Bad medicine? Trump targets overhead costs for research grants, gets pushback from universities

A federal judge on Monday temporarily blocked a new Trump administration rule that would cap the amount of overhead costs universities and researchers could charge the federal government.

Last week, the National Institutes of Heath — which is part of the Department of Health and Human Services — outlined a new policy aimed at standardizing the “indirect” cost rates for its grants.

If allowed to go forward, the announced change could significantly impact the University of Utah, potentially costing the institution millions of dollars in grant funding. University officials plan to hold a Tuesday town hall with its stakeholders on the issue.

The university received $291 million in NIH grants in 2023, according to the Office of the Vice President for Research. The portion of those funds slated for indirect costs was not immediately clear.

“Indirect” costs are typically categorized as a portion of a research grant award that goes toward facilities and other administrative/overhead expenses.

The change drew a swift response from universities, higher education associations and almost two dozen state attorneys general, who filed a lawsuit over the change. Judge Angel Kelley of the U.S. District Court for the District of Massachusetts issued a temporary restraining order late Monday, with a hearing set for Feb. 21, according to The New York Times.

The NIH, according to its recent statement on the funding caps, has historically negotiated “indirect” cost rates with grant recipients. Typically, those costs account for a little over 25% of grants awarded. The updated policy would restrict all NIH research grant awards “indirect costs” to be uniformly capped at 15%.

“The United States should have the best medical research in the world,” the report noted. “It is accordingly vital to ensure that as many funds as possible go towards direct scientific research costs rather than administrative overhead.”

The NIH, the report added, 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.”

But indirect costs — which might include using a percentage of research grant awards to cover facility expenses such as equipment — makes NIH oversight difficult.

The 15% indirect cost rate cap policy will apply to all current grants “for go forward expenses from Feb. 10, 2025, forward, as well as for all new grants issued.

“We will not be applying this cap retroactively back to the initial date of issuance of current grants to IHEs, although we believe we would have the authority to do so,” the NIH report noted.

The NIH guidance report added that the updated policy outlining indirect cost rate caps is in line with similar grant policies from private foundations such as the Bill and Melinda Gates Foundation.

In 2023, the NIH reportedly spent more than $35 billion on almost 50,000 competitive grants to more than 2,500 American universities, medical schools and other research institutions.

“Of this funding, approximately $26 billion went to direct costs for research, while $9 billion was allocated to overhead through NIH’s indirect cost rate,” according to the report.

Those defending the change argue that by cutting indirect costs at the university administrative level, there will be more money available to fund additional research.

The University of Utah responds

In response to the updated NIH grant policy, the University of Utah’s Office of the Vice President for Research said it remains committed to “the power of research” to illuminate the future.

“We are committed and have a variety of mechanisms to ensure that research at the University of Utah remains strong, even as we navigate policy changes like shifts in our (facilities & administration) rate at NIH,” according to a press release. “The University of Utah is well positioned to navigate these changes with vision and resources.”

University leaders are planning a Tuesday “town hall” to provide updates on its research advocacy efforts with the Association of Public & Land-Grant Universities and other higher education associations.

“Through past challenges — whether responding to COVID-19, securing research funding in shifting landscapes, or forging new collaborations — our community has remained resilient,” the research office release added.

“We solve problems because they matter. From identifying the gene linked to breast cancer to developing software that protects wildland firefighters, our researchers take on the toughest challenges. And when policies shift, research continues.

“Because discovery doesn’t pause.”

Association of Public & Land-Grant Universities President Mark Becker added his own response to the NIH’s recent grant policy update:

“NIH slashing the reimbursement of research costs will slow and limit medical breakthroughs that cure cancer and address chronic diseases such as diabetes and heart disease,” said Becker. “Let there be no mistake: this is a direct and massive cut to lifesaving medical research. We urge the administration to reconsider this self-defeating action.”

Arguments on NIH actions reach the courts

The arguments surrounding the NIH’s updated research funding policy is stretching from the campus to the courtroom.

Attorneys general representing 22 states, all Democrats, sued the Trump administration on Monday, leading to Judge Kelley blocking the change.

In the lawsuit, the attorneys general argued that NIH’s abrupt decision to set a 15% cap on payments for indirect costs would cause “major harm to institution budgets, jeopardizing basic operations and medical research,” according to STAT.

The effects of the rate change notice, the plaintiffs argued “will be immediate and devastating,” — resulting in layoffs, suspension of clinical trials and disruptions of ongoing research programs and laboratory programs.

The attorneys general also argue that the NIH’s new policy violates the Administrative Procedure Act, a federal law that governs how federal agencies implement new regulations, because the policy is “arbitrary and capricious.”

Attorneys generals from Arizona, California, Connecticut, Colorado, Delaware, Maine, Maryland, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Washington state and Wisconsin filed the suit against NIH and its parent agency, the Department for Health and Human Services.

Maine Sen. Susan Collins, who chairs the Senate Appropriations Committee, became the first Republican lawmaker to speak out against the new NIH policy.

“I oppose the poorly conceived directive imposing an arbitrary cap on the indirect costs that are part of NIH grants and negotiated between the grant recipient and NIH,” she said in a statement.

Collins added that she called Robert F. Kennedy — Trump’s nominee to lead HHS — and that he had promised to “re-examine this initiative” that was implemented prior to his confirmation.

“There is no investment that pays greater dividends to American families than our investment in biomedical research,” Collins added.