A Sensible Take on Indirects

A Sensible Medicine Guest Post

With all the news coming from NIH and HHS, the angst about proposed cuts to “indirects” has quieted some. This remains an important issue and continues to cause considerable concern and disruption within research universities. Here, David Kareken discusses what these funds are used for and what changes could make cuts more palatable.

I love this piece. I think it reflects what we are most proud of at Sensible Medicine. It gives a thoughtful take on a topic without trying to sell you on one side of an argument.

Adam Cifu

Since the NIH proposed dramatic cuts to the indirect payments associated with federal research grants, funds intended to support “facilities and administration” (F&A), there has, understandably, been widespread worry within research centers. This is because these funds now underwrite a significant portion of institutional budgets. Some reduction would be acceptable, but only if accompanied by widespread deregulation.

For those outside the system (and frankly even for many inside), this is a difficult area to grasp. NIH indirects have been referred to as critical to the entirety of American research and the facilities that require upkeep and lighting. In corners of the popular media, however, they have also been called a university-led financial racket disguised as a light bulb-buying and janitor-paying program. The truth is, of course, more nuanced.

Individual scientific studies have direct costs that are specific to the proposed research (supplies for experiments, investigator and staff/technician salaries, etc.). In contrast, indirect funds pay for general institutional expenses incurred to make research possible. For example, a typical NIH grant that funds my group’s research on human brain-related risks for alcohol use disorder (the technical term for alcoholism) might hover around $2,000,000 across five years. Approximately 44% of that amount ($880,000) would then be added to the direct costs to cover general institutional expenses, making a total grant of $2,880,000. Notably, this example’s 44% rate on my direct costs is effectively less than my university’s negotiated F&A rate of 58.5%. This is because, per NIH policy, some direct costs must be excluded from F&A calculations. Thus, the effective F&A rate depends on the exact nature of the costs to be incurred.

Obviously, that added $880,000 is not just for light bulbs and janitors. Building maintenance, while far costlier than one might expect, is not the sole expense. Those buildings house equipment: the research MRI and PET scanners that I use for my human research, animal housing/care for preclinical work, shared instrumentation, core laboratory facilities not linked to any single lab’s work, and the secure computing platforms to store large amounts of data. All require staff, maintenance, repair, and software licenses.

Beyond this, universities and research institutions must comply with federal laws and regulations governing research, which include oversight by an Institutional Review Board (IRB) for human research, monitoring for NIH clinical trials, radiation safety monitoring, and the Institutional Animal Care and Use Committee (IACUC), all of which are time- and personnel-intensive. The mere process of submitting an NIH grant application is administratively complex, as is the post-award fiscal management necessary to comply with government law and regulation. Indirect funds help support all of this, and the university is subject to government audit of both direct and indirect expenditures. All told, modern biomedical research infrastructure and regulatory compliance are expensive.

An additional nuance is that, within any one institution, there are very few “principal investigators” (those proposing the ideas and writing the grant applications) who are continually funded by NIH grants. Long funding gaps are not unusual, and new faculty may go for many years before securing their first NIH grant, all while relying on the infrastructure to acquire the preliminary data needed to support the grant application. As review panels are conservative and risk-averse, these preliminary data are required to prove that 1) the hypotheses are believable and 2) that the investigator can credibly do the work after receiving the money. The result is that NIH grants are exceedingly difficult to obtain, often requiring multiple applications. Most ideas die on the vine. Thus, those who are funded at any moment help sustain the general infrastructure with their indirect funds.

All that said, I could accept lower levels of indirects.

When I first began submitting NIH grant applications 30 years ago, I wrote them on a personal computer but still used a typewriter to complete the paper administrative forms. An institutional official and I signed them (in ink!), and I mailed the application at the post office. Post-award, I happily did my work with relatively little administrative hassle.

Thirty years later, the process is vastly more complex, requiring multiple administrative eyes on the application for regulatory compliance purposes. The administrative forms now dwarf the 13 pages of proposed science. Post-award compliance (with the IRB or IACUC, the grants administration office, internal monitoring for FDA purposes, annual reports, etc.) involves increasingly complex, ever-evolving forms and procedures that occupy an expensive and distracting amount of the scientist’s and research staff’s time.

Thus, I might be more accepting of lower F&A rates with substantial deregulation, which would reduce the costly efforts to comply with government requirements. Unfortunately, I see no such deregulation on the horizon.

As a matter of public trust, research institutions might do well to strive for increased transparency in indirect cost expenditures, such as proposed in the so-called “FAIR” (Fiscal Accountability in Research) models. But a scam for lightbulbs? Hardly. I’d happily pay out of pocket for my lab’s light bulbs in exchange for less paperwork.

David A. Kareken, Ph.D., is a Professor in the Department of Neurology at the Indiana University School of Medicine. The opinions expressed here are solely his and not intended to represent any institution.