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 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.”
These costs, which cannot be linked to a single research project, cover funding for facilities, equipment, and staff that support 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 a university’s actual costs.
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 plaintiffs warned that if implemented the policy would trigger 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 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.
The Trump administration had also sought to impose a similar 15% cap for funding from the National Science Foundation and the U.S. Departments of Defense and Energy. Universities sued over those funding caps as well, consistently winning court orders blocking the administration from implementing the cuts.
(Reporting by Nate Raymond in Boston; Editing by Rosalba O’Brien)
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