician, said the U.S. government pays significantly more than nonprofits. He also disputed claims that the cuts would eliminate research.
“The Trump administration did not cut funding for biomedical research. Funding excessive ‘indirect costs’ is not the same as funding the research itself,” said Harris.
