The AMA has joined dozens of other physician organizations are raising the alarm about a proposed 15% cap on indirect-cost recovery of federal grants critical to advancing innovation in medicine, improving patient outcomes, and sustaining the biomedical research enterprise.
Research that drives economic growth and fuels America’s competitive edge will suffer because of an arbitrary policy, says the joint letter (PDF) to Matthew J. Memoli, MD, MS, acting director of the National Institutes of Health (NIH).
“The collateral damage of this policy, if implemented, will be profound and generational, reshaping thefuture of scientific progress in ways that cannot be easily undone. Beyond its immediate financial strain, the policy introduces significant procedural and structural issues that undermine the integrity of federal research funding,” says the joint letter, which was led by the American Association of Neurological Surgeons and the Congress of Neurological Surgeons. AMA President Bruce A. Scott, MD, and the heads of over 40 physician organizations signed on.
Just 500 treatments now exist to treat 10,000 known diseases, 7,000 of which are rare diseases. NIH’s study of fundamental biological processes has led to breakthroughs in cancer and many other conditions. Research on the immune system’s molecular workings, for example, has led to advancements in cancer immunotherapy.
“Such innovations stem from a research pipeline that would not exist without stable federal investment,” says the letter.
Neurological diseases and disorders in particular are a high-ranking priority for federal funds, “due to their devastating impact on the U.S. healthcare system and global health,” wrote Dr. Scott and colleagues, citing the NIH’s BRAIN Initiative as a key contributor to potential neurological therapies.
For these reasons, the NIH should rescind this directive in favor of working with medical groups and the U.S. Office of Management and Budget to develop a more transparent and sustainable solution.
“Once dismantled, these funding structures will not be easily restored,” the joint letter warns.
How indirect-cost recovery works
Appropriate indirect-cost recovery—whether it’s through grants, cooperative agreements or contracts—is an essential mechanism to fund grants across the federal government. Universities heavily rely on federal funding to support their research. Indirect-cost rates refer to the expenses needed to sustain this type of groundbreaking work.
“The proposed 15% cap on indirect-cost recovery would disrupt this well-established research ecosystem, forcing institutions to absorb critical infrastructure costs. No major research university could sustain its operations under this funding model, which would dismantle the very framework that has enabled US institutions to lead in global research and innovation,” says the joint letter, sent in March.
The cap would strain high-impact, transformative science projects, forcing many in academia to leave their jobs and find work in the commercial sector with fewer financial restrictions. The cap also would weaken clinical studies, which “are the backbone of medical advancements that offer patients access to cutting-edge, lifesaving, and quality-of-life-improving therapies,” the letter says.
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The lion’s share of NIH’s $47.7 billion budget in fiscal year 2023 went to competing and noncompeting grant awards. Over 2,700 institutions received 58,951 extramural grants, amounting to $34.9 billion in support from the NIH. Many of these human and animal clinical trials are used to advance medical innovation.
Clinical trials aren’t just about patient care and treatment. They’re a resource-intensive exercise involving data collection, drug administration, and patient monitoring as well as regulatory compliance, infrastructure, and administrative expenses that support multiple projects. “While these resources are shared across multiple projects, they remain essential for any trial to function. A 15% cap on indirect costs creates a financial gap that disproportionately affects the institutions conducting trials, particularly those without unrestricted funding sources to absorb administrative and infrastructure expenses,” according to the medical leaders.
Policy would lead to expensive restructuring
This abrupt policy shift would also destabilize a research system that thrives on efficiency and transparency, the letter says, creating administrative burdens. Specifically, it would disrupt “longstanding cost-negotiation processes, bypasses cognizant agencies, and imposes unilateral restrictions that conflict with existing federal financial management systems, undermining regulatory continuity and consistency in federal grant policies,” the joint letter says.
Research institutions will have to completely restructure their institutional budgets and financial planning if this cap is enacted, an “extensive, expensive and multiyear process. Reclassifying costs and shifting previously covered indirect costs, where feasible, will lead to increased compliance and justification requirements,” warns the letter, adding that this would complicate the NIH’s grant-application and budgeting process.
The guidance also fails to consider the allowance or prohibition of cost-sharing policies between private foundations and federal government requirements.
“As physicians, we are committed to finding treatments and cures,” says the letter. “While we recognize the importance of directing more funding toward direct research costs, this policy carries unintended consequences that threaten the sustainability of U.S. biomedical research.”
