NIH Funding Guidance; FDA Reinstates Key Staff Amid Industry Pressure; Make America Healthy Again Commission; and the Latest on Tariffs

At a Glance

• The NIH announced a standard indirect-cost rate of 15% will be included with its awards, though a federal judge temporarily blocked the rule and a U.S. district court judge is expected to rule soon on whether the cap can go into effect.
• After significant backlash from key industry players, the FDA has reversed recent terminations of probationary employees overseeing medical devices and other critical areas.
• While the Make America Healthy Again Commission brings much-needed attention to the chronic disease burden, its critical stance on medication and skepticism towards public health and scientific processes raises significant concerns for biopharma and medical device companies.
• We summarize tariff actions taken by President Trump since February 1, which may impact the imports of pharmaceutical and life sciences companies.

With the rapidly evolving regulatory landscape, staying on top of the latest updates is crucial for companies in biopharma and medical devices. In this briefing, we highlight recent regulatory and legislative developments that should be top-of-mind for companies in these industries.

NIH Funding Guidance

The National Institutes of Health (NIH) awards thousands of grants each year to support health research, with much of this money flowing to universities and academic medical centers. In addition to the direct costs of a grant, each institutional recipient receives funding to cover facilities and administration (F&A) or “indirect” costs that reflect the overhead needed to maintain research operations. Each institution negotiates its own indirect rates and some of these rates are significant. This has led to criticisms that NIH should pay a lower indirect rate akin to most philanthropic organizations.

The first Trump administration proposed in its budgets capping this rate at 10%, but that was ultimately pushed back. However, the NIH announced earlier this month that, moving forward, a standard indirect-cost rate of 15% will be included with each award, moving more aggressively to revisit this proposal. This comes despite a provision in current spending bills that limits such unilateral actions. The policy took effect beginning on February 10, 2025, for all current grants with go-forward expenses and all new grants, though a federal judge temporarily blocked the rule on February 11 and a U.S. district court judge is expected to rule soon on whether the cap can go into effect.

FDA Reinstates Key Device Staff Amid Industry Pressure

The U.S. Food and Drug Administration (FDA) has reversed recent terminations of probationary employees at the Center for Device and Radiological Health (CDRH), many of whom are reviewers of medical device applications and other submissions. This decision comes after significant backlash from key industry players who cautioned that the mass firings could lead to slower approvals and negatively impact public health. Reports indicate that some senior executives, recently promoted employees and individuals in acting positions may have been inadvertently included in the terminations, further complicating the situation.

Make America Healthy Again Commission

The recent executive order establishing the Make America Healthy Again Commission, led by recently confirmed HHS Secretary Robert F. Kennedy, Jr., aims to address childhood chronic diseases. While the initiative brings much-needed attention to the chronic disease burden, its critical stance on medication use and skepticism towards public health and scientific processes raise significant concerns. This could impact regulatory practices and funding for biopharma and medical device companies, necessitating close monitoring of developments. Similar to CDRH, the latest Department of Government Efficiency (DOGE) related news articles suggest that the Human Foods Program has seen 89 terminations with at least 10 employees rehired. Read more here.

The Latest on Tariffs — Potential Impacts on Imports for Pharma and Life Sciences Companies

President Trump has taken the following actions since February 1, which may impact the imports of pharmaceutical and life sciences companies:

• Under the International Emergency Economic Powers Act (IEEPA), imposed tariffs of 10% on all articles from China beginning February 4, 2025, and threatened tariffs of 25% against Canada and Mexico (i.e., "paused" them until March 4, but they are scheduled to take effect as of the time of publication):
  • These tariffs are not eligible for drawback.
  • Initially could not use Section 321 / de minimis process to avoid them, but the administration walked that back.
  • Chapter 98 duty provisions still provide relief.
  • President Trump recently stated that the pause on Mexico and Canada will not be extended.
• Under Section 232, modified the aluminum and steel and their derivative products tariffs, effective March 12:
  • Increased aluminum tariffs to 25%.
  • These tariffs are not eligible for drawback.
  • Removed exclusion process and revoked general exclusions beginning March 12.
  • All specific exclusions are allowed until the volume of imports covered by the exclusion is imported or the exclusion expires, whichever is earlier.
  • No information yet on which products are covered by these modified orders.
• Proposed Reciprocal Tariffs against countries that discriminate against U.S. imports or U.S. companies:
  • President Trump has specifically mentioned the following products: autos, pharmaceutical products, semiconductors, and lumber and forest products.
  • He has specifically mentioned retaliation for digital services taxes imposed by France, Austria, Italy, Spain, Turkey and the UK.
  • In his press conference, he also focused on Japan’s nontariff barriers and India’s high tariffs, as well as value-added tax (VAT) assessed by other countries.
• Why do these matter for pharmaceutical and life sciences companies?
  • Chapter 30 products and Heading 9018 medical devices will be subject to these duties of 25% if they have Canadian or Mexican origin and 10% if Chinese origin.
    • If the application programming interface (API) has Canadian, Mexican or Chinese origin, the duties will apply.
  • The Prototype Provision provided for in Chapter 98 will provide duty relief from the tariffs above (we’d be happy to discuss that in more detail).
  • The Pharmaceutical Appendix will not provide duty relief from the tariffs above (this is called out specifically in the previously released Federal Register for Canada, but not for China, although the Section 301 duties were imposed regardless of pharmaceutical appendix, so we have every reason to believe these will as well).

In Case You Missed It

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• China Issues Final Compliance Guidelines in Regulating the Medical Industry
• Biden’s 11th-Hour Ethylene Oxide Decision Continues the Environmental Protection Agency’s Expansion Into Occupational Safety