The news that Elon Musk and the Trump administration want to cut indirect costs on NIH (National Institutes of Health) grants has caused a tsunami of hysteria not seen since the year 2000 craze. NIH Budget Cuts Are the ‘Apocalypse of American Science,’ Experts Say. Much of the outcries are the result of ignorance, but some of the doom-sayers should know better.
Some background information is needed for the average person, and alas some of the scientists as well. Indirect costs are a negotiated percentage of the amount of a grant that is paid to the administration of the organization (typically a medical school or teaching hospital) for which the scientist receiving the grant is employed. For example, suppose the grant is $1,000,000. If the institution’s indirect cost rate is 50% an additional $500,000 is paid to the dean or other administrative officer to fund heating, electricity, air conditioning, and other upkeep of the facilities where the research will be conducted. That’s the theory.
In reality, most of those facilities exist with or without the extra funds from indirect costs. They form a slush fund for all sorts of functions unrelated to research. Sometimes a very successful researcher cuts a deal with the dean and gets back some of the indirect costs to use for further research or other related activities. On other occasions, the department chair gets some of the indirect costs back to the department’s general funding which explains the complaints by department chairmen about the proposed cuts.
When I was on the NIH study section that reviewed nephrology grant applications indirect costs were a constant irritant. One of the Harvard Hospitals had an indirect cost rate of 120%. We were repeatedly told to ignore the indirect cost rate when adjusting the budget for direct costs. But like jury nullification, we couldn’t, and the very high indirect cost of a very rich institution found its way into a reduced budget for direct costs which, of course, was unfair to the applicant who usually had no influence on the institutional indirect cost rate.
At the same time I was reviewing grant applications for the NIH I was also doing the same for the American Heart Association and the National Kidney Foundation. These organizations limited indirect costs to 10%. No institution ever turned down money from these and similar groups that paid low indirect costs.
What effect would the proposed cut have on medical research? Almost none. When an NIH grant is approved and funded, two separate events, a proportion of the primary recipient’s salary is paid for by the NIH – other salaries may also be paid. If the applicant says he will spend 25% of his time on the proposed research and the study section agrees that such an allocation of time is appropriate then 25% of his salary is paid from the direct cost of the grant relieving the dean or department chair from paying that amount. Thus the dean or chair gets a twofer. He pays less for his faculty member while receiving an indirect cost reimbursement for the salary he no longer pays.
The facilities in which the research is carried out are usually already in place and paid for with or without indirect costs. The great bulk of NIH grants go to about 20 institutions all of which are very affluent and could do the funded research with a fraction of the indirect costs they receive.
I suspect that Elon Musk doesn’t fully understand the indirect cost scam that Harvard and Yale (and similar institutions) impose on the NIH budget – indirect costs for those rich universities of more than 65% are usurious. He just sees huge amounts of money going to fund an inflated overhead. If he really knew what was going on he’d come down harder on these academic administrators who are like administrators the world over. The public can easily be scared by cries that cancer won’t be cured or that sick children will not be healed because money will be withheld from administrators.
Indirect costs have been an open scandal among NIH funded researchers for generations. These costs can be reduced without jeopardy to medical research or the health of the country. I hope both politicians and journalists can be educated about the true nature of these costs allowing money now being spent by administrators to be diverted back to researchers where they can be used to add to the sum of our medical and scientific knowledge. A medical apocalypse is not near. The press is feeding misinformation about a subject about which they know almost nothing. It’s supplied by medical administrators who do know the truth of indirect costs which they seek to camouflage with distortions designed to scare the public into fearing for their lives and those of their children.
The takeaway message is that indirect costs go mainly to administrators. Decreasing them will have little or no effect on medical research.
One of the Harvard Hospitals had an indirect cost rate of 120%. Wouldn’t that be that the grantees owes them money for giving them x amount? That will be extremely abusive. Please clarify if I’m understanding this well
The indirect costs are paid in addition to the direct costs. Thus, the institution receives an additional percentage. In the case of the Harvard Hospital I mentioned, the total paid would be $2.2 million – $1 million direct cost plus $1.2 million indirect. Today the NIH does not allow a 120% indirect cost rate, but 60+ is still way too much.