States Sue the Trump Administration Over NIH Grant Funding Cuts

A group of 22 attorneys general sued the Trump administration Monday over its announcement on Friday that the percentage of NIH research grant funding that goes to pay grantees’ indirect costs would be cut to 15%.

The cuts to indirect cost funding “will devastate critical public health research at universities and research institutions in the United States,” the attorneys general wrote. “Without relief from NIH’s action, these institutions’ cutting-edge work to cure and treat human disease will grind to a halt.”

NIH Acting Director Matthew Memoli, MD, announced the cuts on Friday afternoon. The announcement noted that while indirect cost funding is usually negotiated individually with each institution, “pursuant to this Supplemental Guidance, there will be a standard indirect rate of 15% across all NIH grants for indirect costs in lieu of a separately negotiated rate for indirect costs in every grant.” The announcement noted that the indirect cost rate has averaged between 27% and 28% over time, although “many organizations are much higher — charging indirect rates of over 50% and in some cases over 60%.”

When NIH awards a grant, they pay for two different categories of funding: “direct” costs, which include researchers’ salaries and the cost of equipment; and “indirect costs” — also known as “facilities and administration” costs — which include building maintenance, utilities, and other administrative overhead. The indirect cost amount has typically been negotiated by each institution and is paid in addition to the actual cost of the grant, so that, for example, if a university is awarded a $100,000 grant and negotiates 30% for indirect costs, the actual amount it would receive is $130,000. Friday’s announcement would cap the indirect cost amount at 15%.

The announcement has raised “deep concerns” for biomedical research institutions about the immediate and long-term impacts, said Elena Fuentes-Afflick, MD, MPH, chief scientific officer at the Association of American Medical Colleges (AAMC), in a phone interview. “Institutions rely on the direct cost and the facilities and administration costs to successfully undertake research all across the country. And the abrupt announcement of an across-the-board rate of 15% represents a significant reduction. All across the country, institutions, leaders, and investigators are scrambling to understand what this means and how any charges might be implemented.”

The Infectious Diseases Society of America (IDSA) also expressed alarm about the cut. “Massive cuts to funding for the National Institutes of Health will eliminate the promise of lifesaving medical treatments for millions of Americans of all ages, topple America’s longstanding role as a global leader in innovation, leave our nation less safe and more vulnerable to disease outbreaks and bioterror attacks, and will hurt our economy,” IDSA President Tina Tan, MD, said in a statement.

A spokesperson for the University of Alabama at Birmingham (UAB) said in an email that the cuts “jeopardize life-saving research … If the reduction remains in place, advancements in virtually all areas of research would slow, including those addressing the leading causes of death in the United States.”

“To be clear, these cuts are to real costs for equipment, facilities, digital security, and other infrastructure necessary to conducting critical research,” the spokesperson said. “UAB will continue to closely monitor and assess rapidly evolving developments.”

The cuts did have some supporters, however. “Defenders of 60% overhead rates … insist that they absolutely need this money to cover things like the costs of buildings, research labs, electricity, and janitorial staff that research projects require but that are not directly listed as expenses in a research grant,” the Heritage Foundation said in an email. “The truth is that no one knows exactly how much overhead on research costs. Universities supposedly calculate their costs and negotiate a rate with the federal government, but university finances are opaque and easily manipulated to inflate the overhead rate. While we don’t know the true rate for overhead, we have many reasons to believe that it is nowhere near 60%.”

“The claim that a 60% overhead rate is necessary is also undermined by the fact that universities regularly accept research grants from private foundations that pay 15% or less for overhead,” the email continued. If they can do research for private foundations that pay so much less for overhead, “maybe they can do it for taxpayers for a lot less than 60%.”

But that is not a fair comparison, said AAMC’s Fuentes-Afflick. “The way that foundations structure their grants is fundamentally different from the way NIH structures their grants,” she noted. “Foundations use different categories to allow what we would call direct costs [so] then their indirect cost is usually lower than what the NIH has negotiated … Of the two categories, what is considered a direct cost is not a true comparison when you compare NIH to foundations.”

In their lawsuit, which was filed in the U.S. District Court for the District of Massachusetts, the attorneys general said that this was not the first time President Trump had attempted to cut indirect cost funding.

“In 2017, during his first administration, President Trump made a budget proposal that would have reduced the indirect cost rate for research institutions to an across-the-board, categorical rate of 10%,” they wrote. “Congress unequivocally responded to ward off such a change to the calculation of indirect cost rates. In 2018, Congress enacted an appropriations rider prohibiting HHS or NIH from spending appropriated funds ‘to develop or implement a modified approach to’ the reimbursement of ‘indirect costs’ and ‘deviations from negotiated rates’ … That rider has remained in effect through every appropriations law governing HHS to this day.”

In addition, “the Rate Change Notice violates the Administrative Procedure Act (APA) in multiple ways,” they continued, including “its failure to articulate the bases for the categorical rate cap of 15%, its failure to consider the grant recipients’ reliance on their negotiated rates, and its disregard for the factual findings that formed the bases for the currently operative negotiated indirect cost rates. The Rate Change Notice contravenes Congress’s express directives in the appropriation acts governing the NIH, and HHS’s own regulations that prohibit NIH from requiring such categorical, indiscriminate changes to indirect cost rates. In issuing the Rate Change Notice, the NIH has also acted beyond its statutory authority, and has failed to promulgate the change using notice and comment rulemaking.”

The suit asks the court to set aside the announcement.

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