An update from the Dean
March 17, 2025
Dear Colleagues,
I know that many of you are as concerned as I am about the impact of federal directives and legislation on our research, clinical, and education missions. While we remain strong, there are many challenges ahead. I wanted to provide an update regarding relevant recent activities.
Facilities and Administrative cost reimbursement
On Friday, Congress passed and the President signed a continuing resolution that will fund the NIH through September 30, 2025. The bill extends statutory language preventing the Administration from imposing a 15% cap on Facilities and Administrative (F&A) cost reimbursement, although the Administration is challenging this statutory prohibition in the courts.
F&A (also called indirect) rates are negotiated with and set by the federal government to help to offset critical infrastructure and administration expenses that support research. While direct costs consist of the costs of conducting a particular research project, indirect costs include the costs of maintaining and running our buildings (including heat and electricity) and necessary research support activities such as regulatory compliance (e.g. EHRS, IACUC, IRB).
These funds do not fully fund the costs of conducting research. On average, the AAMC estimates that academic medical centers invest at least 50 cents in addition to every dollar provided by the federal government. More information can be found here.
At Penn, our F&A rate is presently 62.5%, but many federal grants have much lower rates, including training and equipment grants. Thus, our “effective rate” (what we really receive) is about 40%. That means for every $1 in direct costs that we receive, an additional 40 cents is provided for F&A costs. Thus, the total grant amount (direct plus indirect) is $1.40 and 28.6% of this total is for F&A (0.40/1.40 = 0.286). Hence, even though our stated indirect rate is 62.5%, in reality less than 30% of the total grants are used for F&A. If the federal F&A rate is reduced to 15%, PSOM would stand to lose ~$150M per year.
Use of our endowment
Many have wondered if we could make up for this loss by tapping our endowment. We do not actually have a single endowment, but rather many hundreds of endowments that have been provided by generous donors or organizations over our 260-year history. Most of these endowments are restricted for specific purposes at the direction of the donor and are intended to remain as endowments in perpetuity with only the investment returns used for the specified purpose.
Furthermore, for the endowments to remain relevant, the corpus must grow at a rate that keeps up with inflation, so we reinvest a portion of the investment returns into the endowments when annual earnings are sufficient to do so. The remainder of the investment returns are available to spend in accordance with the University’s spending rule income policy and consistent with the terms of the individual endowment agreements. Some of our endowments have more flexible terms and we can deploy those funds to fill important gaps and to advance our most critical programs. At the same time, if we lose significant amounts of NIH funding, these funds will not be sufficient and we will need to identify operational savings and new funding streams, or to curtail some activities. We are aggressively pursuing each of these possibilities and welcome your partnership and ideas.
Impact of executive orders and federal directives
Last week we learned of catastrophic challenges for our colleagues at Columbia and Johns Hopkins Universities due to federal withholding of hundreds of millions of dollars of federal funds. Thousands have or will lose their jobs. Over 100 other institutions will be investigated by the Department of Education for potential violations of executive orders related to DEI or antisemitism. Individual NIH grants previously awarded to Penn and other institutions have been canceled because of changes to Administration priorities. Many of us are struggling with heightened concerns regarding holders of visas or green cards in light of recent events. At Penn Medicine, we have made difficult decisions to adjust some of our activities and practices to comply with current law. We remain committed to being a welcoming environment where everyone can belong and to providing equal opportunity devoid of discrimination.
Some good news
Encouragingly, we received confirmation of some new NIH awards in recent days, including our large Abramson Cancer Center grant. Study sections are once again being posted to the Federal Register so that we anticipate that new grants will begin the process of peer review. I am hopeful that NIH institute advisory council meetings will also be rescheduled soon such that grants can be approved for funding and scientific progress can continue. We are working actively with state and federal officials, and with our colleagues at other institutions and medical/scientific organizations to stress the importance of federal funding and biomedical research. Few convey this message more poignantly than Penn sophomore Emily Whitehead whose life was saved in 2012 when she became the first child treated with CAR T-cell therapy. “Without the funding that went into the research that created CAR T-cell therapy, I wouldn’t be here today,” Emily recently told CNN’s Jake Tapper.
What we can do
I urge you all to find opportunities to stress the vital importance of what we do. Communicate it to your families and friends, your patients, your government officials, and to the public. I am so proud of all we do together at Penn Medicine to improve and save lives each day. We will and we must work together to continue our vital work.
Jon
Jon Epstein, MD
Dean|EVP
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ADDITIONAL INFORMATION
Keep updated on federal policy changes
University Communications updates this website that aggregates public information, messages, and campus resources related to recent federal actions. The purpose of this site is to centralize a broad range of public information and relevant campus resources for faculty, staff, and students.
Our colleague John Wherry, Chair of the Department of Systems Pharmacology and Translational Therapeutics, put together this white paper on the Importance of NIH Funding that outlines some facts, figures, and talking points.
Changes to grants, certifications, and study sections
If you are aware of changes to grants (such as receipt of notice to stop work order related to a project) or requests for certifications, please contact Missy Peloso.
Researchers should continue to submit proposals for existing funding opportunities in accordance with published sponsor deadlines. Please check "Funding Opportunity Announcements" frequently (up to submission) to confirm dates and guidelines.
Website with updates via the Office of Research Services
The Office of the Vice Provost of Research is making current information and guidance available here. This web page will be updated on a regular basis. There is also a link on the homepage of the Office of Research Services.
Guidance and information regarding international students
The office of International Student & Scholar Services [ISSS] provides updates on the latest immigration policy, announcements from ISSS, resources to help navigate changes in federal policy, and contact information for further assistance on the Immigration Policy Updates & Resources webpage.
Also, ISSS recently added a page providing guidance for Penn international students about navigating U.S. ports of entry and secondary inspection.
Wellness
Penn employees can access Penn Cobalt, a web-based platform, that matches Penn employees to mental health resources and the appropriate level of group and individual mental health and well-being support. Resources and tips are also available for faculty and staff looking for ways to support students.
PSOM Contacts
Holly Auer, Associate Vice President for Communications
215.200.2313 | holly.auer@pennmedicine.upenn.edu
Kristen Molloy, Corporate Director, Government and Community Relations
267-809-0564 | Kristen.Molloy@pennmedicine.upenn.edu
Denene M. Wambach, Associate General Counsel, Office of the General Counsel
215.746.5269 | denene.wambach@ogc.upenn.ed