The States vs NIH: What You Need to Know About the Legal Battle Over Research Funding Caps

Laptop displaying logo of The National Institutes of Health

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Yesterday, February 10, 2025, a coalition of 22 states filed a lawsuit against the National Institute of Health (NIH) and related federal entities that challenged the NIH policy change announced February 7, 2025, to cap indirect cost rates for research funding at 15%, which were shown to be a significant reduction from previous rates. This change was set to take effect the following Monday, February 10, 2025.

In the claim to the United States District Court of Massachusetts, the states argued that this abrupt change violated established federal regulations and would threaten critical public health and medical research.

“Implementing this 15% cap will mean the abrupt loss of hundreds of millions of dollars that are already committed to employing tens of thousands of researchers and other workers, putting a halt to countless life-saving health research and cutting-edge technology initiatives. Not only that, but the sudden cut of funding will have ripple effects into the private sector as it disrupts numerous partnerships with private institutions.” (page 39)

On Friday, NIH announced on X (formerly Twitter) that it would cap funding of indirect costs to research institutions to 15% to save $4B a year. “Last year, $9B of the $35B that the National Institutes of Health (NIH) granted for research was used for administrative overhead, what is known as ‘indirect costs.’ Today, NIH lowered the maximum indirect cost rate research institutions can charge the government to 15%, above what many major foundations allow and much lower than the 60% + that some institutions charge the government today. This change will save more than $4B a year effective immediately.”

Friday’s announcement from the NIH of cuts to research funding elicited an outcry from public health, researchers, and universities across the nation. In a press release from Harvard University, Provost Alan Garber, PhD, MD, stated that “Implementing a 15 percent cap on indirect support, as the NIH has announced it intends to do, would slash funding and cut research activity at Harvard and nearly every research university in our nation.”

In addition to the concern for the impact on medical and scientific research, experts argued that reducing indirect research costs would have a significant economic impact. According to NIH, in fiscal year 2023, NIH research funding generated $92.89 billion in economic activity. Angela Rasmussen, PhD, American virologist at the Vaccine and Infectious Disease Organization at the University of Saskatchewan in Canada, (@Angie-Rasmussen) took to X (formerly Twitter) to highlight the impact that funding cuts from NIH would have on the economy, “Every $1 invested by NIH returns $2.5. So $4B in “savings” is actually $10B we lost.”

The indirect costs of research are not well understood by the public outside of the research community, but these costs include the essential expenses of facilities and administration (F&A), including, but not limited to, building maintenance, utilities, administrative support, and compliance infrastructure. Research institutions negotiate these indirect cost rates with the federal government based on their unique needs and cost structures. These rates are formalized in agreements and are crucial for institutions to manage the comprehensive costs of conducting research.

In the recent claim, the states argued, "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. 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.” (page 2)

The Criticism

Social media has recently questioned whether the judicial system has the authority to block recent executive orders and proposed funding cuts, such as the one presented by the NIH. A recent post shared by Elon Musk on X read, “The supreme court [sic] needs to reign in these judges before we don’t have any real elections.”

However, the public must remember the important checks and balances of the judicial system that we value as a democracy. The judicial branch acts as a check on the executive branch. It ensures that presidential power does not overstep and complies with the Constitution of the US. If a president issues an executive order that is believed to overstep his legal authority, the judicial system has the right to challenge the order in court and ultimately block the order if found unlawful, reinforcing constitutional law. The recent injunction by the states is an example of the right that a state’s attorney has to sue the federal government if they believe an order or a policy overreaches its federal authority, violates constitutional law, or harms its state’s constituents.

According to the claim filed by the coalition, “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. The well-being of the Plaintiff States’ citizens will also be adversely affected by the halting of research involving a better understanding of health conditions. These universities and research institutions are vital economic and social institutions in each state, employing thousands of their citizens, educating and training thousands more, and creating investment and partnering opportunities with the private sector.”

What’s Next?

Only hours after filing their claim, US District Judge Angel Kelley issued a temporary restraining order blocking the NIH from further enacting its policy change to reduce indirect cost rates to universities. The NIH was also ordered to submit regular status reports to confirm that funds were being dispersed at previously agreed-upon rates.

This current order only temporarily restrains the NIH funding cuts from moving forward. Next, the NIH and federal entities must respond to the coalition’s claim by February 14, 2025, with a hearing scheduled for February 21, 2025. All eyes will be on the February 21^st hearing, where a judge will decide whether to continue the block until the case can be heard in court and a final decision is made. If the judge approves injunctive relief, the legal process will follow, consisting of motions, discoveries, and a potential trial if the matter is not settled outside of court. The entire process could take months if not years.

Although universities nationwide are no doubt celebrating the temporary block to the NIH funding caps, their excitement is tempered by the knowledge that we’re not out of the woods yet. The upcoming February 21st hearing will determine whether the policy remains on hold while the lawsuit unfolds. Even if the states win at this stage, the NIH could appeal, sending the case to a higher court where the ruling could be overturned. If the case continues to escalate, it may eventually reach the US Supreme Court, where a final decision could reshape how research funding is allocated nationwide.

Meanwhile, universities and researchers remain in limbo, unsure whether their negotiated funding agreements will stand or be slashed. As a researcher in the infectious disease community, I feel dizzy with fear aboard an emotional roller coaster threatening to upend decades of progress in medical and scientific research.