By Conor Gowder & Mark Skinner
The Feb. 7, 2025, memo from the NIH Office of the Director (NOT-OD-25-068), now on hold because of two federal judge actions, announced the implementation of a flat 15% Facilities and Administrative fee (F&A) “across all NIH grants.” While the historic average F&A, or indirect cost rate, paid for by NIH is between 27 and 28%, the memo stated, the agency has previously allowed private small businesses without a negotiated F&A rate to charge up to 40% on their SBIR/STTR awards without further justification, drastically lowering their administrative burdens. Thus, a flat 15% fee on F&A if ever implemented would likely lead to some hardship for the small businesses.
Due to the expensive nature of much research in the biotech, pharma, medical device or life science industries, even if a research company had previously negotiated an F&A rate with the federal government, SSTI anticipates the rate likely exceeded 15%.
The $2.8 billion figure represents just under 8% of the $37 billion NIH awarded last fiscal year. The balance of the awarded funds went to institutions of higher education, independent hospitals, nonprofit research institutions, state and local government, and foundations.
More than one-third of the total NIH R&D funding awarded to domestic for-profits in FY 2024, or just under $1 billion, is reported as being to firms in Maryland—most likely due to companies that frequently work with NIH maintaining offices near its facilities in Bethesda, MD. The actual amount of R&D conducted near NIH facilities is likely to be large, but it is also possible Maryland’s figure is skewed by administrative offices of these firms being located in the state and R&D could be taking place in other locations.
The second highest amount of dollars awarded is to firms in California, which received approximately $400 million in FY 2024.
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