When it comes to the National Institutes of Health’s (NIH) funding for medical research, it’s not a matter of truth or consequences. It’s more like truth and unintended consequences.

Cheered on by prominent researchers, the NIH has embarked on an all-out campaign to spread the word about the consequences sequestration is having on its ability to fund grants and the long-term impact those consequences are likely to have on the basic research that’s the foundation of drug discovery.

The $1.6 billion the NIH expects to lose from its 2013 fiscal budget because of the sequester will translate into a loss of “hundreds and hundreds” of grants the agency would have awarded otherwise, NIH Director Francis Collins has said, warning that such cuts could place an entire generation of researchers in jeopardy.

The truth is that sequestration is just part of the threat to university-based research. NIH funding has been on the decline for a few years. Consequently, labs relying on those research dollars often apply for numerous grants, hoping to improve their odds of getting a single grant. But that strategy has its own consequences, as it tends to weaken the quality of the applications and floods the NIH reviewers with questionable projects, further reducing the percentage of requests that get funded.

Today’s funding crisis also is an unintended consequence stretching back more than 30 years to when Congress passed the Bayh-Dole Act, which gave universities the right to patent and license research funded by federal dollars. Bayh-Dole set off a chain reaction that has many universities betting their life on expanding their portfolios of intellectual property.

Rather than limiting their investments to scientific discoveries that have clear translational value, many universities continue to lose money by gambling large sums on patenting and licensing everything their researchers churn out. That gamble adds to their administrative expenses. So now a number of schools expect the NIH and other government agencies to pick up more of their indirect costs.

While many foundations spend less than 25 percent of their grants on indirect costs such as facilities and administration, some universities are spending up to 95 percent on overhead, Rep. Tim Murphy (R-Pa.) said at a House subcommittee hearing last year. As a result, much of the money the NIH awards isn’t going for research – it’s going to subsidize universities.

The NIH may not be able to change the truth of congressional actions, but it can hope for happier consequences. To wean universities off gambling on the wheel of fortune and to focus its limited funding on real research, the agency needs to put a cap on indirect costs.

So the $64,000 question is “what’s a fair amount?” More than half the respondents in a recent informal BioWorld survey said the NIH should restrict indirect costs to no more than 25 percent of a grant. Another 23 percent said no indirect costs should be allowed, 17 percent thought the limit should be at less than 35 percent of the grant, and 7 percent would put the limit at 50 percent. No one thought indirect costs should exceed 50 percent.