In contrast, the states argue that there is no significant basis for a 15% indirect rate. “The notification of rate change is a whim that, among other methods, cannot clearly express the basis of a 15% category rate cap, the lawsuit states that grant recipients will depend on the fees negotiated. and ignores the findings of fact that have formed the basis for the indirect cost rates currently in operation.”
The NIH announcement suggests that the process of determining a 15% rate involves checking indirect rates for a small number of private foundations. The state argues that this does not make the policy arbitrarily or whimsical.
However, if the judge determines that the new NIH policy is not a federal rule compliant with the Administrative Procedure Act, the state has a backup. As mentioned above, the first Trump administration tried to reduce indirect cost rates in 2017. In response, the Democratic-controlled Congress in 2018 was able to attach riders to a budget bill that would prevent the NIH from spending money on developing or implementing it. A policy that changes the existing system at the time that determines indirect cost rates. That rider has been around since then. This suggests that by simply announcing new policies, the NIH spent a portion of its budget in a way specifically prevented by the law.
Relief
The state was seeking many forms of relief. These include formally declaring the new policy as a violation of the Administrative Procedure Act and hitting it with a temporary injunction. Another lawsuit granted an injunction against another Trump administration policy, but only to confirm that the policy continued under other permission. With this in mind, the states are also seeking injunctions against similar policies that are enacted in different ways or in clear names.
To ensure that no further action is required to enforce the injunction, the case asks judges to order ongoing compliance reports from the NIH and the Department of Health and Human Services. Judge Kelly agreed and ordered that these reports be delivered biweekly.
For a short period, the injunction only applied to the states where the first sued was first. However, subsequent rulings resulted in a second injunction suspending NIH policies in all states in a similar lawsuit filed by national healthcare agencies.
Update 2/10: The story has been updated to reflect the fact that the injunction was granted on the day the lawsuit was filed.
Update 2/11: The story has been updated to reflect the second injunction that applies nationwide.
