In a major legal setback for the Trump administration’s controversial revamp of federal science funding, a federal appeals court on Monday delivered a decisive defeat to efforts aimed at slashing research dollars at the U.S. National Institutes of Health (NIH). The ruling, handed down by a three-judge panel of the 1st U.S. Circuit Court of Appeals in Boston, upheld a lower court’s injunction and made clear that steep cuts to NIH research grants cannot be implemented under current law.
The legal battle centers on a policy announced in February 2025 that sought to cap so-called “indirect cost” reimbursements — funding that helps universities and research institutions cover essential support functions such as facilities, equipment, administrative staff and infrastructure. Under the policy, indirect cost rates would have been limited to 15% of direct research funding, no matter what an institution actually spends to run its labs and sustain long-term studies.
Major research universities, including those with hefty endowments like Harvard, Yale and Johns Hopkins, were quick to challenge the rule, but the backlash reached far beyond wealthy campuses. A coalition of 22 state attorneys general, alongside leading medical associations and public and private research universities, argued that the arbitrary cap would devastate institutions’ ability to conduct cutting-edge science. Critics warned the policy would trigger layoffs, close laboratories, halt clinical trials and erode America’s global leadership in biomedical innovation.
The appeal court agreed. Echoing the earlier decision of U.S. District Judge Angel Kelley in Massachusetts, the panel found that the administration’s policy violated NIH’s own regulations and Congressional appropriations language that protects negotiated reimbursement rates. “Congress went to great lengths to ensure that NIH could not displace negotiated indirect cost reimbursement rates with a uniform rate,” wrote one of the judges for the unanimous panel.
The legal fight underscored broader tensions between the executive branch and the scientific community over federal research priorities. The Trump administration had defended its approach as an effort to rein in what it described as “excessive overhead charges” at wealthy institutions, asserting that redirecting funds could make research more efficient and accountable. But opponents said the change was a thinly veiled attack on academic freedom and on the collaborative ecosystem that supports research into diseases like cancer, Alzheimer’s and diabetes.
The court’s decision comes amid a series of judiciary confrontations with Trump-era policies. Earlier rulings have similarly blocked attempts to impose caps on research overhead at other agencies such as the National Science Foundation and key Defense and Energy Department programs. Beyond NIH, these legal battles reveal how the courts are emerging as critical arbiters of federal science funding and administrative authority in the current political climate.
For universities and medical researchers, Monday’s ruling provides a reprieve from the threat of abrupt funding disruptions and offers certainty at a time when long-term investment and multi-year grants are foundational to breakthroughs in health and biomedical sciences. In ruling against the administration, the appeals court reaffirmed that significant shifts in federal grant funding must operate within the bounds established by legislation and regulatory practice — not unilateral executive action.