While managing recent cancellations of some federal research grants, the Medical College of Wisconsin is bracing for more substantial funding cuts. In February, the National Institutes of Health issued guidance that capped the indirect cost reimbursement rate for all current and new NIH awards to 15% of grants effective Feb. 10, but a federal judge
While managing recent cancellations of some federal research grants, the Medical College of Wisconsin is bracing for more substantial funding cuts.
In February, the National Institutes of Health issued guidance that capped the indirect cost reimbursement rate for all current and new NIH awards to 15% of grants effective Feb. 10, but a federal judge has since blocked that guidance. The NIH also began terminating research grants related to LGBTQ+ issues, diversity, equity and inclusion and other topics. MCW lost $6.6 million as a result of those grant terminations.
Most recently, President Donald Trump’s budget request for fiscal year 2026 includes an approximate 40% reduction in funding for the NIH – indicating that significant funding cuts for MCW may be on the horizon, said Dr. John Raymond, president and CEO of MCW. In fiscal year 2024, MCW received $113 million in NIH funding.
To prepare for potential funding cuts, MCW has already closed programs, put its physician assistant program on hold, capped the number of graduate students admitted this year and initiated a soft hiring freeze that will be extended through September.
“We’re tightening our belts,” Raymond said. “The impact of a reduction in research funding isn’t just felt in our research enterprise. Everything that we do is going to be constrained because of that. Clinical care, education, the work we do in the community. All of our missions are intertwined, and so a challenge in one of the missions is going to rebound across all four of them.”
Threats to reduce indirect cost reimbursement rate
At MCW, the current indirect cost reimbursement rate for NIH research grants stands at 56%.
This means the NIH can reimburse MCW for indirect costs – also called facilities and administrative costs – incurred to cover administrative support, facility maintenance, utilities and other needs to support awarded projects. An institution’s reimbursement rate is negotiated with the federal government every three to four years and typically falls between 50% to 60%. It is essentially an add-on to the grant received for a project. NIH grants are administered in three- to five-year commitments.
The partnership between the NIH and universities “is the envy of the world,” Raymond said, and the NIH’s peer review process for grants – which selects the most meritorious projects – is unique to the U.S.
For the NIH to precipitously reduce the indirect cost reimbursement rate without any consultation is troubling, Raymond said. If the 15% reimbursement rate was applied to all federal grants at MCW, the institution would lose $27 million annually.
“This has completely disrupted the model,” Raymond said. “We can’t absorb a $27 million hit and not shrink our research enterprise.”
MCW also receives federal research grants through the National Science Foundation, U.S. Department of Defense, U.S. Department of Justice, U.S. Department of Transportation, Centers for Disease Control and Prevention, Food and Drug Administration, National Aeronautics and Space Administration, as well as the Environmental Protection Agency. In fiscal year 2024, the combination of NIH funding and all other federal sources MCW received was about $162 million.
While the initial NIH guidance to lower the indirect cost reimbursement rate has been stopped in court, the future is uncertain.
“We are concerned that even if the executive order is deemed illegal – and there are actually good grounds to believe that it is not legal – we have a Congress that is friendly to the president, and they do have the authority to lower the indirect cost rate,” Raymond said.
Trump’s proposed budget would reduce federal NIH funding by nearly $18 billion, which is “absolutely unprecedented,” Raymond said.
“If you have a 40% reduction in the budget, it means even if you issued no grants at all for the next 12 months, you’d still have to cut somewhere,” Raymond said. “It could be that they would retroactively reduce the awards to scientists, or they could then again try to impose that reduction in that (facilities and administrative) cost to try to comply with the budget that they have.
“These threats, even though they’re being tied up in court, are profound, and it is very likely that some significant reduction is going to occur,” Raymond said.
[caption id="attachment_614988" align="alignnone" width="300"] NIH director Dr. Jay Bhattacharya (left) during his visit to MCW in May as part of speaker series hosted by Raymond (right). Credit: MCW[/caption]
NIH grant cancellations
MCW has seen a significant slowdown in the awarding of new NIH grants and non-competing renewals, and 14 research grants have been canceled so far. MCW expects more grants will be canceled in the coming months. Two of the grants have had some or all funding restored.
The canceled grants funded research on HIV, mental health issues with sexual minority stigma, transgender populations, Black populations, structural racism and climate health inequities. Some of the grants had recently been awarded, while other projects were ongoing. The cutoff was immediate, Raymond said.
“All of these grants have undergone rigorous peer review by an objective group of scientists,” he said. “They’ve been deemed to be in the top 10% of all ideas and all projects. This has been really shattering for the morale of our scientists and the confidence they have in the work they’re doing.”
The rescission letters for the canceled NIH grants included language that Raymond described as “demoralizing and pejorative.”
Raymond recited the following passage from a rescission letter: “It is the policy of NIH not to prioritize research programs related to DEI. Research programs based on artificial and non-scientific categories, including amorphous equity objectives, are antithetical to scientific inquiry. They do nothing to expand our knowledge of living systems and provide low returns on investment, and ultimately do not enhance health, lengthen life or reduce illness, and worse, so-called ‘diversity, equity and inclusion studies’ are often used to support unlawful discrimination on the basis of race and other protected characteristics, which harms the health of Americans.”
“There are others that actually are worse, basically saying that the work has no merit,” Raymond said. “I want to emphasize, all of these grants have gone through a rigorous peer review process that has stood the test of time for decades, and it’s the envy of the world. You’re having an administrative policy-driven initiative to cancel these grants. Again, totally unprecedented in the history of the National Institutes of Health.”
MCW faculty members, especially those who are early in their careers, are questioning whether they can continue on as scientists and investigators, Raymond said.
“They’re concerned that the motivation for the cancelations is largely political and not truly scientific,” Raymond said. “They have had to fire staff. They’ve had to suspend work that is in process. On some occasions, there may be some safety concerns if human subjects are involved that they’re going to have to cover with institutional funds to make sure that we don’t have any loose ends.”
MCW is working to provide bridge funding for its researchers who have been affected by the grant terminations as well as help assess whether the work can be repurposed in a way that aligns with NIH priorities and submit appeals to the NIH for reconsideration. MCW is trying to prioritize support for learners and faculty who are in “vulnerable” stages of their careers, Raymond said.
“I fear that if this continues, we may lose a significant portion of the next generation of our scientists,” Raymond said. “A scientific career requires incredible commitment and focus. It requires an ability to be resilient and to be able to survive the ups and downs of funding. If someone believes that the work that they’re doing has been deemed fundamentally invaluable, they may not have the resilience to persevere.”
Visit from NIH director
On May 2, MCW hosted NIH director Dr. Jay Bhattacharya for the seventh session of the President’s Speaker Series. Bhattacharya’s visit to the MCW was his first to an academic institution since assuming the NIH director role on April 1.
During his visit, Bhattacharya defended recent NIH grant cancellations, saying that researchers should avoid political ideology. Bhattacharya mentioned systemic racism and climate change as examples.
“My promise to you is that if you put your talents to the things that actually affect American health and avoid political ideology, you’re going to be very successful,” Bhattacharya said during his visit to MCW.
At a time when the NIH is restricting the research it funds, Bhattacharya said that academic freedom, such as providing space for disagreement in science, was a priority.
Bhattacharya’s willingness to listen and provide answers impressed Raymond, who said MCW is grateful to have been the NIH director’s first university visit.
MCW supports academic freedom and freedom of expression, Raymond said.
“The concern, though, by some people, is that those words are masquerading as a political agenda to actually silence voices,” Raymond said. “I understand why people are concerned about that. Work we’re doing on health equity is important. We’re here to help people that need us the most. If African American men in central city Milwaukee have a higher rate of prostate cancer and worse outcomes, we have an obligation to understand why that’s happening. If African American women have worse outcomes for them and their children in the perinatal period, we have an obligation to understand those things.”
‘We may well have to shrink our research enterprise’
MCW has been working on its physician assistant program for five years, but had to put it on hold due to the current funding climate.
“That was very painful, because we are here to serve the workforce needs of the state, and we were proud of that program, but we had to put it on hold,” Raymond said.
MCW also folded its Neuroscience Research Center, which had previously maintained some significant independence, into its Wisconsin Institute for Neuroscience to gain some administrative savings.
Typically, MCW admits 60 to 65 graduate students into its Ph.D. program. This year, in its “best recruiting year ever,” MCW capped it at 56 graduate students, Raymond said. The program could have admitted 80 if not for the threat of potential funding cuts.
“It just was so painful to have to turn away these bright young minds that could be our future,” Raymond said. “But we really had to do it.”
MCW’s Ph.D. students don’t pay tuition, so it’s a financial commitment to support those students through the duration of the program. Faculty and potential applicants were unhappy with the cap, “but it was one of the things that we really had to do to put ourselves in a position to survive some of these potential cuts,” Raymond said.
If Trump’s proposed cut to the NIH becomes a reality, MCW will need to take additional measures to survive.
“In the long term, we may well have to shrink our research enterprise,” Raymond said. “If the NIH funding is reduced by 40%, you can’t go to the private sector and make up $20 billion of a deficit, and you certainly can’t pivot quickly to be able to fill those gaps.”
MCW may shift its research focus to clinical research and clinical trials because there’s interest in the private sector to fund that type of work, Raymond said. Clinical trials are more closely aligned with new therapy developments.
While MCW has strong relationships with companies in health-related industries, those companies “have a limited capacity to absorb such a tremendous cut that is happening in such a short period of time with no warning whatsoever,” Raymond said.
Raymond said that shift in its research focus “would be a shame for the United States,” because NIH often funds discovery science, in which researchers are making discoveries that may not directly apply to health for 10 to 20 years. MCW is still committed to continuing discovery science even if the institution must shrink its research mission.
“It’s really important for us to find ways to conduct that basic research, not just for the value of the science itself or the potential applications down the road, but having that kind of opportunity here brings talent to our institution and to our region,” Raymond said. “It enriches our learning environment. It helps us to translate basic discoveries into better treatments and cures for disease much faster. It’s essential to the work that we do as an academic medical center.”
MCW will continue to invest in all of its missions amid today’s challenges.
“We’re trying to communicate clearly to all of our faculty, staff and stakeholders about what we’re doing and why we’re doing things to prepare ourselves for these potential cuts,” Raymond said. “We’re also trying to maintain everyone’s morale. That’s become more and more challenging, but it’s important for us. We have people that are coming to work every day trying to make a difference, and we want them to feel good about the work that they’re doing.”
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