NIH cap on indirect research costs struck down on appeal

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Dive Brief:

• A federal appeals court ruled on Monday that the National Institutes of Health cannot cap research overhead funding across the board, upholding an April lower court decision that spelled relief for beleaguered universities.
• The 1st U.S. Circuit Court of Appeals unanimously concluded that NIH violated statutory law and the agency’s own regulatory procedures when it issued a policy capping reimbursement rates for indirect research costs at 15% for current and new grants.
• The ruling is the latest blow to the Trump administration’s attempts to have multiple federal agencies cap indirect cost reimbursement rates at 15%. NIH on Tuesday declined to comment on the ruling or say if it planned to appeal.

Dive Insight:

When NIH issued the contested guidance in early February, it said it expected the move to save $4 billion — money that it planned to funnel toward financing direct research costs for institutions. 

The move — widely panned in the academic community and elsewhere — broke with long-standing procedure of negotiating reimbursement rates with individual research institutions. For many large research universities, those rates top 50% and help pay for things like information technology, utilities, administrative support, and building and running laboratories. 

These negotiations, built into NIH’s regulations, were also codified by Congress during the first Trump administration. Legislators passed an addition to an appropriations bill that advocates and judges have said specifically bars NIH from drawing up a universal reimbursement rate rather than negotiating individually with grantees. 

NIH’s new policy drew multiple lawsuits, with high stakes looming while the legal battle played out. As one researcher at the University of Alabama at Birmingham put it, the cap would “cripple research infrastructure at hundreds of US institutions, and threatens to end our global superiority in scientific research.” 

In court documents, scores of universities have described in detail how NIH’s 15% indirect cost cap would imperil their medical research operations and workforces, as well as the country’s ability as a whole to advance biomedical science — historically one of the U.S.’s major economic strengths. A February New York Times analysis found the policy could cost some of the top research universities over $100 million a year in funding. 

As federal appellate Judge Kermit Lipez, a Clinton appointee, noted in this week’s ruling, NIH research has led to major medical breakthroughs and lowered death rates from conditions such as heart attacks and strokes. 

“In short, the public-health benefits of NIH-funded research are enormous,” Lipez wrote.

In March, a district court judge ruled the new policy illegal and issued a preliminary injunction against it, followed by a permanent injunction in April. Despite the setbacks, the Trump administration has tried instituting identical caps at other agencies — namely, the U.S. departments of Energy and Defense, and the National Science Foundation. Federal judges so far have blocked those moves as well.

Several of those opposing NIH’s cap, which included a coalition of state attorneys general, lauded this week’s ruling. 

“The Trump Administration wanted to eviscerate funding for medical research that helps develop new cures and treatments for diseases like cancer, diabetes, and Alzheimer’s,” California Attorney General Rob Bonta said in a statement Monday. “We’re starting the new year by building on our previous successes and securing yet another important victory against the Trump Administration.”