A Massachusetts court on Monday temporarily blocked a National Institutes of Health (NIH) cap on indirect costs that could have severely impacted vital research at Stanford University and research universities and medical centers across the country.

The temporary restraining order came in response to a legal challenge brought by 22 states, including California. The states argue that the proposed cap violates explicit direction from Congress contained in the federal budget. A hearing has been scheduled for Feb. 21.

Stanford worked with dozens of research, public, and land grant universities to develop another legal challenge that was filed Monday. The lawsuit was filed on behalf of the universities by the Association of American Universities (AAU), the Association of Public and Land-grant Universities, and the American Council on Education.

“We are working intensely with research universities across the country to make clear the vital role of federal funding in generating transformative scientific advances and maintaining U.S. leadership in innovation,” said Stanford President Jonathan Levin.

Part of a broader trend

Research grants from the NIH and other funding agencies have historically been divided into two components: direct costs, which pay for the researchers involved and their project-specific equipment and materials, and indirect costs, which go to the university to cover the costs of laboratory construction and maintenance, facilities, equipment, and computing that might be used across many projects, as well as administrative support. The government periodically negotiates the fraction of costs that can fall into the second category with each university, and audits these expenses. Currently, Stanford can receive a maximum of $54 in indirect costs for every $100 in direct costs; in practice, the fraction for many grants is lower.

The imposed NIH cap reflects a broader trend of universities shouldering a greater share of research funding as federal funding declines. In 1980, the federal government funded 67% of research at universities, while institutional funds accounted for only 14%. By 2023, the federal government’s share had declined to 55%, while institutional funds increased to 25%. Other funding sources, including state and local governments, businesses, nonprofits, and miscellaneous sources, saw much smaller shifts. These changes have occurred at Stanford along with many other universities.

Decades-long cooperation

University leaders stress that government support for the research performed at universities provides the foundation for the country’s scientific and innovation ecosystem.

The federal government chose the model of supporting university research after World War II because it saw the opportunity to harness universities’ expertise and curiosity-driven culture. “Severely cutting research funding, whether through indirect costs or otherwise, makes it harder for universities to create the environment and attract the talent that is essential to groundbreaking discovery,” said David Studdert, Stanford’s vice provost and dean of research.

Maintaining a robust research infrastructure is crucial for the U.S. to remain competitive in areas like cancer research, neuroscience, AI, data science, and quantum computing. The NIH is the largest funder of biomedical and behavioral research in the world.

“NIH-funded biomedical research at Stanford has yielded breakthroughs in areas ranging from new cancer immunotherapies to life-saving therapies for rare diseases to advances that make organ transplantation safer and more effective,” said Lloyd Minor, dean of the School of Medicine and vice president for medical affairs. “Without this sustained support, we risk slowing – if not halting – crucial research with the potential to improve millions of lives.”

As legal arguments continue, Levin said that he and other university leaders are committed to continued discussions in Washington. “At the highest level, the task before us is to renew the social contract between universities and the government that is critical to the country’s success,” Levin said.