The National Institutes of Health (NIH) published guidance late on Feb. 7, 2025, setting the indirect cost rate for NIH grants at 15 percent, replacing the negotiated indirect cost rates at many universities, which typically range between 25 percent to 70 percent. The financial toll of this change will be significant, potentially cutting billions of dollars from academic clinical research.
The Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates indicates that the cap will be applied for all go-forward expenses as of Feb. 10, 2025, for all new and current NIH grants.
In support of the rate change, the NIH provided a list of private foundations' maximum indirect rates with ranges from 10 percent to 15 percent, suggesting that universities readily accept grants from these foundations at these lower rates. However, foundation support is often a supplemental source of research funding, supporting a lower indirect cost rate.
The indirect cost rate is intended to provide support for facilities and administrative expenses – i.e., overhead such as office space and equipment, back office support including financial, technology, legal and compliance support, research security and biosafety, and utilities. These overhead items are more difficult to track and report than direct costs such as salaries and benefits expenses for researchers. The concern among federally funded researchers is that previously planned and budgeted infrastructure costs that are no longer covered by the new indirect cost rate will have to be absorbed by institutions with little or no margin to do so. Absent available funding, the research will have to be scaled back or cut altogether.
Special interest groups are calling on stakeholders and the broader scientific community to take action in support of clinical research, including outreach to local members of Congress to object to this action and advocate for sustained research funding.
Holland & Knight attorneys familiar with the congressional and political landscape surrounding this issue will continue to monitor these developments, including whether additional federal grant agencies will follow suit and potential legal challenges to the process utilized by the NIH to promulgate this substantial change.
