Blue States to the Rescue. Again.

A devastating rule could wipe out NIH research. But it’s now on hold for half the country, thanks to blue state attorneys general.

A coalition of 22 attorneys general led by Andrea Campbell of Massachusetts sued the Trump administration over its plan to cap indirect costs for research grants. Photo by David L. Ryan / Getty Images

It was another “Avengers Assemble!” moment for our country yesterday with blue state attorneys general coming to the rescue, this time to save the biomedical scientific community.

The latest crisis began, as so many do, late on a Friday. Trump’s evil wrecking crew once again launched a weekend assault, targeting $4 billion in funding for the National Institutes of Health (NIH). The announcement cut deeply into research funding that had already been approved and was underway, imperiling thousands of existing projects at universities and medical centers.

Specifically, NIH suddenly slashed funding for “indirect” costs, such as administrative support and facilities. A new rule capped such costs at just 15 percent of each grant, even for projects already in progress.

The move stunned the scientific community. It threatened to shutter key projects nationwide and cause thousands of layoffs, setting critical medical research back by years.

As panic swept across labs around the country, a call went out to state attorneys general to protect the interests of their citizens. Twenty-two blue states responded quickly, filing a complaint in federal court in Massachusetts. By Monday afternoon, they had obtained a temporary restraining order.

But the order came with an interesting twist that could be a game-changer in how the administration operates going forward. I’ll get to that in a bit. Let’s first review how the attack unfolded, how much crucial research was impacted, and why this sounds so familiar.

Indirect costs are necessary and already baked in

Like its attack upon USAID, the administration’s assault upon NIH was cloaked in a guise of cost-savings and eliminating waste. Sounds great, right? Cut the fat! That’s certainly how the new NIH leadership positioned this policy.

“Today, NIH lowered the maximum indirect cost rate research institutions can charge the government to 15%, above what many major foundations allow and much lower than the 60%+ that some institutions charge the government today,” NIH wrote in a social media post. “This change will save more than $4B a year effective immediately.”

As David Gorski noted in his Science Based Medicine blog, the announcement came under the “boring title” of “Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates (Notice NOT-OD-25-068).” But underneath that yawner was a cluster bomb that would destroy massive amounts of biomedical research funding for schools and universities, all under the guise of “providing indirect cost rates that comport with market rates.”

Musk, who is trolling the world under the handle of a man-child, misleadingly tweeted that universities were “siphoning off 60% of research award money for ‘overhead’” and added, “What a ripoff!”

Musk of course knows nothing about how NIH funding actually works. He acts like the money was being taken by the universities (through “siphoning”!) and the schools were profiting on these indirect costs, when in fact they go toward supporting the actual needs of the research projects.

Gorski notes that “indirects are in addition to the direct costs of the grant.” Thus, “If you have an indirect rate of 60%, that means that if your university is awarded an NIH grant for $1M, the university actually gets $1.6M.” He also points out Musk’s misleading statement: “That means that, of the total grant, a 60% indirect cost rate is really only 37.5%. (See Musk’s deception there?)”

The fact is, most universities have already negotiated indirect cost rates at between 40-70 percent because that’s simply what it takes to support such research. That the schools had already agreed to and budgeted these costs is a key factor, too, as a rule change after the fact means an immediate and unexpected cut to funding.

It is fair to ask why there is a high average current rate for NIH indirect costs, especially compared to the lower rate provided by private foundations. Gorski argues that the higher rate from NIH helps subsidize infrastructure necessary for research, from a building’s heating and electricity to personnel. The government’s willingness to fund these indirect costs at higher rates actually helps balance out the lower rate researchers receive from private foundations.

Policymakers can have a reasonable argument about whether schools and universities should do a better job of capping indirect costs. What they can’t do is yank the funding arbitrarily after it’s already been negotiated and planned for. And unlike NIH’s implication in its misleading social media post citing big schools like Harvard and Yale, most program recipients aren’t backed by huge endowments that protect them from sudden losses of grant money.

The rule would have a devasting impact

It’s important to understand how terrible an impact this single rule change would have. The Washington Post interviewed an expert in the field:

Kimryn Rathmell, who led the National Cancer Institute under the Biden administration before stepping down last month, said she was grappling with the difficult choices ahead for the scientific field.

“This abrupt change in the way grants are funded will have devastating consequences on medical science,” said Rathmell, a longtime cancer researcher at Vanderbilt University, predicting that the policy shift would have both health and economic consequences. “Many people will lose jobs, clinical trials will halt, and this will slow down progress toward cures for cancer and effective prevention of illness.”

The New York Times reported on the likely impact on just one university system:

The plan would cost the University of California system hundreds of millions annually, said the system’s president, Dr. Michael V. Drake.

“A cut this size is nothing short of catastrophic for countless Americans who depend on U.C.’s scientific advances to save lives and improve health care,” Dr. Drake said in a statement on Monday. “This is not only an attack on science, but on America’s health writ large. We must stand up against this harmful, misguided action.”

A sudden shuttering of labs would cause many time-sensitive studies, trials and experiments to fail, with years of lost work in some cases.

There are also states like Massachusetts where biomedical research is core to the local economy. Massachusetts prides itself on being the “medical research capital of the country,” state attorney general Andrea Joy Campbell said in a statement. “We will not allow the Trump administration to unlawfully undermine our economy, hamstring our competitiveness or play politics with our public health.”

Trump tried this before and Project 2025 wants it again

The move to suddenly cap indirect costs was also a blatantly illegal one Trump had attempted in his last presidency. In 2017, Trump tried to slash indirect costs on NIH grants to a level of just 10 percent. That got significant pushback at the time from grant recipients, and the proposal went nowhere.

Congress was sufficiently alarmed by Trump’s move that it passed a law, with bipartisan support, in response to it. The statute, signed as part of the budget, banned any changes to how NIH funds overhead costs from those that had already been negotiated between federal officials and each research institution—which is precisely the situation we saw today with the new rule.

It’s important also to note that the slashing of indirect costs on NIH grants is also a stated goal of Project 2025. The report of that project made a political argument that such cuts “would help reduce federal taxpayer subsidization of leftist agendas.”

Apparently, science, including life saving vaccines and cancer fighting agents, is a “leftist agenda.”

Blue state attorneys general sue and win the first round

After a weekend of panic for the scientific community, blue state attorneys general from 22 jurisdictions filed suit on Monday to block the new rule. They pointed out that the law expressly forbids the kind of indirect cost changes that the new rule is trying to impose.

That same day, a temporary restraining order issued from federal district Judge Angel Kelley in Massachusetts. The order blocked the NIH from cutting off research funding, but here’s the twist I mentioned earlier: The order halts the denial of funding only in the 22 blue states that sued, not in any others.

Assuming NIH complies with the order, that means money will flow to the schools and universities in these 22 blue states, while it will remain blocked for most projects in the remaining mostly red states. (If you’re wondering which blue states are covered, it all depends on if your state has a Democratic state attorney general. Sorry, Pennsylvania.)

This distinction will likely add significant pressure on red states to demand their share of the critical funding, too. Already, some red states senators are begging for a reprieve from the rule. Sen. Katie Britt (R-AL), best known for her cringey over-the-top kitchen table response to Biden’s State of the Union address in 2024, issued a plea during an interview with AL.com:

“Every cent of hard-earned taxpayer money should be spent efficiently, judiciously, and accountably — without exception,” U.S. Sen. Katie Britt said on Saturday.

“While the administration works to achieve this goal at NIH, a smart, targeted approach is needed in order to not hinder life-saving, groundbreaking research at high-achieving institutions like those in Alabama,” Britt told AL.com.

As of now, based on reporting from Popular Info, which is in communication with NIH officials on the inside, the White House still appears not to have released any of the NIH funds, risking an order to show cause and even a contempt holding from Judge Kelley.

Judges in other cases have begun to bear down on the administration and demand compliance with their orders. So far, the White House is seeking reconsideration or appellate review. In short, as Norm Eisen observed today in The Contrarian, a “cat and mouse game” has begun. The blue state attorneys general are going to apply pressure to ensure the freeze on funds gets lifted as ordered.

Meanwhile, I imagine the White House is going to be hearing from a lot of red state governors and Congressmembers in the coming days as funding for key projects at their universities dries up. The Trump Administration is either going to have to back off its threats and rescind the rule (as it did with the OMB financial assistance freeze); support only blue state projects with funds while withholding money from the red states; or defy the court order altogether.

The second option would generate howls of protest and cost the White House politically. And the third option would set up a constitutional showdown over facts and law that aren’t strong for the administration. After all, if you’re going to assert the right of the executive branch to impound funds, you might want to pick a battle over something other than a law that Congress passed—and that Trump himself signed—which specifically states that the President cannot change the funding levels.

Your move, Trump White House.