Judge Orders Nationwide Halt on NIH Cuts to Overhead Costs

A federal judge ordered a nationwide pause late Monday to the Trump administration’s plans to slash National Institutes of Health payments for facilities and administrative costs.

The restraining order was granted in response to a lawsuit filed by the Association of American Medical Colleges in the Massachusetts District Court. A court hearing is due to take place Feb. 21.

The nationwide halt expands a pause granted earlier Monday that applied to 22 states whose attorneys general also sued NIH. The Association of American Universities, the American Council on Education, the Association of Public and Land-Grant Universities, and a group of 13 universities and colleges filed a separate lawsuit this week seeking a nationwide pause.

The lawsuits were filed in response to an NIH announcement last Friday that the agency would be drastically cutting the payments it makes to institutions to cover their indirect research costs starting Monday, Feb. 10. The plaintiffs claim the agency’s actions are illegal and violate the Administrative Procedure Act.

Indirect costs, also known as facilities and administrative (F&A) costs, are used to cover research expenses such as equipment and facilities maintenance, IT services, and administrative support. Indirect costs are paid in addition to direct research costs and are often expressed as a percentage. For example, an indirect cost rate of 50% means that for every dollar awarded as part of a research grant for eligible direct costs, the institution would receive an additional 50 cents to cover indirect costs. In this case, indirect costs would represent one-third of the total award.

In its Friday announcement, NIH said it would universally cap the indirect cost rate at 15% for both new and existing grants and claimed the reduced rate could save $4 billion annually.

The announcement estimated that NIH’s average indirect cost rate has hovered around 28% in recent years, citing a budget table that displays NIH’s total expenditures on indirect costs as a percentage of the total costs (direct plus indirect). However, the rate using this estimation method should actually be the ratio of indirect costs to direct costs, which is around 38%. If the direct costs figure cited by NIH includes grants that are ineligible for indirect costs, than the current average rate is higher than this figure.

At present, many universities have negotiated indirect cost rates that are higher than 50%. The University of Michigan has an indirect cost rate of 56%, for example, while Harvard University has a rate of 69%.

University groups and research organizations were quick to criticize NIH’s move, stating it would limit research progress and force institutions to shoulder huge, unplanned expenses. Members of Congress from both sides of the aisle also expressed concern about the plans.

Sen. Susan Collins (R-ME), chair of the Senate Appropriations Committee, issued a statement describing the planned cuts as a “poorly conceived directive” that would be “devastating” to research institutions in her state. Rep. Rosa DeLauro (D-CT), ranking member of the House Appropriations Committee, went further, issuing a statement accusing the Trump administration of “attempting to steal critical funds promised to scientific research institutions funded by the NIH, despite an explicit legal prohibition against this action.”

This is not the first time the Trump administration has tried to drastically cut NIH indirect cost rates. In 2017, the first Trump administration proposed capping indirect cost rates at 10%, a move that was blocked by the Senate and House Appropriations Committees through a new provision that has been included in the annual bills funding NIH since 2018.

Despite bipartisan opposition, conservative leaders have continued to circulate the proposal to cut indirect cost rates, including in the policy blueprint Project 2025.

Note: This article has been updated to explain the method used in the NIH announcement to estimate the indirect cost rate and make clear the actual average rate is significantly higher.