Judge Issues Permanent Block on Trump Admin’s Change to NIH Indirect Cost Rate

A federal judge in Massachusetts issued a permanent injunction on April 4 blocking the Trump administration from reducing the amount of money the National Institutes of Health pays grant recipients for indirect costs, such as those for administration or maintenance of facilities.

The order solidifies a preliminary injunction U.S. District Judge Angel Kelly issued in March. Her more recent order vacated the NIH’s notice of change to the indirect cost rate. She also entered judgment in favor of various states and organizations on multiple legal claims they brought against the administration.

More specifically, she found in favor of the plaintiffs’ claim that the administration violated the Administrative Procedure Act (APA) by, among other things, not acting in accordance with law and acting in an arbitrary and capricious way.

In its notice on Feb. 7, NIH said $9 billion was allocated in fiscal year 2023 to overhead expenses through its indirect cost rate, while the average indirect cost rate has averaged between 27 percent and 28 percent over time.

The agency said when announcing the new 15 percent ceiling that it 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.”

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In February, the Department of Justice (DOJ) told Kelly that it complied with the APA and existing regulations, and that Kelly didn’t have jurisdiction to block NIH’s policy. The DOJ said a law known as the Tucker Act vested jurisdiction over the case in the Court of Federal Claims “because Plaintiffs are effectively seeking damages for breach of contract—the regulations incorporated into their grant agreements.”

Kelly said in her April 4 order that her court had jurisdiction. In March, she disputed the idea that the Tucker Act prevented her from exercising jurisdiction over the case, stating in part that the essence of the plaintiffs’ action was “not contractual in nature.”

Administrative costs include things such as university administrator salaries, departmental staff, and office supplies. Since 1991, NIH has capped administrative costs for universities at 26 percent of the direct cost of the grant. Universities that receive grants from the NIH negotiate this rate every four years and must show why the money is needed to support research.

As Kelly noted in March, the first Trump administration offered a budget proposal that would have reduced the indirect cost rate in 2017. Congress rejected the idea and instead codified the existing cost reimbursement formula into law.

DOJ attempted to distance that earlier dispute from its more recent guidance on indirect cost rates, stating that Congress had reacted to a budget proposal that would have capped indirect costs in order to achieve savings.

“But that concern … has no application here,” DOJ said, adding that NIH’s recent change “does not seek to save the government money.”

“Rather,” the department said, “it takes the appropriations to NIH as a given and allocates the grants made with that money so that more of the money is spent on the direct costs of the projects NIH is funding.”

Kelly’s March opinion rejected the DOJ’s argument and said that the administration had violated the plain language of an appropriations law. She also pointed to an NIH post stating the potential amount of savings from the rate change and published on X the same day that the agency issued its guidance on the rate change.

“This change will save more than $4B a year effective immediately,” the agency said in the post.

Lawrence Wilson contributed to this report.