The judge ruled in response to a lawsuit from 22 state attorneys general that says the NIH cuts are unlawful.
A federal judge issued a nationwide injunction on March 5, blocking the Trump administration from instituting funding cuts for administrative costs associated with research at the National Institutes of Health (NIH).
U.S. District Judge Angel Kelley’s ruling follows a request from 22 Democratic state attorneys general and groups representing universities and medical schools who argued the NIH funding cuts were unlawful and would lead to layoffs, lab closures, and disruption in scientific and medical research.
On Feb. 7, the NIH decreased the maximum indirect cost rate research institutions can charge the government to 15 percent, a drop from a previous average of 27–28 percent.
“The average indirect cost rate reported by NIH has averaged between 27 percent and 28 percent over time. And many organizations are much higher—charging indirect rates of over 50 percent and in some cases over 60 percent,” the NIH stated in a Feb. 7 post on the social platform X, adding that $9 billion of the $35 billion granted for research “was used for administrative overhead, what is known as ‘indirect costs.’”
On Feb. 10, Kelley temporarily blocked the NIH from carrying out the cuts until she could consider arguments in the lawsuit. While considering whether to order a longer-term injunction, she extended that order.
President Donald Trump has instituted a broad range of federal funding cuts since retaking office in January, including efforts to downsize the federal workforce, decrease federal spending, and dismantle certain agencies entirely.
After the NIH announced on Feb. 7 that it would sharply lower the rate for reimbursing institutions for “indirect costs,” which relate to a research project’s goals and its personnel, service contracts, equipment, and infrastructure, the states and groups filed their lawsuit.
“The effects of the Rate Change Notice will be immediate and devastating,” the lawsuit stated, referring to the Trump administration’s actions. “This agency action will result in layoffs, suspension of clinical trials, disruption of ongoing research programs, and laboratory closures.”
The White House said the new NIH policy would see federal grants fall in line with private sector requirements for their grants.
The states and groups accuse the NIH of exceeding its authority and violating federal law. They also argued that the agency would be unable to carry out “cutting-edge work to cure and treat human disease,” adding that the cuts would also prevent individuals from becoming “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.”
If the cuts were allowed to stand, they would result in layoffs, research disruptions, and laboratory closures, the states and groups argued.
The cuts would cap the rate at which the NIH reimburses indirect institutional costs at 15 percent, down from an average of roughly 27–28 percent, the Trump administration said. The NIH said in a post on the social platform X that this would save the government $4 billion a year.
“The average indirect cost rate reported by NIH has averaged between 27% and 28% over time,” the NIH stated in a notice published on Feb. 7. “And many organizations are much higher—charging indirect rates of over 50% and in some cases over 60%.”
The NIH reportedly spent more than $35 billion in fiscal year 2023 on grants given to researchers at more than 2,500 institutions, with roughly $9 billion of that money going to overheads and institutions’ indirect costs.
During his confirmation hearing on March 5, Jay Bhattacharya, nominee for NIH director, was asked about the 15 percent cap.
“That amounts to a massive funding cut for research institutions, large and small, red and blue states,” Sen. Patty Murray (D-Wash.) said, “and brings a lot of life-saving research to a screeching halt.”
Stanford University would stand to lose some $160 million per year under the plan, she noted.
Sen. Susan Collins (R-Maine) described the move as ill-conceived and arbitrary.
“A one-size-fits-all approach makes absolutely no sense, and that is why NIH negotiates with the individual grant recipient what the indirect cost cap should be,” Collins said.
Bhattacharya acknowledged that universities often incur overhead costs while conducting important research.
“But there’s a lot of distrust about where the money goes because the trust in the public health establishment has collapsed in the pandemic,” he said, adding that universities could address the problem with more transparency on how they spend the indirect cost allocations.
Lawrence Wilson, Jack Phillips, Kimberly Hayek, and Reuters contributed to this report.