As you are likely aware, Friday evening we received news of an unprecedented action from the National Institutes of Health (NIH) that they will immediately be capping the Facilities & Administration (F&A) rates on research grants to universities at 15%. This announcement understandably has raised many questions and concerns. Please know that we are working to identify solutions to minimize the impact on faculty and staff, and the important research and clinical trials currently underway at Penn.
This is not simply an accounting change; it is far more serious with significant implications for Penn’s research programs. On NIH grants, the actions announced this past week would reduce annual federal funding to Penn by approximately $240 million. If other federal agencies were to adopt the same formula, the loss to Penn would reach $315 million. The effect of this sudden and major change in research support will be to severely harm our highly impactful research mission.
NIH-funded research at Penn has enriched the world in innumerable and lifesaving ways, whether combatting cancer with CAR T therapy; developing vaccines with mRNA technology; creating gene editing tools and advancing gene therapy cures; developing drugs that treat a range of maladies, including those that combat macular degeneration and rare forms of congenital blindness—the list is long and powerful in its impact. The reduction in funds announced by the federal government would blunt this critical, lifesaving work.
Conducting academic research incurs significant infrastructure costs—such as construction of specialized labs, utilities costs, technical equipment, and regulatory compliance. These F&A rates, sometimes referred to as indirect costs, have been carefully negotiated for decades using a rigorous review process. Even at the current rate of 62.5%, government funding covers only about half of these infrastructure costs. The historic model has been one of partnership between academic institutions and the federal government, and it is arguably a major reason the U.S. is the leader in biomedical research and the envy of the world.
These cuts by NIH will affect universities across the country, and we continue to explore legal options to address these reductions. Among our actions, we are working with the Association of American Universities (AAU), which represents the 71 largest research universities, both public and private, to reach out to lawmakers to explain the impact this decision will have for research, patients, and the economy. Importantly, AAU filed a motion in federal court for a restraining order to block the implementation of the cuts. Penn, along with a number of other universities joined the AAU in filing this action.
In addition to our work with AAU and other higher education associations, we have formed a planning group internally to address the many changes coming out of Washington.
We understand that the consequences of the actions being taken by NIH are significant, and if allowed to stand, will require us to work together to implement necessary cost saving measures. We are actively working with the leadership in each of our schools to model the potential impact of these funding cuts and will keep our community apprised of major developments and actions that need to be taken. While we don’t yet know how these administrative and judicial actions will evolve, I want to emphasize that Penn has long been a leader in research, resilience, and adaptation. Our community is strong, and we will continue our groundbreaking research, advocate forcefully, and take the steps needed to sustain our mission.