The First U.S. Circuit Court of Appeals has upheld a lower federal court’s permanent injunction on the National Institutes of Health’s attempt to slash cuts for research grants.
Such cuts, which would affect research institutes nationwide, could have a $13 million impact on Virginia Tech’s research budget, much of which goes to Roanoke-based Fralin Biomedical Research Institute at Virginia Tech Carilion, university President Tim Sands has said.
An NIH spokesperson, in an email exchange, said the agency is “unable to comment about ongoing litigation.” It has the option to appeal the decision to the U.S. Supreme Court. The agency falls under the umbrella of the Department of Health and Human Services, which is also a party in the proceedings.
The case began Feb. 7, 2025, after the NIH posted a notice that it would cap payments at 15% for “indirect costs,” particularly facilities and administration, in research funding. The notice listed such “overhead expenses” as equipment and capital improvements, general administration and personnel.
Plaintiffs numbering 22 states, five medical and research associations and 16 higher education associations and universities filed suit Feb. 10 to stop the move. Massachusetts-based U.S. District Judge Angel Kelley ruled in their favor, and the NIH appealed.
In an opinion posted earlier in January, the court’s three-judge panel agreed with Kelley’s assertions that NIH’s move violated a previous congressional action, as well as Health and Human Services’ own regulations.
An existing ban
The congressional action, an appropriations rider attached to the 2017 budget, was a response to the first Trump administration’s proposal to place a 10% cap on facilities and administration, or so-called indirect costs. Congress has reenacted the rider every year since.
The rider directs NIH to continue reimbursing institutions for indirect costs and prohibits it from implementing further caps on so-called F&A costs, according to the appeals court opinion.
Such costs include laboratory maintenance, high-speed data processing, data storage and security, lab equipment, radiation safety, hazardous waste disposal and support staff for administrative and regulatory compliance work.
The House of Representatives Appropriations Committee said in 2017 that the cuts “would have a devastating impact on biomedical research across the country,” and the Senate counterpart said that it “would radically change the nature of the [f]ederal [g]overnment’s relationship with the research community” while jeopardizing biomedical research nationwide, the opinion noted.
Virginia Tech has negotiated facility and administrative costs of about 60% in recent years — that means that for every dollar granted, about 60 cents more would be added for overhead. In fiscal year 2024, the university’s total federally sponsored research expenditures totaled more than $308 million. That included direct expenditures of $235 million and facilities and administration reimbursement of $73 million.
Despite the NIH reimbursements, Virginia Tech’s indirect costs are actually 65%, Sands has said.
President Donald Trump’s 2026 budget plan calls for further cuts to the NIH budget and across the Department of Health and Human Services, led by Robert F. Kennedy Jr., but there is bipartisan resistance in Congress.
Both the House and Senate appropriations committees have included language in their respective 2026 fiscal year labor, health and human services bills that would prohibit Trump from changing the cost rate for facilities and administration, essentially restating their previous prohibitions.
The House bill, sponsored by Rep. Tom Cole, a Republican from Oklahoma, passed last week and would give NIH $48.7 billion; the 2025 allocation was about $48.5 billion. The Senate bill, which West Virginia Republican Sen. Shelley Moore Capito introduced, has yet to move past the appropriations committee, but recommends the same amount.
By contrast, the Trump administration is requesting $27.9 billion for NIH. It also wants to reorganize its 27 institutes and centers by eliminating, consolidating or moving them to leave the total at eight restructured institutes and centers, according to a congressional document published in December.
Regulations at issue
HHS’s own regulations “require it to negotiate with each grant recipient to agree upon an indirect cost reimbursement rate,” the appeals court wrote.
An HHS agency such as NIH may change the rate for a class of awards or a single award only, according to HHS regulations. NIH’s lawyers argued that the regulations don’t limit the size of the group of awards that may be adjusted. The court disagreed with that assertion.
Quoting Kelley, the court wrote that calling a class of awards equal to all federal awards would render it “superfluous and meaningless.” Ultimately, the regulations require that negotiations are to be on an “institution-by-institution basis” that precludes a “one size fits all” approach of 15% across the board, the court wrote.
If the “supplemental guidance” the NIH introduced to justify the changes “violates HHS’s regulations pertaining to deviations from the negotiated rates, it necessarily also violates the first sentence of the [congressional] appropriations rider requiring NIH to comply with those regulations.”
NIH grants at least $30 billion per year for biomedical research. At Fralin Biomedical Research Institute at VTC, where most grants are multiyear awards, the NIH’s portfolio was $163 million last year, accounting for about 68% of all outside funding to FBRI.
Neuroscience, cardiovascular science, cancer research, addiction recovery, children’s health and infectious disease science are on the list of specialties at FBRI.
Virginia Tech spokesman Mark Owczarski on Tuesday said in an email exchange that the university does not comment on active or pending judicial matters, “other than to say that Virginia Tech is deeply committed to maintaining a strong research program — one that has a positive impact on the quality of life of people in the Commonwealth and across the world.”