US appellate court upholds injunction on federal funding cuts to medical research Dispatches
National Institute of Allergy and Infectious Diseases (NIAID), NIH, Public domain, via Wikimedia Commons
US appellate court upholds injunction on federal funding cuts to medical research

A US federal appellate court on Monday upheld a district court injunction on funding cuts to National Institutes of Health (NIH) grants for medical research.

A three-judge panel for the Court of Appeals for the First Circuit ruled that “the district court properly exercised subject-matter jurisdiction over the plaintiffs’ claims,” and that the proposed cuts likely exceeded congressional and regulatory authorization.

Lawyers for the plaintiffs had warned that if implemented, the policy would trigger layoffs, laboratory closures, and stalled clinical trials. The court reiterated the importance of NIH funding, writing: 

[NIH funding] has led to lifesaving scientific breakthroughs, including the creation of new treatments for diseases like cancer and diabetes… a decline in death rates from acute conditions like heart attacks and strokes, a better understanding of various infectious diseases, a decrease in maternal death and morbidity, and an increase in the ability to detect ovarian tumors and diagnose Alzheimer’s disease. In short, the public-health benefits of NIH-funded research are enormous.

Medical research funding is distributed on a reimbursement basis rather than as lump sum awards. Researchers are reimbursed for two types of costs: “direct” and “indirect.” Direct costs are those tied to a single research project; indirect costs are those incurred across multiple projects, such as facility maintenance or equipment costs.

Agency regulations and congressional appropriations riders have long mandated indirect costs to be calculated as a certain percentage of direct costs–amounts and percentages differ with each project. Recipients then use that calculation as a starting point to negotiate reimbursement amounts with NIH. The agreed amount is then formalized in a “negotiated indirect cost rate agreement,” or NICRA.

However, the proposed cuts would do away with this scheme and cap indirect cost reimbursement at 15 percent of direct costs. Before the court, NIH claimed that the district court did not have subject matter jurisdiction over the case and challenged plaintiff’s contention that the reimbursement cap exceeded NIH authority. 

On the first issue, NIH argued that under the Tucker Act, plaintiffs suing the federal government over contractual disputes must bring their suit in the Court of Federal Claims as opposed to federal district court. The agency claimed that NICRAs were contracts with the federal government and that plaintiffs filed in the wrong court.

However, the appellate court disagreed. Citing two recent Supreme Court cases, the panel reasoned that plaintiffs did not challenge the NICRAs or ask for retroactive relief, but rather challenged the regulation that instituted the reimbursement cap on prospective grounds. The distinction allows plaintiffs to bring the case in federal district court, the court explained: 

[P]laintiffs in this case do not challenge any withholding of funds promised under grant agreements… [T]he district court’s ruling is not an order “to pay money”… Instead, the plaintiffs challenge only the agency-wide guidance announcing that NIH will reimburse indirect costs at a 15% rate going forward.

On the second issue, the court analyzed controlling congressional language and determined that NIH’s proposed reimbursement cap likely exceeded agency authority. 

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

Plaintiffs include 22 attorneys general, five medical associations, and 16 higher education associations and universities all of whom brought their original suits in February following NIH’s announced funding cuts. In March, the district court granted the plaintiffs’ request for a preliminary injunction on the basis that it had subject-matter jurisdiction over the plaintiff’s claims. Looking at the merits, the court held that the proposed cap “likely… represents an arbitrary and capricious agency action.”

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