Useful Stats: Which businesses are potentially impacted by the NIH F&A rate change?

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%.

To establish an understanding of potentially impacted businesses, this week’s Useful Stats maps where the 2,566 domestic for-profit companies that shared $2.8 billion in Fiscal Year (FY) 2024 NIH awards are located. Starting at the state level is Figure 1, followed by the congressional district level in Figure 2.

Figure 1: NIH awards and award funding to domestic for-profit organizations by state, FY 2024

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.

North Carolina, Massachusetts, Virginia, and New York are the only other states to surpass $100 million during FY 2024. Companies in these six states combined captured $2.06 billion of the $2.81 billion total, or 73%.

The remaining $750 million of the funds are also skewed to a few states: only three states received between $50 million and $80 million: Pennsylvania, Texas, and Colorado. Firms in nine states captured between $25 million and $45 million. Together, these 12 states represent nearly $495 million, or 17.6%, of the $2.81 billion total.

While R&D funding is not awarded on a per capita basisthe 18 states capturing 90% of NIH R&D funding to firms represented only 62% of the year’s estimated population.

Figure 2 provides additional granularity outside of aggregated state-level statistics. The figure includes the number of awards and total funds by congressional districts, the second of two location-based presentation views NIH RePORT provides for the data.

Congressional districts are geographic areas from which members are elected to the U.S. House of Representatives. Each state has at least one congressional district, and as many as 52.

Congressional districts without any NIH awards/award funding are filled with a light grey checkered pattern, while those with awards/award funding are colored according to the scale indicated in the figure. SSTI matched the congressional districts provided by NIH RePORT to the most up-to-date districts available in Flourish, the program used to visualize the data.

Figure 2: NIH awards and award funding to domestic for-profit organizations by congressional district, FY 2024

Of the 435 congressional districts in the U.S., 295, or 68%, received any amount of award funding from NIH in FY 2024. At the top were four districts, including two in Maryland (Districts 6 and 8), one in Virginia (District 11), and one in North Carolina (District 4), which each received at least $100 million in award funding during FY 2024. Between these top four districts, 41% of FY 2024 award funding to domestic for-profits is accounted for.

An additional four districts (California’s Districts 15 and 50, Massachusetts’ District 5, and North Carolina’s District 7) received at least $50 million in award funding, while 43 others, for a total of 51 districts, received at least $10 million in FY 2024.

While one might expect states inclusive of congressional districts with the most NIH R&D funding to be most vulnerable to any negative impacts from the flat F&A fee, it is impossible to tell from just these figures how large of a role life science firms play as employers in each of the districts and how much of a hit those firms might be taking.

This article was prepared by SSTI using Federal funds under award ED22HDQ3070129 from the Economic Development Administration, U.S. Department of Commerce. The statements, findings, conclusions, and recommendations are those of the author(s) and do not necessarily reflect the views of the Economic Development Administration or the U.S. Department of Commerce.