The University of Pennsylvania stands to lose $250 million in federal funding under a directive from President Donald Trump’s administration that caps National Institutes of Health spending on the overhead costs associated with research at universities and medical institutions, who rely on the government funding for scientific studies seeking to advance care for cancer, heart disease, and other health concerns.
The Philadelphia region’s academic medical schools and research institutions receive hundreds of millions of dollars in NIH funding. Though it’s hard to pinpoint the exact amount of federal research money coming to the region annually, Penn receives by far the largest share, with some $980 million in federal grants in fiscal 2025.
The implications sent shock waves across the region’s public and private universities, including those receiving far less NIH funding.
New Jersey and Delaware are among a coalition of 22 states that sued in federal court to stop the proposed cuts, which were due to take effect Monday, and a federal judge late in the day temporarily blocked the Trump administration from implementing the cuts in the states that sued.
The Democratic attorneys general who are suing, along with national research leaders, say the unprecedented NIH cut could bring years of research on critical medical developments to a grinding halt.
At Penn, for instance, NIH funding has supported work on CAR-T therapy, considered a cure for some types of blood cancer; mRNA technology, the Nobel-winning science underpinning COVID-19 vaccines; rare disease treatments; and cancer therapies.
“The list is long and powerful in its impact. The reduction in funds announced by the federal government would blunt this critical, lifesaving work,” a Penn spokesperson said.
Much still remains unknown about the implications of the late-Friday NIH announcement, part of Trump’s focus on eliminating what his administration views as wasteful spending — this time by significantly limiting so-called “indirect” research funding, which pays for building and administrative costs associated with conducting studies and clinical trials.
Rutgers University, for example, could lose $22 million in the current fiscal year, administrators said in a memo to faculty and staff at the New Jersey-based institution, which they said could impact staff salaries.
Delaware State University stands to lose $1.4 million that could immediately impact its ability to draw funding used to pay for expenses such as the salaries of research support workers, doctoral student stipends, and building maintenance, according to the lawsuit.
A second federal lawsuit fighting the funding change was filed in Massachusetts by the Association of American Medical Colleges and several other education and hospital advocacy groups.
Penn is a co-plaintiff, along with other leading research universities, in a lawsuit brought by the American Association of Universities, Association of Public & Land-grant Universities, and the American Council on Education.
Pennsylvania is not involved in the lawsuits.
In the states’ lawsuit, the attorneys general note that in 2017, the first Trump administration proposed capping indirect costs at 10%. The next year, Congress passed a law prohibiting NIH from deviating from negotiated rates. That law remains in effect, according to the lawsuit.
The “indirect” funding system can be complicated, researchers acknowledged, with funders from charitable foundations, federal authorities, and the scientific industry setting different rates.
Ari Friedman, an assistant professor of emergency medicine at Penn, conducts research on geriatric abdominal pain and cognitive impairment that is supported by two federal grants. Speaking as an individual, and not on behalf of the institution, he said Congress could discuss reforms to the system, or federal officials could drive efficiencies without funding cuts.
“Instead, what we are seeing is billions of dollars of cuts to health research in this country. It seems like the purpose here is not efficiency,” he said. “The purpose is to attack universities and to cut the amount of science that we fund in this country.”
‘Indirect’ costs of research targeted
At issue is the calculation the NIH uses to reimburse research grant recipients for ancillary costs associated with conducting research.
”The United States should have the best medical research in the world. It is accordingly vital to ensure that as many funds as possible go toward direct scientific research costs rather than administrative overhead,” the NIH wrote in Friday’s announcement.
Each institution negotiates with the federal government an “indirect cost” reimbursement rate based on a review of audited financial statements and expenses for running research programs.
The NIH change caps the reimbursement rate at 15% — meaning for every dollar in research funding, an institution could get an additional 15 cents to cover “indirect costs.”
That’s well below the reimbursement rates Philadelphia-area institutions negotiated.
Rutgers has a reimbursement rate of 57%. The loss of $22 million this year under the new policy could have a “destabilizing financial impact,” according to a joint memo by Rutgers’ J. Michael Gower, executive vice president and chief financial officer, and Michael E. Zwick, senior vice president for research.
Rutgers received a total of $250 million to support 1,200 grants for research on heart disease, cancer, brain health, and infectious diseases in fiscal 2025.
“This action will have a significant and troubling impact on Rutgers’ biomedical and other scientific research projects and the university’s ability to support them,” Gower and Zwick wrote.
New Jersey Attorney General Matthew J. Platkin called the Trump administration’s directive “reckless and illegal,” and ”a direct attack on our state.”
“Trump has Republican majorities in the House and Senate if he wants to change the laws, including laws that set funding levels,” said U.S. Rep. Dwight Evans, a Democrat who represents part of Philadelphia.
Grant funding and university budgets
In a social media post, the NIH wrote that the policy would “save more than $4 [billion] a year effective immediately.” The claim was accompanied by a graphic referencing multi-billion-dollar endowments at Harvard University, Yale University, and Johns Hopkins University, in an apparent suggestion that those endowments could make up for the cuts.
Penn’s research has been lucrative in its own right. The university has earned $1.6 billion in royalties from the Pfizer-BioNTech COVID-19 vaccine, made with mRNA technology developed by Penn scientists.
But research institutes have long relied on the NIH to help pay for the infrastructure needed to conduct research, such as building maintenance, data security, regulatory compliance, paperwork, and administrative needs.
Temple’s leadership wrote in a memo to faculty and staff that “grant funding, alone, is insufficient to fund university research enterprises.”
Temple has an “indirect cost” reimbursement rate of 58%. Reducing payments to 15% would have a “significant financial impact,” wrote John Fry, Temple’s president; Gregory Mandel, senior vice president and provost; and Josh Gladden, vice president for research.
In Nora Newcombe’s lab at Temple, “indirect” funds cover salaries for staff who serve as liaisons between the research team and federal government, conduct financial accounting, and oversee the ethical considerations of research. “Indirect costs” also cover rent for lab space, utilities, and tech support.
Newcombe, a psychology professor and researcher at Temple, spoke in a personal capacity, not on behalf of her university.
She compared research funding to a football team.
“The direct costs in your budget are like the salaries for the players. And the ‘indirect costs’ are like the salaries of coaches, money to transport people to New Orleans and buy the equipment,” she said. “You can’t have one without the other. If you had players with no coaches, uniforms, pads, airplane tickets — you wouldn’t exactly win.”
Inquirer staff writers Lizzie Mulvey, Fallon Roth, and Wendy Ruderman contributed to this article.
Editor’s note: This story has been updated with additional detail on a lawsuit involving Penn and comment.
