Continuing coverage of UChicago’s lawsuit and the NIH’s “indirect” funding cuts can be found here and here.

The University of Chicago and 15 other plaintiffs sued the National Institutes of Health (NIH) and the Department of Health and Human Services (HHS) Monday following a Friday NIH directive that slashed “indirect” cost funding for university research effective Monday. The directive would threaten $52 million in University funding annually.

On Monday night, Massachusetts District Court Judge Angel Kelley issued a temporary restraining order (TRO) blocking the directive following a Monday morning lawsuit by Illinois, Massachusetts, and 20 other states against the NIH and HHS, which oversees the NIH. The order only applies within the 22 states that were plaintiffs in the suit. 

The University of Chicago was joined in a separate lawsuit by the Association of American Universities (AAU), American Council on Education (ACE), Association of Public and Land-Grant Universities, and 12 public and private universities. UChicago is a member of the AAU and the ACE. 

“At stake is not only Americans’ quality of life, but also our Nation’s enviable status as a global leader in scientific research and innovation,” UChicago’s lawsuit reads.

Indirect costs are overhead expenses that support administrative functions and maintain buildings, utilities, and equipment. Generally, grant money supporting direct costs of research cannot be allocated to indirect expenses.

When the NIH awards research grants to a scientist at an institution of higher education (IHE), the agency includes additional funding for indirect costs at a rate negotiated between HHS and the institution. 

Prior to the directive’s issuance, the NIH covered indirect costs of on-campus organized research at UChicago at a rate of 64 additional cents for every dollar of direct grant funding, a number in line with rates at other major research universities. 

The University negotiated the rate of indirect costs with HHS for a five-year period ending in June 2026, but under the new directive, all indirect costs would be set at a flat rate of 15 cents per dollar, effective Monday.

The change to the flat rate would apply both to all new grants and “existing grants to IHEs retroactive” to February 9, per the NIH announcement. 

The University has 3,258 active NIH awards totaling to $1,012,945,241. For fiscal year 2024, the University received approximately $338 million in NIH funding, of which $241 million went to direct costs and $97 million supported indirect costs. 

“NIH funding supports UChicago faculty, researchers, and students to make critical advancements in patient care including for diabetes prevention and treatment in children and adults, the treatment of celiac disease and advanced metastatic prostate cancer, and cognitive resilience in aging,” the University’s lawsuit reads.

The University estimates that the new decreased indirect cost rate of 15 percent would cost UChicago about $52 million in reimbursement, per the lawsuit.

In 2023, the NIH spent $35 billion of its $47.7 billion budget on funding research at universities, medical schools, and other research institutions.

“We don’t yet know all the consequences of a decision of this sort, but there’s no question that it’s going to compromise the mission of the University and [its] research program,” professor of anesthesia and critical care Daniel McGehee told the Maroon. McGehee is the principal investigator of the McGehee Lab, which receives support from NIH awards.

“It is going to limit what’s possible in exploring and discovering new treatments for all sorts of diseases, from cancer to pain modulation.”

NIH Claims Cuts Will Promote Research

In the Friday directive, Acting NIH Director Matthew Memoli stated: “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.”

The NIH, which is the world’s largest public funder of biomedical and behavioral research, commits $9 billion toward paying indirect costs annually. The NIH claimed that slashing and standardizing indirect cost rates will save $4 billion a year.

The NIH’s annual budget of $48 billion accounts for less than 1 percent of the annual federal budget of $6.75 trillion.

In the directive, the NIH stated that most private foundation grants to university researchers carry low or no coverage for indirect costs.

“Most private foundations that fund research provide substantially lower indirect costs than the federal government, and universities readily accept grants from these foundations,” the NIH wrote in its statement. 

Private foundations provide lower rates for indirect costs but typically classify a broader range of expenses as direct research.

William F. Parker, a pulmonary care doctor and medical ethicist at the UChicago Pritzker School of Medicine, told the Maroon that the NIH’s declared 15 percent rate was “clearly just made up to align with what some other major philanthropy organizations use.”

Friday’s cuts to NIH spending come as the Trump administration slashes spending across the federal government, particularly in grant spending. On January 22, two days after Trump’s inauguration, the administration imposed an abrupt cancellation of all NIH meetings, communications and hirings. 

President Donald Trump has long argued that more scientific research in the U.S. should be funded by private entities, rather than by the federal government.

Project 2025, a sweeping Heritage Foundation policy framework developed by members of Trump’s first and second administrations, stated: “funding for scientific research should not be controlled by a small group of highly paid and unaccountable insiders at the NIH, many of whom stay in power for decades. The NIH monopoly on directing research should be broken.”

When asked for comment, the NIH referred the Maroon to HHS. When asked whether Friday’s directive might compromise researchers’ ability to cover indirect costs within university systems, HHS referred the Maroon to the directive.

The White House did not respond to multiple requests for comment.

Critics Say Cuts Threaten Research

On Saturday, the Association of American Medical Colleges released a statement denouncing the cuts.

“Make no mistake,” the statement said. “This announcement will mean less research. Lights in labs nationwide will literally go out. Researchers and staff will lose their jobs. As a result, Americans will have to wait longer for cures and our country will cede scientific breakthroughs to foreign competitors.”

Access to funding for indirect costs is especially important for early-career researchers, according to Parker.

“When you’re starting out,” he told the Maroon, “the university has to take a bet on you and give you resources to start your lab [before you] go on to secure independent funding for your direct costs…. That’s all funded by indirects from other researchers that [have] been recovered. But now that whole chain will be broken for future generations.”

Indirect costs also support administrative needs, such as federal regulatory compliance and the lengthy process of submitting NIH grants.

“An indirect cost would be the pre-award administrator who helps you put in the grants,” Parker said. “NIH grants are incredibly long and complicated and very difficult to assemble and do well. Without the support from the URA [University Research Administration], it would literally be impossible for PIs [principal investigators] to put in these grants.” 

Parker acknowledged problems with the current NIH funding process but noted the damaging effects of the directive.  

One specific problem, per Parker, is that senior investigators “have so many grants that they’re bringing to the University and such a huge amount of indirects that they can use that as leverage to negotiate some of that cut coming back to their lab and get higher salaries and cement themselves in academia.” 

“I think it’s good that we’re having an open conversation about that as a community, and there should be more explanation for why these indirect rates are so high,” Parker said. “But that being said, if the major source of support for all universities receiving NIH grant funding gets cut off overnight, it’d be devastating for higher education overall,” he continued.

In a social media post Friday evening, the NIH defended the directive by highlighting Harvard, Yale, and Johns Hopkins’s respective 53.2, 41.4, and 13.1 billion dollar endowments. Johns Hopkins, which leads all U.S. universities in NIH funding, is also a party to the lawsuit jointly filed by UChicago on Monday. 

HHS suggested in a statement to the Maroon that universities should pay down indirect costs with endowment money.

“Most of these higher education institutions already have endowments worth billions of dollars,” the statement said. 

“Can you believe that universities with tens of billions in endowments were siphoning off 60% of research award money for ‘overhead’?” head of the Department of Government Efficiency Elon Musk wrote on X. “What a ripoff!”

The University of Chicago’s endowment is valued at $10.4 billion, but much of that sum is tied up in investments or restricted to specific purposes.

“Most funds that are in an endowment are restricted in use,” UChicago Law tax policy lawyer Julie Roin told the Maroon. “People have donated money to the University with restrictions on what money can be used for.”

“Our University happens to be in a very serious position,” Roin said, referring to the University’s budget deficit, which reached $288 million in fiscal year 2024. “If the NIH says we’re not providing you with reimbursements, then this University is probably not going to be in a position legally where they can take money from the endowment to cover these costs.”

And, unlike biomedical research at private companies, research at universities generally does not produce profit with which to pay overhead costs.

According to Classics and history professor Clifford Ando, who raised the alarm on the University’s budget crisis in 2023, UChicago’s high debt means the University has “less elasticity to absorb this than other similarly ranked institutions.”

“The University only pays its operational costs at this point by borrowing,” Ando told the Maroon. “So the question for the University is whether it can borrow at an even greater rate without risking a downgrade in its debt.”

The University did not respond to multiple requests for comment by the time of publication.

At time of publication, UChicago had not sent any messages to University faculty, staff, or students regarding the NIH’s indirect cost spending cuts or UChicago’s lawsuit. Harvard and Yale, among others, issued university-wide communications on Sunday and Monday, respectively, outlining the “devastating” disruption caused by the NIH’s announcement.

In an update on its “2025 Federal Administration Actions and Updates” page, the University wrote, “We are working with our internal and external partners to understand the impact of and response to this change in policy.”

That site, which shares information on recent executive orders and federal agency actions affecting University research, reads: “The University of Chicago is dedicated to supporting our researcher community and the impactful, field-defining research produced across all academic disciplines. As the broader landscape of federal funding for academic research evolves, the University will continue to explore ways to support research while minimizing disruptions.”

Two Lawsuits Raise Wide-Ranging Objections 

Legal experts who spoke to the Maroon said that the lawsuits raised a number of valid administrative, statutory, and contract concerns. These conversations took place before the University’s lawsuit against the NIH and HHS was made public. 

The stakes of the legal questions were particularly high, Northwestern Pritzker School of Law administrative law professor James Speta wrote to the Maroon in an email, because “cuts would damage fundamental research: research that saves lives, promotes education and basic knowledge, and keeps our economy advancing.”

“This suit challenges a flagrantly unlawful action by the National Institutes of Health (‘NIH’) and the Department of Health and Human Services (‘HHS’) that, if allowed to stand, will devastate medical research at America’s universities,” the University’s lawsuit reads. 

In that lawsuit, the 16 plaintiffs allege that the NIH’s actions threaten the constitutional separation of powers and violate federal law.

“Medical schools, scientific research institutes, and other grant recipients across the country have structured their programs and development of physical infrastructure assuming that the substantially higher indirect cost recovery rates would remain in place, and that any changes to those rates would be based on actual changes in cost. The rates were negotiated with the relevant federal agency through a well-understood legal process and in reliance on NIH’s longstanding approach,” the University’s lawsuit reads.

According to UChicago Law contract lawyer Elizabeth Kregor, whether the NIH could retroactively change the rate of existing grants depends on specifics of the contract negotiated between UChicago and the HHS. The Maroon was unable to obtain a copy of that contract.

“This is a decision (yet another) Congress must make, not an action that can be taken unilaterally from the White House,” Speta wrote. “And, even apart from the appropriations law, the decision is very sparse on reasoning, and a challenge under the Administrative Procedures Act has a significant probability of success.” 

The Administrative Procedure Act (APA) regulates the process by which federal agencies engage in rulemaking, and requires agencies provide advance notice of rules and an opportunity for public comment.

UChicago Law administrative lawyer Jennifer Nou told the Maroon that the NIH’s directive could reasonably be seen as “arbitrary and capricious,” saying, “Where does 15 percent really come from?”

With regards to notice-and-comment, Nou said, “the Administrative Procedure Act says there are exceptions for guidance documents, so the NIH will try to argue that this is a guidance document.” Nou said the government would likely also argue that the directive was not final and therefore not covered by the APA.

According to Speta and Nou, the NIH’s rate-cutting likely also violates a Congressional appropriations rider passed as part of the Consolidated Appropriations Act of 2018 to prevent the first Trump administration from slashing indirect costs rates to an across-the-board rate of 10 percent.

Both Nou and UChicago Law health economics lawyer Anup Malani expressed skepticism that lawsuits would ultimately restrain Trump’s NIH from cutting indirect cost funding.

“If the court says that this is just a procedural violation, then [the NIH] can simply follow the correct procedure, they can just go through notice and comment…. And if they say that this directive is arbitrary, then the agency has something of a do-over to just make the number and language not arbitrary,” Nou said.

Malani told the Maroon that whether the NIH’s directive would hold up in court was only part of the story.

“In law school, we teach that litigation is the be-all and end-all,” Malani said. “In real life, litigation is not the be-all and end-all because it’s part of a broader process of negotiation. Even if the government loses, the Trump administration has made credible its threat to negotiate hard on indirect costs. Getting obsessed with the first step is missing the point. This is how negotiations go… [especially when] the Trump administration is brash in how they pursue their agenda.”

“The Trump administration is trying to get the courts to tip their hand as to what the confines of the law are on this matter…. In football, very often an offense will line up, and the goal isn’t to run that formation, it’s to see the defense’s plan, and then you reorient your offense or call a timeout. This legal strategy is exactly that. Go out there and call your play and you can see the defense’s strategy—the strategy of the courts and of the [states and universities].” 

“If you look at this [directive] against the backdrop of the other things Trump has said, it’s hard not to read this as part of a larger aim to undermine universities and their role in society,” Nou said.

Update, February 11, 2025, 12:55 p.m.: On Monday night, Massachusetts District Court Judge Angel Kelley issued a nationwide temporary restraining order (TRO) following a lawsuit brought by the American Association of Medical Colleges (AAMC) and other medical organizations. Two other lawsuits were filed Monday: one by UChicago and other universities, and one by Illinois and other states. The latter resulted in a Monday afternoon TRO applying only within the 22 plaintiff states. The status of the former is unclear. 

In a statement, the AAMC wrote that they were “pleased that the court agreed with our assertion that the notice would have resulted in irreparable harm to the research mission, leaving institutions no choice but to scale back research activities.”

Update, February 11, 2025, 11:15 a.m.: In a Tuesday morning email titled, “Regarding the policy landscape,” University President Paul Alivisatos wrote to faculty that he authorized Monday’s lawsuit because the NIH’s funding cuts “would immediately damage the ability of our faculty, students, and staff… to engage in health-related fundamental research and to discover life-saving therapies.”

“Following an election,” Alivisatos wrote, “policy changes are an expected part of our democracy. Yet today, some of these, if implemented, would have far-ranging adverse impacts on institutions of higher education and academic medical centers, including ours.”