The hidden costs of clinical trials

Abstract

Amid the intense controversy over drastic cuts to the National Institutes of Health (NIH) and its workforce, a hotly contested cap on the NIH’s reimbursement of indirect costs for facilities and administrative expenses is focusing new attention on the financial burden of the institutions and trial participants that make clinical research possible.

In 2023, the NIH distributed more than $35 billion in grants to more than 2500 universities and institutions in all 50 states, Washington, DC, and Puerto Rico. That amount included approximately $26 billion to researchers for the direct costs of conducting their work and an additional $9 billion to cover indirect costs, such as maintenance, utilities, rent, personnel, shared facilities, and other necessary expenses borne by the research institutions. As the Association of American Cancer Institutes (AACI) has phrased it, “indirect costs are what ‘keep the lights on’ at many of our nation’s premier research facilities.”

Each institution negotiates its percentage rate for indirect cost reimbursements with the NIH based on factors such as the local rental market and other overhead expenses; the rates generally vary from 30% to 70%. In February 2025, however, the Trump administration announced a new formula capping all reimbursements at 15%, regardless of location. Among the many research organizations decrying the move, the AACI charged that the cut “would be devastating for the patients our cancer centers serve and would stifle progress against cancer.”¹

The Trump administration has cast the controversial rule as a cost-conscious move that will save the NIH an estimated $4 billion annually. As a rule of thumb, though, economists have suggested that every $1 spent by the institutes yields roughly $2.50 in economic activity. The cuts, in other words, could wipe out $10 billion in economic activity, resulting in a $6 billion net loss.

Research administrators such as Prakash Nagarkatti, PhD, a professor of pathology, microbiology, and immunology at the University of South Carolina, say that their indirect cost reimbursements are closely tracked and monitored. “It’s not like it just goes into a bucket and disappears,” he says. In a perspective piece in The Conversation, he and his wife, Mitzi Nagarkatti, PhD, also a professor of pathology, microbiology, and immunology at the university, further assert that the funding cuts will hit hardest in red states, rural areas, and underserved communities.² To explain why, they point to a huge geographic disparity in which 27 states receive 94% of all NIH funding. That leaves the remaining 6% of funds to be divided among 23 states—including the 18 least populous ones—and Puerto Rico.

Dr Prakash Nagarkatti says that more rural states with smaller economies and a relative lack of investment, infrastructure, medical centers, and research universities can struggle to be competitive in NIH grant applications. In 1993, a Congress-backed program called the Institutional Development Award (IDeA) began setting aside a bit less than 1% of the NIH’s annual budget for grants to help such states to become more competitive by developing and expanding their research infrastructure and recruiting new faculty. At the University of South Carolina, Dr Nagarkatti points to the Center for Biomedical Research Excellence, which he directs, as a highly successful example of an investment made possible by IDeA funding.

Even so, IDeA’s $430 million in annual spending has not yet helped under-resourced states to pull even with their peers. In a 2024 policy paper, Drs Prakash and Mitzi Nagarkatti along with two of their colleagues wrote that on a per capita basis, non-IDeA states received $120 from the NIH, whereas IDeA states received only $45.³ Consequently, the latter states are highly dependent on indirect cost reimbursements as well, which Dr Prakash Nagarkatti says have at least helped them to compete for funding to address high-priority regional needs.

The NIH traditionally has rewarded institutions that upgrade their research infrastructure with higher recurring rates. “Basically, money gets more money,” he says. On the flip side, a lack of attention to antiquated facilities might yield lower rates. Steep cuts to the NIH’s indirect cost reimbursements harm states in both groups, Dr Nagarkatti says. For institutions that have invested in infrastructure and seen higher indirect cost rates, the fall to 15% represents a larger loss—in essence, a penalty for spending more to upgrade their facilities.

For IDeA states such as South Carolina, the cut further harms their research capabilities and abilities to land future grants, Dr Prakash Nagarkatti maintains. The University of South Carolina currently receives a 49% reimbursement rate. The drop to 15% could cost the university roughly $17 to $20 million, he estimates, which does not count grants already canceled because of their association with vaccine or Covid-19 research or with diversity, equity, and inclusion initiatives. “We are going to be losing a lot of money,” he says.

The American Cancer Society (ACS) recently reduced its own indirect cost reimbursement rate from 20% to 10% (the ACS publishes Cancer Cytopathology). Douglas Hurst, PhD, scientific director of biochemistry and immunology of cancer at the ACS, acknowledges that there is a good debate to be had about the right rate and whether the negotiation process should be revisited. “It’s always good to question things,” he says.

Other research has revealed the substantial indirect costs also borne by study participants for necessities such as transportation, lodging, food, and childcare. Under existing federal regulations, including an anti-kickback statute prohibiting inducements for Medicaid or Medicare beneficiaries, most reimbursements are not allowed. In February 2025, the ACS Action Network and 20 other cancer organizations penned a letter asking the Health and Human Services Office of the Inspector General to create a regulatory “safe harbor” that would allow participants in clinical trials targeting cancer or other life-threatening diseases or conditions to be compensated for their added costs.⁴

The letter notes that such reimbursements could improve the racial, ethnic, and socioeconomic diversity of clinical trials, which have struggled to recruit the very patients that often bear a disproportionate disease burden. That letter, in turn, was informed by a recent study led by Courtney Williams, DrPH, an assistant professor of general internal medicine and population science at the University of Alabama at Birmingham. Her survey-based study found that almost half of respondents who had enrolled in a cancer clinical trial faced financial hardship due to their participation.⁵ That hardship made more than half of the respondents less willing to participate in future trials.

The small sample size of patients who previously received financial and social support may limit the study’s generalizability. Even so, the results point to a largely unaddressed problem that deserves far more attention and study, Dr Williams maintains. To compensate participants for the added costs, “we’re seeing that $1,000 monthly is not out of the question,” she says.

Two pending pieces of federal legislation would allow trial sponsors to financially support participants to alleviate their hardship and improve accrual and retention rates. Any change in federal policy, of course, leaves open the question of who would provide the additional money needed to reimburse clinical trial participants.

A larger question, perhaps, is whether the United States will continue to invest in the ability of biomedical centers to conduct the research needed to improve patient care. For researchers such as Dr Prakash Nagarkatti, that means not letting indirect costs slip through the cracks. “I think we need to make sure that the public understands that the indirect costs are helping support the grants that are funded but also help create opportunities for future funding and help attract the talent to our IDeA states,” he says. Funding cuts, he fears, could exacerbate the brain drain and leave states like his even further behind. ■