What happens when billions of dollars in research funding goes away

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0:13There is this building going up in downtown Birmingham, Alabama. And in a way, it's a symbol of how much this city and really the country's entire economy has changed. Because while Birmingham was founded on the steel industry, today it's all about health research. Federal funding from the National Institutes of Health has been the rocket behind the biomedical research industry. NIH funds have helped transform not just Birmingham, but other cities like Pittsburgh and Baltimore. It's why the University of Alabama at Birmingham is not only the largest single employer in the city, it's the largest in the entire state.

0:52And now with the Trump administration trying to make deep cuts to research funding, Birmingham and cities like it are worried about what happens if billions of dollars for the industry disappears overnight. This is The Indicator from Planet Money. I'm Darian Woods. And I'm Stephen Massaha from the Gulf States newsroom. On today's show, we're pulling out our microscopes for a close look into how these research grants actually work and why the Trump administration says the NIH is getting ripped off. And we talk about what deep cuts to funding would mean in a deep red state. This message comes from NPR sponsor U.S.

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2:14Loved by over 10 ,000 companies, Zendesk AI makes service teams more efficient, businesses run better, and your customers happier. That's the Zendesk AI effect. Find out more at Zendesk.com. First off, got to give a quick disclaimer. the University of Alabama at Birmingham handles the finances and oversees my organization, the Gulf States Newsroom. But that newsroom and the business departments, they operate independently from each other. And with that out of the way? So my first reaction was, what are we going to do? How are we going to manage this? Keita Swamy is the Associate Vice President for Research at Duke University.

2:51And like a lot of people, she found out about this NIH news when it was released late on a Friday. So you kind of canceled your weekend plans to get on all these group calls? Lots of emails on Friday night, text messages Saturday, and then started with Zoom calls on Sunday with some of these groups. And the reason this set off all of Gita's devices is because these cuts would mean Duke losing nearly$200 million in NIH funding. Now the Trump administration is targeting a very specific part of NIH funding and giving a specific justification. They're cutting what's sometimes called indirect costs.

3:28Right. So let's say we want to do a study into, I don't know, why hangnails are so annoying. We've got to get some research into this. Let's say we're asking for$100 ,000 in grant funding for the NIH to do this. And this money can only be spent really on specific things. To buy supplies, to pay individuals their salary or portion of their salary to work on that. What we're talking about here is the direct cost of research. But the thing is, it's not the only cost. Right. Like, take that biomedical building going up in Birmingham. Like, let's say we hire a grad student for this research, and they end up doing their important hangnail analysis in a specialized lab there.

4:10And running that lab takes money. From the light bulbs to the faucets to that new centrifuge with all the fancy dials, and only one dude in the lab knows how to use it because it's so complicated and expensive. Well, the university wants to get paid for the use of that centrifuge and the tech person running it. And to pay for all that research, institutes add on top of those grants what's called the indirect cost. And figuring out the rate for that cost is a long process. There's plenty of paperwork and back and forth between the university and NIH that's handing out grants. They actually come and visit your institution, do a walkthrough of a space that you've identified, go through various components of it to verify what you said, and come up with that rate.

4:55And the rate Duke negotiated was about 60%. So that$100 ,000 grant we were talking about actually jumps up to$160 ,000. And this right here is what the Trump administration says is the problem. They say that is way too much spending on indirect costs. On February 7th, the NIH sent out this memo that said, from now on, indirect rates for all grants are 15%. And not just for future grants, but, you know, grants already approved. The administration says that would save$4 billion a year starting immediately, which also, it sounds like a lot, but it's not even 1 % of Doge's goal to cut a trillion dollars or so from the federal budget.

5:37Either way, as you can imagine, universities and their states did not take this well. In fact, nearly half of all states sued and a federal judge quickly froze the order. So the NIH's argument ultimately here is that that is a lot of money and way too much to be spending here. I mean, I think a lot of people see that 61 % for like admin and facility sounds like a lot. I mean, how do you justify that amount? It sounds like a lot. I mean, there is a lot that we do and, you know, research is expensive. It's also a lot when you compare what private grant providers are willing to pay. Like the Bill and Melinda Gates Foundation, it caps how much it's willing to give universities in indirect costs at 10%.

6:21Geeta says part of that is because groups like the Gates Foundation offer more flexibility for spending. And she adds the type of research private groups are doing tends to be a lot less lab intensive. Right. Like when the NIH, they might be all about discovering the cure for a disease with the grant. The Gates Foundation is more about figuring out how to get that cure to under-resourced areas. And that kind of work just requires a lot less specialized equipment. You don't need a biocontainment lab that has to have sophisticated, you know, anti-rooms, pre-rooms, clean rooms, all those kinds of things to do that.

6:58Things I imagine are pretty expensive. Very expensive. Very expensive. Quite costly. Sarah Helms-McCarty says all this back and forth over the details about direct or indirect costs, well, that could be missing the big picture here. To me, that's not necessarily the point of what happened. What happened was this abrupt, unanticipated, unwarned, unplanned for change in what they say they're going to provide for. Sarah is an economist at Samford University, which is located in one of Birmingham's suburbs. Sarah says the justification for these cuts are way less important than the simple fact that this represents billions of dollars in promised research funding going away.

7:42This is money that these universities relied on and planned for. Duke University negotiated its rate with the NIH back in August, and that was supposed to last for four to five years. And Sarah says the research at UAB that would be threatened by this, well, we're not actually talking hangnails here. This is literally life-saving work. and treatments for cancer and heart attacks and strokes and Parkinson's, which from an economic perspective, we would argue the government should be helping to subsidize this kind of research. We call this a public good or a positive externality, this idea that when they create these breakthroughs in medicine, this is information that can save lives across the country and across the world.

8:24You know, this funding is also sort of a form of economic development for these areas. literally hundreds of millions of dollars flowing into states like North Carolina and Alabama. Cutting this funding also means extracting these dollars out of communities that have come to rely on them. While these cuts are supposed to be targeting facilities and admin, a lot of those things universities will still have to pay for. Something would have to give, and Sarah says that would certainly mean jobs, including research ones. You know, anecdotally, I have friends who work in the labs at UAB, and they're very concerned.

8:58I was texting with them last week, like, hey, you know, and they're like, yeah, I'm dusting off my resume because I don't know what this means for me. Duke University says this would likely cost thousands of jobs. It's also caused a hiring freeze at North Carolina State. Now, we should keep this all in perspective. Even if the courts let these cuts go through, it's not like it's an end to all NIH funding or health research. Members of some conservative think tanks have praised the cuts, in part saying it could free up more funding to go to that direct research. And in the memo announcing these cuts, the NIH says it's vital to make sure as much of the funding as possible goes to the direct research rather than overhead.

9:40We reached out to the NIH. It redirected us to Health and Human Services. So we asked HHS if the funds saved from cutting the indirect costs would go back into direct research. We also asked if they could respond to criticisms that the abruptness of these attempted cuts are threatening, life-saving work. The HHS did not respond to our emails or a couriered letter detailing these questions. This episode was produced by Cooper Katz-McKim with engineering by Neil Tivolt. It was fact-checked by Angel Carreras. Cake & Cannon edits the show and The Indicator is a production of NPR.