Attorneys general representing 22 states sued the Trump administration on Monday, asking a federal judge to temporarily block a major policy change by the National Institutes of Health that would substantially limit payments for research overhead to universities, medical centers, and other grant recipients.
In the lawsuit, filed in U.S. District Court for the District of Massachusetts, the attorneys general argued that NIH’s abrupt decision to set a 15% cap on payments for indirect costs — administrative and facility costs linked to research — would cause major harm to institution budgets, jeopardizing basic operations and medical research.
“The effects of the Rate Change Notice will be immediate and devastating,” the plaintiffs said in the lawsuit. “This agency action will result in layoffs, suspension of clinical trials, disruption of ongoing research programs, and laboratory programs.”
The attorneys general argue that the NIH’s new policy violates the Administrative Procedure Act, a federal law that governs how federal agencies implement new regulations, because the policy is “arbitrary and capricious.”
In addition, the plaintiffs wrote that the policy ignores certain congressional powers by retroactively modifying existing contracts that set the indirect cost rate between the federal government and research institutions. “No such power was conveyed by Congress here. Indeed, Congress has explicitly limited the NIH’s authority to modify indirect cost rates retroactively,” the lawsuit said.
The lawsuit asked the court to declare the policy illegal and issue a temporary restraining order and preliminary injunction preventing federal agencies from implementing the policy.
Attorneys generals from Arizona, California, Connecticut, Colorado, Delaware, Maine, Maryland, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Washington state, and Wisconsin filed the suit against NIH and its parent agency, the Department for Health and Human Services.
The request for a temporary restraining order comes hours after NIH’s sweeping change took effect on Monday morning. Since it was announced Friday afternoon, clinicians, scientists, and academic administrators have warned the move could have catastrophic consequences for biomedical research. A STAT examination of publicly available financial records and internal emails showed that some top universities and medical centers stand to lose $100 million or more a year if the policy is implemented — including prestigious institutions in conservative states that voted for President Trump.
The new case adds to a growing list of legal challenges to Trump administration actions during the first three weeks of his second term, including a freeze on federal spending that was later rescinded and an effort to incentive federal employees to resign.
The NIH, the nation’s premier funder of biomedical research, sparked bedlam in the nation’s scientific community when it announced that it would slash support for indirect costs. These are expenses that can’t easily be tied to a single project, such as the cost of keeping the lights on in a lab or heating and maintenance fees. They also include the salaries of administrative staff and others involved in preparing grants.
The federal government typically negotiates the rate at which it will support the indirect costs of each grantee institution after a monthslong process that includes a detailed review of audited financial documents. NIH then uses that negotiated percentage to tack on to each grant additional support for overhead.
Indirect cost rates generally vary from 15% to 75%, with big-name institutions often supported at higher rates, in part because they have expensive, specialized equipment used across projects and larger administrative structures (though there has been a cap on administrative costs since the 1990s).
The NIH announced that it would do away with the current system and set indirect cost rates to 15% for all new and current grants.
“The United States should have the best medical research in the world,” the agency said in its announcement. “It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead.”
The move would save the government $4 billion a year, according to a post from NIH on X. It is unclear, however, whether those savings would be funneled into additional support for direct research costs, which include scientist salaries and the costs of lab supplies used to complete a particular project.
Since the announcement, many researchers have argued that, despite their name, indirect costs are vital to science. And while scientists and university administrators acknowledged that looking for ways to make the current system more efficient isn’t inherently unreasonable, they warned that a sudden 15% limit could lead to layoffs and reduced research output across institutions.
The attorneys general referenced that impact in the lawsuit, arguing that the stop in research would harm the health of their states’ citizens. “Effectively halting research to cure and treat human disease will directly impact the well-being of the Plaintiff states’ citizens, who are the beneficiaries of research creating treatments, such as modern gene editing, vaccines such as flu vaccines, and cures for diseases like cancer, infectious diseases, and addiction,” they said.
There were signs that the new policy would face legal challenges from nearly the moment it was announced. Samuel Bagenstos, a law professor at the University of Michigan, noted in a newsletter over the weekend that federal regulations contain language allowing NIH to reimburse indirect costs for individual grants or classes of grants at rates that differ from those negotiated with the institution. But he argued that congressional provisions prevent the agency from implementing major changes. Bagenstos, who was general counsel for the Department of Health and Human Services during the Biden administration, added that the NIH’s announcement was sudden and poorly explained, further opening it to legal challenge.
Since Trump’s return to the White House, many researchers have raised concerns over the administration’s disruption of grant reviews and executive orders that ended federal support for programs that support diversity, equity, and inclusion. But at an institutional level, major universities have mostly been quiet and reluctant to directly oppose the administration.
Now that Trump is going after the fiscal lifeblood of these institutions, however, that seems to be changing.