The National Institutes of Health (NIH) is the world’s largest funder of medical research.
U.S. colleges and universities received $26.7 billion from NIH in 2024.
A point of contention in NIH funding is the little-known practice of paying indirect costs for medical research.
Indirect costs are the expenses an organization incurs while performing its primary work—like payroll management, administrative support, janitorial services, and building maintenance.
The Trump administration—and some lawmakers—are asking whether NIH is paying too much in indirect costs.
The formula for calculating the indirect cost rate is complex. Universities that receive grants from the NIH negotiate this rate every four years.
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The rate can be raised or lowered for certain projects depending on a host of factors.
For example, the University of Michigan has a negotiated indirect cost rate of 56 percent according to a university statement. So if NIH granted the university $100,000, it would likely get another $56,000 to cover indirect costs.
NIH awarded 869 research grants to the University of Michigan in 2024, according to NIH data. The indirect cost rate for 322 of those grants was 56 percent. The average was 48 percent.
The University of Alabama at Birmingham received 366 NIH research grants in 2024 with an average indirect cost of 40 percent.
The Trump administration issued a directive on Feb. 7 limiting indirect costs to 15 percent.
It is “vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead,” the NIH statement read.
Nearly all of the top 20 NIH research grant recipients have also received grants from the Bill and Melinda Gates Foundation, which limits indirect costs to 10 percent for U.S. colleges and universities.
Others say the indirect costs paid by the federal government are fair and any reduction would result in the cancellation of important medical research.
“A one-size-fits-all-all approach makes absolutely no sense, and that is why NIH negotiates with the individual grant recipient what the indirect cost cap should be,” Sen. Susan Collins (R-Maine) said during a committee hearing.
The lower rate paid by private foundations can’t be compared to that paid by NIH, according to the Council on Government Relations, an association advocating for federal support of research.
Foundation rates are often calculated differently and the projects are usually focused on fieldwork, which is less costly than laboratory research.
A federal judge in Massachusetts issued a nationwide injunction against enforcing the cap pending the outcome of court challenges.
—Lawrence Wilson
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