US States Sue National Institutes Of Health Over $4 Billion Annual Cut In Biomedical Research Grant Budget

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A U.S. judge temporarily blocked NIH from enforcing a 15% indirect cost cap on grants, affecting 22 states and major research institutions.
NIH planned to cut indirect cost rates from an average of 27%-28% to 15%, estimating $4 billion in annual federal savings.
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On Monday, the U.S. District Court for the District of Massachusetts temporarily blocked the National Institutes of Health (NIH) from cutting research funding in 22 states.

What Happened: On Friday, under updated guidelines, NIH said it would now apply a standard indirect cost rate of 15% to all new and existing grants, replacing the previous practice of negotiating separate rates for each grant.

Historically, NIH's average indirect cost rate has been around 27%–28%, with some institutions charging over 50% or even 60%.

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In 2023, NIH awarded over $35 billion in research funding across nearly 50,000 grants. Of this, $26 billion went directly to research, while $9 billion covered indirect costs.

By implementing a 15% rate, NIH aligns more closely with private research funders. Many private foundations, including the Bill & Melinda Gates Foundation, cap indirect costs at 10%–15%, while some do not cover indirect costs at all.

Why It Matters: NIH has a $48 billion budget and 27 institutes that fund critical research on diseases like cancer and diabetes. The funding cuts were to take effect on Monday, 10 February.

In a social media post, NIH said the change would save the federal government $4 billion annually. It said three schools that had charged more than 60% in indirect rates—Harvard University, Yale University, and Johns Hopkins University—had multibillion-dollar endowments.

A complaint filed earlier on Monday argued that "Without relief from NIH's action, these institutions' cutting-edge work to cure and treat human disease will grind to a halt."

The lawsuit also mentioned, "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 lawsuit adds, "The Rate Change Notice is arbitrary and capricious in, among other ways, 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 NIH action will "devastate critical public health research at universities and research institutions," the lawsuit claims.

The complaint alleges that the agency's action will result in layoffs, suspension of clinical trials, disruption of ongoing research programs, and laboratory closures.

Judge Angel Kelley of the U.S. District Court for the District of Massachusetts issued a temporary restraining order asking the 22 states to file a status report in 24 hours and again every two weeks to confirm the regular disbursement of the funds. The judge set a hearing for 21 February.

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