Federal Judge Halts National Institutes of Health's Grant Policy Overhaul Citing Legal Violations

On Wednesday, a federal court issued a nationwide preliminary injunction against the National Institutes of Health (NIH) following its abrupt decision to slash and cap indirect cost rates on biomedical research grants.

The ruling prevents implementing the policy change, which would affect billions of dollars in funding and disrupt ongoing research and clinical trials.

The controversy began when NIH released a Supplemental Guidance on February 7, 2025, modifying indirect cost rates in grant awards.

NIH said it would now apply a standard indirect cost rate of 15% to all new and existing grants, replacing the previous practice of negotiating separate rates for each grant.

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Historically, NIH's average indirect cost rate has been around 27%–28%, with some institutions charging over 50% or even 60%.

Critics argued that the policy, issued without public notice or stakeholder input, threatened the viability of research institutions nationwide.

Three separate lawsuits were filed in response, representing 22 state attorneys general, multiple medical associations, and leading universities. Thomson Reuters published a copy of the lawsuit online.

Plaintiffs contended that NIH's unilateral action violated federal regulations, exceeded statutory authority, and failed to comply with the Administrative Procedure Act. They also cited the potential harm to life-saving clinical trials and medical advancements.

NIH has a $48 billion budget and 27 institutes that fund critical research on diseases like cancer and diabetes.

In 2023, NIH awarded over $35 billion in research funding across nearly 50,000 grants. Of this, $26 billion went directly to research, while $9 billion covered indirect costs.

In granting the injunction, the court determined that NIH's policy change disregarded existing laws, risked substantial harm to the nation's research infrastructure, and failed to follow proper procedures.

The decision maintains the current funding structure until the legal challenges are resolved.

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