Colorado Attorney General Phil Weiser, who plans to run for Colorado Governor in 2026, has joined 21 other states to sue President Donald Trump’s administration for cutting research funding through the National Institutes of Health (NIH). The suit pertains to a newly established “indirect cost” cap that will be paid by the federal government.
The NIH Office of the Director released a statement on February 7 to state that the agency will cap indirect costs at 15 percent. The statement explains that the average indirect cost rate for grants issued by the NIH is between 27 percent and 28 percent, while some organizations charge as high as 60 percent for indirect costs. According to the administration, this cap will save the NIH $4 billion per year.
The lawsuit complaint says this action is necessary to “protect their states and residents from unlawful action by the National Institutes of Health (“NIH”) that will devastate critical public health research at universities and research institutions in the United States. Without relief from NIH’s action, these institutions’ cutting edge work to cure and treat human disease will grind to a halt.”
The NIH statement refers to the typical indirect cost rates covered by private foundations — most do not provide funding for indirect costs. The statement said the largest funders of research in the country provide a maximum indirect cost rate of 15 percent. The Bill and Melinda Gates Foundation only provides ten percent indirect costs to institutes of higher education.
An analysis of 72 universities found that 67 of them were willing and able to accept research grants with no indirect costs. The statement says that “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 is accordingly imposing a standard indirect cost rate on all grants of 15% pursuant to its 45 C.F.R. 75.414(c) authority.” This applies to all new grants and all payments on current grants moving forward. The NIH is not going to apply this rate retroactively for active grants, although the agency believes it has the authority to do so.
The lawsuit explains that research institutions negotiate indirect cost rates with the federal government through the Office of Management and Budget (OMB) and the Department of Health and Human Services (HHS). The lawsuit states that “the agency may deviate from the negotiated rate only when required by federal statute or regulation, or when the deviation is individually sought and justified through a decision-making process that identifies the criteria and circumstances justifying that decision in specified instances.”
Regulation 45 C.F.R. 75.414(c) is written differently than the lawsuit alleges. It states that “an HHS awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph (c)(3) of this section.”
Paragraph (c)(3) dictates that “the HHS awarding agency must implement, and make publicly available, the policies, procedures and general decision making criteria that their programs will follow to seek and justify deviations from negotiated rates.” The NIH statement fully explains the “policies, procedures, and decision making criteria” and the purpose of modifying the current negotiated rates.
