In what Sen. Mark Warner called a “period of enormous uncertainty” for research grants nationwide, he is floating an idea that might appeal to “The Art of the Deal” president: rebates to taxpayers for university-born innovations.
Trump administration officials at multiple agencies, including the National Institutes of Health and the Department of Energy, have attempted to decrease payments to research universities, specifically targeting facilities and administration reimbursements.
Virginia Tech officials say the NIH move could cost the school $13 million annually, while a similar move from the Department of Energy could cost the university about $5 million. Roanoke-based Fralin Biomedical Research Institute at Virginia Tech-Carilion receives most of the university’s NIH money, while DOE money comes to the Blacksburg campus.
Both scenarios are playing out in federal courthouses.
Warner, D-Va., gathered with Carilion Clinic and Virginia Tech decisionmakers and other stakeholders on Wednesday in Roanoke for a roundtable discussion about the potential impact.
[Disclosure: Carilion is one of our donors, but donors have no say in news decisions; see our policy.]
Arguments about facilities and administration, also known as indirect costs, aren’t likely to sway people who see it simply as “overhead” and aren’t interested in those details, Warner said. But there are other possibilities to preserve funding at levels higher than the NIH’s proposed 15% cap on indirect costs, which he and university officials agreed would devastate biomedical and other research efforts.
For example, universities hold intellectual property rights to innovations developed on their campuses. Why not share a piece of that with the taxpayers who fund the research? he said.
It could be a 1%-2% “rebate” per taxpayer for a “home run” innovation, said Warner, a three-term senator and former Virginia governor. Multiple details might stand between the idea and reality, he said, but in an era when researchers are pressed to justify the federal grants they receive, putting a return on investment into folks’ bank accounts might be persuasive.
“These are tax dollars that are almost pre-venture stage investing,” Warner said. “I think there would be a kernel of something there. I do think it would be even safe to say that this particular administration would love to declare that kind of [benefit] for the American taxpayers.”
Michael Friedlander, executive director of the Fralin Biomedical Research Institute, said that he personally likes the idea and has for years. University ownership of intellectual property goes back 45 years in federal law, and it has helped research institutes in many ways, Friedlander said.
“But another way to look at it is, as Senator Warner said, the taxpayers funded the research of the United States, and so why not take a little bit of that anyway and funnel it back,” he said in an interview after the meeting. “And if you could use that to help support the overall biomedical research enterprise, you can take some pressure off. I’m not speaking for the institution. It kind of makes sense to me. It has a logic.”
Warner discussed another line of public persuasion, this one centering on Trump ally Elon Musk, whom the president appointed to lead his new Department of Government Efficiency.
Musk is at the center of most arguments in favor of cuts, but Warner said that if Musk’s SpaceX were classified as a research institute, its indirect costs would include rockets and would be higher than 70%. SpaceX received more than $3 billion in government contracts in 2024, according to multiple published reports.
Indirect costs include items such as research laboratory maintenance, high-speed data processing, data storage and security, lab equipment, radiation safety, hazardous waste disposal and support staff for administrative and regulatory compliance work. They are calculated separately from the direct cost of research.
The top negotiated rate at Virginia Tech is 61%, university President Tim Sands said. For every dollar granted, 61 cents more would be added for overhead. The grant reimburses institutions for money already spent, but Virginia Tech’s expense is actually 65%, Sands said.
“So we actually take a 4% cut right off the beginning, and we don’t recover all of what we spend,” he said.
Nationwide, NIH spent more than $35 billion in the 2023 fiscal year on about 50,000 grants to universities, medical schools and other research facilities. About $26 billion went to direct costs for research, while $9 billion went to overhead via the indirect cost rate, according to a notice that NIH officials posted announcing the planned reduction.
The aim of Trump’s directive is to save $4 billion, according to an NIH post on Musk’s social media site X, formerly Twitter.
‘One big deal away’
The roundtable focused in part on alternative means to support what Warner said is an “incredible” Roanoke-based biotechnology sector that is “one big deal away” from “kind of breaking into the big leagues.”
Heywood Fralin, whose last name is on the biomedical research institute, pointed to a candidate to make that hit, Tiny Cargo Co.
Tiny Cargo is corralling milk exosomes — which serve as cells’ cargo-delivery system — to carry drugs to humans dealing with radiation’s effects in cancer treatment. The exosomes might also treat other diseases. Fralin said that its applications to cardiac medicine might turn out to be even more impactful. Rob Gourdie, a scientist and researcher at FBRI who co-founded the company, was part of the roundtable as well.
“By any measure, he has latched onto something that nobody else has, that is of extraordinary importance,” Fralin said.
He said that Warner could help bring venture capital to the table for Roanoke-based biotechnology startups. Warner, who created wealth as a venture capitalist investing in cellular communications, said he is willing, but wants to see the pitch. Big investors typically allow one shot, and it had better be strong.
“As a venture capitalist for a long time, I never met an entrepreneur that didn’t have an idea that they thought was going to change the world and make a gazillion dollars,” Warner said. “So they’re not quite as jaundiced as old politicians, but they’re pretty damn close. … I can get you the hearing. You’ve got to tell me you’re ready.”
Funding limbo
The NIH plan dates to the night of Feb. 7, when it issued a directive to slash previously negotiated funding for existing research projects and capped future funding. The directive was due to go into effect Feb. 10, a Monday.
Multiple states’ attorneys general’s offices and lawyers for two academic groups — the Association of American Medical Colleges and the Association of American Universities — filed for a temporary restraining order against the NIH and its overseer agency, the Department of Health and Human Services.
After a Feb. 21 hearing, Massachusetts-based U.S. District Judge Angel Kelley ordered a preliminary injunction against the NIH and HHS. Earlier this month, she ordered the injunction be permanent, pending appeals.
The NIH notice “impacts thousands of existing grants, totaling billions of dollars across all 50 states — a unilateral change over a weekend, without regard for on-going research and clinical trials,” Kelley wrote in a memorandum and order filed March 5. She ruled that the rate cut could cause “irreparable harm” to the institutions, their communities and far beyond.
Among the issues was the NIH’s assertion that capping indirect rate payments at 15% would bring its reimbursement rate closer to that of such private organizations as the Gates Foundation, which also funds biomedical research at U.S. universities. The NIH’s rate change notice, however, did not provide reasoning to back up that assertion, as the law requires in such moves, Kelley wrote.
“The Rate Change Notice seems to have ignored the need for indirect funds in the administration of any and all research,” she wrote. “In essence, by cutting indirect funds, NIH is cutting research. There also seems to be a limited rational connection between the facts, particularly the nature of private funding opportunities and their differences from federal funding grants, as well as the limitation on university endowments, and the decision to cut ICRs to bring them in line with private organizations.”
The judge, citing a declaration submitted to the court in the case, wrote that most universities’ existing endowments can’t legally be drawn down to cover research infrastructure costs.
Meanwhile, according to the judge’s memorandum and order, defendants “subsequently filed reports confirming that they would not implement the Rate Change Notice until further notice from the Court.” The payments have continued, a Virginia Tech spokesman said.
The Trump administration appealed Kelley’s order to the 1st Circuit U.S. Court of Appeals in Boston.
The Association of American Universities led the list of plaintiffs filing for a restraining order against the Department of Energy, with a hearing scheduled for April 28 at the Massachusetts federal courthouse.
After the meeting with Warner, Sands said that he thinks that issues accompanying indirect cost rates and terminated grants will be in the courts long enough to give him and other research leaders time to talk about the value of what they’re doing. He sees the opportunity to reduce bureaucracy in the process, “and provide some return to the taxpayer.”
“In the long run, I’m very worried about the potential impact of reduced research funding overall,” Sands said. “You know, as we move into the budget seasons, the competitiveness of the United States in all sorts of areas, not just the health sciences, but national security, artificial intelligence, all these things, take money to support, and we were lagging before, and now we’re at the risk of falling even further behind.”
He expressed further concern about the potential loss of international talent as the administration makes moves to remove foreign-born residents from the country.
“We have 4% of the population of the world,” he said. “You can’t do it all with that 4%. You need to bring talent in from overseas, and I’m concerned about that as well. If we start making it very difficult for someone in another country who sees an opportunity to come and be part of the science and technology enterprise in the United States, and we’re telling them no, we don’t want you, what is that going to do in the long run to our competitiveness?”
“Our economy, our way of life, has been built on our leadership and technology and science since the Sputnik era, and we’re now talking about letting that go. That would be a tragic mistake.”