Attorney General Andrea Campbell and nearly two dozen of her peers sued the Trump administration and federal health care agencies Monday, alleging that they unlawfully moved to cut crucial federal dollars for research.
Twenty-two attorneys general, all Democrats, filed a complaint in federal court in Massachusetts seeking to block an abrupt cut in National Institutes of Health (NIH) funding that goes toward administrative and overhead costs associated with research projects.
The NIH announced Friday that it would limit the amount of money available for so-called indirect costs — which it defines as covering “facilities” and “administration” — at 15 percent of new grants. That change, agency officials said, would ensure taxpayer dollars are directed primarily toward research costs instead of related overhead.
It would represent a significant shift: according to the NIH, in fiscal year 2023, the agency spent about $26 billion on “direct costs for research” and $9 billion on “overhead through NIH’s indirect cost rate.”
The policy was set to take effect Monday, the first business day after officials announced it.
Opponents argued that the sudden change runs afoul of a federal law known as the Administrative Procedure Act and could lead to layoffs, trial suspensions and laboratory closures.
“High-level research requires funds not just for the costs that can be directly attributed to the specific work of a particular project, but also the indirect costs that support multiple projects. These costs are broken up into ‘facilities’ and ‘administration’ costs,” plaintiffs wrote in their lawsuit. “For example, in order to conduct research, a university needs buildings, and needs to maintain those buildings and supply them with heat and electricity. A university also needs the infrastructure necessary to comply with legal, regulatory, and reporting requirements. These facilities costs cannot be attributed to any particular research project, but are still necessary for any research to occur.”
The attorneys general argued that research institutions negotiate indirect cost rates with the federal government, then execute agreements that apply to “all of that institution’s federal grants.”
They noted that President Donald Trump during his first term sought to reduce the indirect cost rate for research institutions to 10 percent, but that Congress stepped in to block the change.
“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,’” plaintiffs wrote. “That rider has remained in effect through every appropriations law governing HHS to this day.”
Campbell’s office warned that the shift could have massive impacts on Massachusetts, which is home to many research institutions and sizable pharmaceutical and biomedical industries.
In fiscal year 2024, NIH provided $3.46 billion to 219 Massachusetts organizations, according to Campbell’s office.
“Massachusetts is the medical research capital of the country. We are the proud home of nation-leading universities and research institutions that save lives, create jobs, and help secure a better future,” Campbell said in a statement. “We will not allow the Trump Administration to unlawfully undermine our economy, hamstring our competitiveness, or play politics with our public health.”
Explaining the new policy, NIH officials said many private foundations that fund research have lower tolerances for the share of funds that go toward overhead than do federal grants. Some organizations, they said, charge indirect rates of up to 60 percent from the NIH.
NIH leaders said the agency is “obligated to carefully steward grant awards to ensure taxpayer dollars are used in ways that benefit the American people and improve their quality of life.”
“The United States should have the best medical research in the world. It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead,” NIH leaders wrote in a memo announcing the new limit.
The indirect cost rate cap and the ensuing lawsuit represent the latest chapter in Trump’s sweeping efforts to realign federal spending with his political priorities.
A federal judge previously blocked the administration’s proposed grant funding freeze. On Monday, the same judge said the administration has been violating his order to resume the spending, according to POLITICO.
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