By Nate Raymond
BOSTON, Jan 5 (Reuters) - A federal appeals court on Monday ruled that U.S. President Donald Trump's administration cannot carry out steep cuts to federal grant funding provided by the National
Institutes of Health to universities engaged in scientific and medical research.
A three-judge panel of the Boston-based 1st U.S. Circuit Court of Appeals upheld an injunction secured by 22 Democratic state attorneys general, medical associations and universities after determining the funding cuts NIH announced in February 2025 were unlawful.
Those cuts were among a range of efforts the Republican president's administration undertook last year that targeted federal spending at major universities, resulting in grants at numerous institutions being frozen or canceled.
NIH did not respond immediately to a request for comment.
NIH, which is part of the U.S. Department of Health and Human Services, issued guidance in February that sought to cap how much grant funding could go to cover research institutions' "indirect costs."
Such costs are the expenses that cannot be directly attributed to a single research project and include the costs of funding facilities, equipment and research staff that provide value across multiple research initiatives.
The NIH guidance held that indirect costs could equal no more than 15% of the funding for direct research costs, regardless of what the costs actually were at universities.
In announcing the policy change, NIH noted Harvard, Yale and Johns Hopkins universities charged more than 60% for indirect costs despite having multibillion-dollar endowments.
Many other universities lack such sizeable endowments, and the lawyers for the universities and states said the policy, if it went into effect, would lead to widespread layoffs, laboratory closures and stalled clinical trials.
As well as Democratic-led states, the policy was challenged by the Association of American Medical Colleges, groups representing public health schools and hospitals, the Association of American Universities, and several individual universities.
U.S. District Judge Angel Kelley last year blocked the cuts, and on Monday the appeals court agreed with her conclusion that the policy violated NIH's own regulations and language attached to funding legislation passed by Congress since 2018 that was designed to prevent such across-the-board cuts.
"Congress went to great lengths to ensure that NIH could not displace negotiated indirect cost reimbursement rates with a uniform rate," U.S. Circuit Judge Kermit Lipez wrote for the panel, which was comprised only of judges appointed by Democratic presidents.
(Reporting by Nate Raymond in Boston; Editing by Rosalba O'Brien)
