First Circuit Rejects Trump’s Move to Slash NIH Research Funds

The Trump administration’s attempt to slash billions in NIH research overhead costs was rejected by a federal appeals court Monday, dealing a blow to the government’s broad cuts to federal spending.

The US Court of Appeals for the First Circuit affirmed that the National Institutes of Health’s attempt to cap research indirect cost rates to 15% was contrary to the US Department of Health and Human Services’ regulations and violates federal law.

“In summary, Congress went to great lengths to ensure that NIH could not displace negotiated indirect cost reimbursement rates with a uniform rate,” Judge Kermit Lipez wrote for the court.

And an older congressional appropriations rider, “provides three independent grounds for invalidating NIH’s” actions, Lipez said.

Indirect costs, also known as facilities and administrative costs, are expenses that cover building construction, utilities, and laboratory equipment for research done at universities, academic medical centers, and other institutions.

More than 20 states, the Association of American Medical Colleges, and the Association of American Universities sued the NIH in February 2025, alleging it violated the Administrative Procedure Act when it issued guidance capping the rate for new and existing grants.

A lower court last year agreed with the states and groups—blocking the administration from capping funds and ruling the guidance was unconstitutional.

“NIH contends that the Supplemental Guidance does not set forth any ‘further ‘procedures and decision making criteria’ . . . because the policy does not contemplate any individualized redetermination of indirect-cost rates,’” Lipez said. “That contention reveals a fatal regulatory flaw in the Supplemental Guidance.”

The government argued that the district court lacked jurisdiction over the plaintiffs’ claims because the case involves a federal contract and should instead be heard in the US Court of Federal Claims.

The NIH supported its argument with the Tucker Act, a statute that allows plaintiffs to sue the US government for money damages in the event of a contract breach, but waives the government’s sovereign immunity with respect to certain lawsuits.

Judges Julie Rikelman and Jeffrey Howard joined the opinion.

The cases are Commonwealth of Massachusetts v. National Institutes of Health, 1st Cir., No. 25-1343; Association of American Medical Colleges v. National Institutes of Health, 1st Cir., No. 25-1344; and Association of American Universities v. Department of Health and Human Services, 1st Cir., No. 25-1345.