Recent/upcoming developments… NIH funding has seen some increased visibility as an issue in recent days, with the release of the White House’s formal FY26 budget proposal – which calls for cutting NIH’s funding by ~$18b (~40%) from FY25 levels – and NIH Direct Bhattacharya testifying before the Senate Appropriations Health Subcommittee regarding the President’s budget and NIH’s use of its funding.

Our outlook… On FY26 funding, despite the White House’s push for dramatic cuts, we believe the worst-case scenario is funding remaining flat relative to FY25, as passing appropriations bills (the source of funding for NIH) requires bipartisan support to pass in the Senate.  Democrats are opposed to cutting NIH funding and even some Republicans, like Appropriations Chair Collins (R-ME)) will strongly oppose NIH cuts.  At this stage, the most likely outcome is a marginal increase in funding, at a lower rate than the historical average (i.e., less than the past decade’s ~5%/year average).  This is not to say that there is no risk to NIH going forward.  As evidenced by the Senate Appropriations hearing, the administration is slow walking the approval of grants and is being more aggressive in the cancellation of grants (i.e., ~$2.3b in fewer dollars have been dispersed this year as compared to last).  Moreover, it remains the case that while the administration’s effort to impose a broad-based indirect cost cap (of 15%) on grants is likely to be found impermissible by the courts (it has already been paused), it is likely NIH may be more aggressive in its posture toward indirect costs going forward, as NIH (1) has the authority to reimburse indirect costs for individual grants or classes of grants at rates that differ from those negotiated with an institution and (2) must periodically renegotiate indirect cost rate agreements with institutions when prior agreements lapse.

Watch for these developments… As we get into Q3, we are watching for calls (particularly from conservatives) for there to be a full year continuing resolution for FY26 (as is already in place for FY25) as opposed to lawmakers working on the individual appropriations titles or an omnibus spending bill.  If this idea gains purchase amongst Republicans and/or the “ordinary” appropriations process appears to be breaking down later this year, it will increase the probability of NIH funding remaining flat for FY26 (the worst-case scenario outlined above) rather than the agency receiving a modest increase.