How capping NIH indirect costs on scientific experiments could impact the Connecticut economy

The Middletown Press – Saturday, April 12, 2025
By Jordan Nathaniel-Fenster

Nathan Grubaugh said the decision to cap what are called “indirect rates” or costs might seem on its face to be a simple idea that would result in more money to researchers. In reality, it could mean experiments are done in adverse conditions here, or move overseas.

Grubaugh is a microbiologist at Yale University. Usually, he studies mosquito-borne illnesses but, during the pandemic, he stepped up to provide services that proved essential in sequencing the genome of the Novel Coronavirus and its subsequent variants.

He said the move to cap indirect rates at 15% will have a far-reaching impact on not just scientific research but on Connecticut’s wider economy.

“I don’t think most people really understand that part. Like, ‘what does this matter?’ It matters a lot.’ We can’t do what we do if we lose that infrastructure around us,” Grubaugh said. “It’s not clear how Yale and other universities, UConn as well, would be able to function as a research organization if this were to happen. It’s not clear. It would have to be different.”

Indirect rates, or indirect costs, expressed as a percentage of the amount of the research grant, is what the university uses to fund the infrastructure around the research. That infrastructure typically consists of administrative overhead, a broad range of expenses for such items as utilities, building maintenance, rent and administrative salaries. The National Institutes of Health announced in February that it would cap indirect costs associated with research grants at 15%.

Usually the rates are negotiated by the university. Yale, for example, has an indirect rate of 67%, meaning that for every research grant dollar, 67 cents is added to the total and goes to Yale. If a researcher needs a $100,000 grant and indirect costs are 50%, the actual request is for $150,000.

“The direct expenditure is the cost of the project, the supplies, the research assistants, the equipment, travel, that kind of stuff,” explained Alexandra Graddy-Reed, associate professor of public policy at the University of Southern California. “Then an indirect cost is charged on top of that, which is used for shared and communal costs.”

The direct costs might pay for Grubaugh’s time and assistants, and the equipment he used sequencing the coronavirus, but they don’t pay for the electricity that everyone in the building uses.

“What I don’t pay for in my grant is the electric bill. I don’t pay for big capital equipment that is being used. I don’t pay for the Yale Center for Research Computing in our high performance computing clusters,” he said. “I don’t pay for custodial. I don’t pay for the administrative staff that helps me put together the grant and the accountants that manage the grant, right.”

“You could give me all the direct funds that you want, if I don’t have the infrastructure around me to do the work, I can’t do it. It doesn’t matter,” he said.

The impact

A judge has initially blocked the cap on indirect costs because it alters existing contracts. The state of Connecticut has signed on to at least one of the lawsuits filed after the indirect rate caps were announced in February.

“Donald Trump is defunding cancer research. He is defunding treatment for heart disease. He wants to defund research into autism, Alzheimer’s, and preventable newborn deaths. He wants to make us all sicker, and we cannot let him,” state Attorney General William Tong said in a release. “In his sloppy rush to slash funding, Trump has ignored federal law, and we are seeking a court order immediately blocking this illegal overreach.”

Depending on the outcome of those court cases, experts say the impact could be significant.

According to a fact sheet compiled by the University of Connecticut, in part using an analysis from Yale School of Medicine Professor Richard Aslin, the NIH awarded $770 million in grants to Connecticut universities in 2023, which UConn said supports 6,609 jobs and generated $1.68 billion in economic activity.

If indirect costs are capped at 15%, UConn and UConn Health would “lose collectively at least $35 million per year,” according to that analysis. That, they say, will impact everything from cancer research to HIV treatments, prevention of emerging tick-borne diseases and everything else that UConn and other research universities do.

“Without this support, UConn’s ability to sustain high-impact medical and scientific research will be significantly reduced and weakened,” the analysis states.

Graddy-Reed, who studies indirect costs, said the impact will be different depending on the university and the surrounding community’s dependence on it.

“The cap will create a huge deficit to revenues for universities. What’s less clear is where those cuts are going to come from, and that really depends on the university, what their priorities are, what should their other sources of revenues are restricted and what they spend it on or not,” she said.

Graddy-Reed said many if not most universities probably won’t cut custodial services, “but is it startup packages for assistant professors? Yes, absolutely.”

“If you’re thinking about trying to recruit top talent and giving them the resources before they start to get their grant funding, you’re going to see a big deficit,” she said. “So, we’re going to see a lag in the actual science being conducted.”

Grubaugh said it’s already happening. He was recently on a call with a friend in Belgium, “and he’s telling me that there’s programs all over Europe that are going to be setting up positions specifically for us scientists to have jobs in Europe.”

“It’s obviously very fast to tear something down, and it takes a long time to build something. If they do so much damage that it completely changes how universities can do research, it’ll be a long time before we can add back to that,” he said. “We’re seeing this happening. People are fleeing. The scientists are fleeing the country. They’re going to find jobs in Europe.”

Graddy-Reed said this shift alone won’t result in recession across the nation, but it could in communities that are integrally intertwined with the local university.

“In a certain environment, if you think about Hopkins in Baltimore, Baltimore is going to be hit very soon, much faster than other areas,” she said of the biomedical research facility Johns Hopkins School of Medicine.

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