Injunction granted on policy change that would hamper funding for teaching hospitals

A federal judge has extended a block on a Trump administration policy that would cap reimbursement for indirect medical research costs at institutions such as teaching hospitals.

Per the Feb. 7 policy issued by the National Institutes of Health (NIH), add-on payments for facility and administrative expenses as part of research grants would be limited to a 15% rate. Some institutions stand to lose many millions of dollars per year through the change, which also applies to previously negotiated rates.

The Association of American Medical Colleges (AAMC), which challenged the policy in federal court, said the change would reduce previously committed funding by $6.5 billion.

The policy was stayed before it could take effect Feb. 10, with a second stay issued Feb. 21. On March 5, the temporary stay was expanded to a full injunction that is set to last until the litigation is resolved.

In her order, Judge Angel Kelley, a Biden nominee presiding in the District of Massachusetts federal court, wrote, “The imminent risk of halting life-saving clinical trials, disrupting the development of innovative medical research and treatment, and shuttering of research facilities, without regard for current patient care, warranted the issuance of a nationwide temporary restraining order to maintain the status quo, until the matter could be fully addressed before the Court.”

Illustrating the imminent risk of financial harm, Oregon Health and Science University (OHSU) asserted in a court filing that it would lose $1.6 million per week in reimbursement that supports salaries, facility costs and research infrastructure.

Kelley also indicated the plaintiffs are likely to prevail in the litigation, including based on their claim that the rate change is unlawful and that it should have been subject to notice-and-comment rulemaking. In addition, she said, previously awarded grants should be viewed as contractually binding.

A drastic change

In a separate lawsuit from the AAMC-led litigation that resulted in the nationwide injunction, 22 states described the prospective impact of the new cap on their research institutions, including academic medical centers and teaching hospitals.

A section about UMass Amherst stated that the institution received $13.1 million from NIH to cover indirect research costs, part of an overall grant of $44.8 million. Among other uses, the grant money has funded a collaboration with Brigham and Women’s Hospital to develop AI-related technologies that can support people with Alzheimer’s disease and their caregivers.

The implication is that the project would be endangered, at least in scope, if the facility’s payment rate for indirect costs were slashed from the negotiated 61% rate.

The University of California’s 32 healthcare research institutions, including six academic medical centers, received more than $2 billion in FY23 contract and grant funding, according to the lawsuit. As proposed, the cap on indirect costs “would result in broad reduction of services, including impact on education, delivery of care to patients, and research,” the court filing states, adding that training of new medical personnel would be impacted.

OHSU would lose about $80 million in funding through the policy change, based on FY23 allocations. That reduction could “immediately and directly impact patient care,” according to the lawsuit.

At Seattle-based UW Medicine, where the 15% cap could mean a loss of between $90 million and $110 million, patients likely would stop being admitted to clinical trials, and even ongoing trials would be affected.

“Any scaling back in [patients’] level of care would be a devastating breach of trust,” the lawsuit states. “The damage to these patients’ lives and their relationship with their care team at UW would be nearly impossible to rectify.”

Prospective NIH director weighs in

The cap on indirect costs came up multiple times March 5 during the Senate Health, Labor, Education and Pensions (HELP) Committee’s confirmation hearing for Dr. Jay Bhattacharya, the nominee to head up NIH in the Trump administration.

In an exchange with Sen. Patty Murray (D-Wash.), Bhattacharya, a professor of medicine at Stanford University, said his institution’s indirect-cost rate in 2024 was roughly 55%. If the rate is reduced to 15%, Murray told him, Stanford would lose somewhere around $160 million per year.

Bhattacharya said improved transparency is vital to ensuring reimbursement for indirect costs is applied as intended.

He added, “I think that a lot of it likely goes to things that are worthwhile: Support for buildings, lightbulbs to make sure that we can see in the lab. But there’s a lot of distrust about where the money goes because trust in the public health establishment collapsed in the pandemic.”

A drawback of the new NIH policy is that it acts as a blunt instrument, one senator said.

“I think it’s important that we all acknowledge that a one-size-fits-all approach absolutely makes no sense, and that is why NIH negotiates with the individual grant recipient [as to] what the indirect-cost cap should be,” said Sen. Susan Collins (R-Maine).

But Sen. Roger Marshall (R-Kan.) said a new approach to indirect costs could allow for a wider dispersal of funding outside states on the two coasts.

“The indirect costs at Kansas University or Kansas State are going to be less than [on] the coast,” Marshall said. “If their indirect costs are that high, it’s their own problem. If we can do the research more efficiently, less expensively at Kansas State University or KU, then let’s move it there.”