Key Takeaways:

Since January 20, 2025, the Trump administration has issued a flurry of executive orders and policy directives targeting the Department of Health and Human Services (“HHS”) and its healthcare-related agencies, including:

• The pause or cancellation of billions of dollars of grant money
• Restrictions on grant money allocated to administrative and facility costs
• A 90-day hiring freeze and forthcoming workforce reduction plan
• The mandated removal of certain references to gender in government data
• Prohibition on gender affirming care for minors and rescission of guidance regarding disclosure of certain related personal health information

These sweeping changes could have significant impacts for the healthcare industry writ large since they affect virtually all the 13 operating divisions or sub-agencies of HHS.

The new policies will affect not just these agencies, but also the healthcare industry more broadly—if, that is, they survive the myriad lawsuits challenging these rapid changes.

Executive Summary

Since January 20, the Trump administration has issued a flurry of executive orders and policy directives targeting the Department of Health and Human Services (“HHS”) and its healthcare-related agencies, including:

• The pause or cancellation of billions of dollars of grant money

• Restrictions on grant money allocated to administrative and facility costs

• A 90-day hiring freeze and forthcoming workforce reduction plan

• The mandated removal of certain references to gender in government data

• Prohibition on gender affirming care for minors and rescission of guidance regarding disclosure of certain related personal health information

These sweeping changes could have significant impacts for the healthcare industry writ large. They affect virtually all of the 13 operating divisions or sub-agencies of HHS—the federal cabinet-level agency formally tasked with providing effective health and human services by fostering sound, sustained advances in the sciences underlying medicine, public health, and social services. Together, those divisions and subagencies are responsible for administering a diverse nationwide set of federal health services and include the National Institutes of Health (“NIH”), Centers for Disease Control and Prevention (“CDC”), Food and Drug Administration (“FDA”), and Centers for Medicare and Medicaid Services (“CMS”).

The new policies will affect not just these agencies, but also the healthcare industry more broadly—if, that is, they survive the myriad lawsuits challenging these rapid changes. With so many new policies and so much litigation, it can be difficult to assess where things stand—and where they may go next. In this Debevoise In-Depth, we attempt to provide a guide. Below is a summary of the legal landscape, including the administration’s actions with respect to HHS and the resulting litigation, as well as a summary of the potential impacts from these evolving legal changes.

Legal Landscape: Significant Administration Actions Since the Inauguration

Hiring Freeze & DOGE Terminations

On January 20, President Trump signed an executive order implementing a 90-day hiring freeze on all federal agencies, which was followed by an additional executive order on February 11 directing federal agencies to coordinate and consult with DOGE to shrink the size of the federal workforce, limit hiring to essential positions, and determine which agency components (or agencies themselves) may be eliminated or combined. Elon Musk and the Department of Government Efficiency (“DOGE”) are not authorized to order layoffs of federal workers, but President Trump has instructed Cabinet secretaries to work with DOGE on cost-cutting measures, which could include significant layoffs. Federal labor cuts are expected and may intersect with an executive order creating a new category of federal employees: “Schedule Policy/Career” employees, in “confidential, policy-determining, policymaking, or policy-advocating” positions, which may lead to many more federal employees being categorized as “at will” and potentially subject to dismissal. Officials at agencies within HHS are anticipating imminent layoffs as Robert F. Kennedy Jr.—the Secretary of HHS—and DOGE reportedly finalize a plan to restructure the department.

Communication Restrictions

On January 21, acting Secretary of HHS Dr. Dorothy Fink issued a memorandum prohibiting external communications by all federal health agencies through February 1. In response, the NIH stopped meeting with researchers who had applied for federal grants—a necessary step in the process of distributing grant money. It has been argued that this practice may be in violation of judicial orders that prohibit the funding freeze because blocking “advisory-committee meetings that are legally required to make payments is no different in effect than simply refusing to sign contracts or issue cheques.” On March 20, NIH began posting advisory committee meeting notices to the federal register, and the first advisory committee meeting since the freeze is scheduled for April 8, 2025.

Funding Restrictions

On January 27, the White House budget office announced that it was pausing the disbursement of billions of dollars in grant funds until the administration could confirm that the funding complied with President Trump’s priorities. Two weeks later, on February 7, the NIH published guidance capping indirect costs for NIH grants at 15%, down from the previous range of 25% to 70%. Indirect costs cover administrative and facility expenses of laboratories, such as electricity to operate complex machinery, hazardous waste disposal, and janitorial staff.

Impact on Data Reporting

The executive order making it the official policy of the federal government to recognize only two biological sexes directed agencies to remove all references to “gender ideology” in their policies and messaging, which had a broad impact on data reporting. Because much of the CDC’s data include some degree of gender-identifying information, in its attempt to comply, the CDC temporarily removed a broad range of data from its websites, including information on HIV, such as data tracking new infections and deaths. In response to a separate executive order aimed at ending gender-affirming care for minors, HHS rescinded its Biden-era guidance that prohibited HIPAA-regulated entities from disclosing personal health information related to gender-affirming care without prior authorization from the patient.

Legal Landscape: Court Challenges to Administration Actions

Numerous lawsuits have been filed in response to the above-referenced changes at HHS and its agencies and divisions. While many lawsuits resulted in early success for plaintiffs in obtaining preliminary relief, they remain pending and raise serious legal issues for the administration’s actions and the individuals affected by them. The cases include:

Gender Language

PFlag, Inc v. Trump, No. 25-337, 2025 WL 510050 (D. Md. Feb. 14, 2025; Mar. 5, 2025; Mar. 21, 2025): PFLAG, Inc., a nonprofit organization dedicated to supporting, educating, and advocating for LGBTQ+ people, the American Association of Physicians for Human Professionals, and seven individual plaintiffs filed suit in the United States District Court for the District of Maryland against the Trump administration. They argued that the executive orders restricting access to gender-affirming medical care for transgender individuals under the age of 19 were in violation of multiple Acts of Congress and the Constitution. On February 26, the District of Maryland issued an order prohibiting the Trump administration from withholding congressionally appropriated funds related to the executive orders. On March 5, the court issued another order, noting that the plaintiffs were likely to succeed on the merits because “the challenged provisions of the Executive Orders place significant conditions on federal funding that Congress did not prescribe.” This order stops the administration from conditioning, withholding, or terminating federal funding based on the executive orders until the court decides the merits of the case. On March 21, the Trump administration filed a notice of appeal to the Fourth Circuit Court of Appeals.

Funding Restrictions

State of New York v. Trump, No. 25-cv-39, 2025 WL 440873 (D.R.I. Jan. 31, 2025; Mar. 6, 2025; Mar. 10, 1015): A group of 22 states and the District of Columbia filed suit in the United States District Court for the District of Rhode Island against the President and the heads of numerous federal executive departments and agencies. They argued that the January 27 memo from the U.S. Office of Management and Budget (“OMB”) which froze federal grantmaking and funding (the “OMB Directive”) violated the Administrative Procedure Act (“APA”) and multiple clauses of the Constitution. On January 31, Judge John McConnell issued an order prohibiting the Trump administration from reissuing or implementing any additional guidance that would effectively implement the OMB directive. On March 6, Judge McConnell issued another order requiring defendants to abide by the same parameters as his January 31 order until the court decides the merits of this case. On March 10, the Trump administration filed a notice of appeal to the First Circuit Court of Appeals.

Massachusetts v. NIH, No. 25-cv-10340, 2025 WL 702163 (D. Mass. Mar. 5, 2025): On March 5, the District Court for the District of Massachusetts issued a nationwide preliminary injunction halting the NIH’s new policy that reduced and capped indirect rates on existing and future grant awards for biomedical research. NIH’s rate change policy, which was issued on February 7 and was set to become effective on February 10, would eliminate individually negotiated rates to impose a flat maximum rate of 15% for indirect costs across all grant awards. The policy had not yet gone into effect because it was stayed under a temporary restraining order on February 10, 2025. The stay was extended on March 5, when Judge Angel Kelley issued an order preliminarily enjoining NIH from implementing its rate change policy in three consolidated cases. The court found that plaintiffs’ claims were likely to succeed on the merits because the rate change policy likely violated the regulations regarding the administration of indirect costs and the APA. Specifically, the court found that, by creating a uniform rate-cutting policy for all grant recipients, the NIH likely did not satisfy statutory requirements to provide sufficient justification for the rate changes. Notably, the court found that the rate change policy could cause irreparable harm by causing grant recipients to scale back research infrastructure and suspend ongoing clinical trials through which patients are receiving critical care.

Hiring Freeze & DOGE Authority

American Federation of Teachers v. Bessent, No. 25-0430, 2025 WL 582073 (D. Md. Feb. 24, 2025; Mar. 24, 2025): A group of unions and membership organizations representing current and former federal employees and federal student aid recipients, and six military veterans who received federal benefits or student loans, filed suit against the Trump administration, alleging that the administration unlawfully granted access to records containing personal information to those implementing the DOGE executive orders. The court issued an order prohibiting the Department of Education from disclosing plaintiffs’ or plaintiffs’ members to any DOGE affiliates. On March 24, the Trump administration filed a notice of appeal to the Fourth Circuit Court of Appeals.

Impacts: Agency Functions Altered by Trump Administration Actions

Despite these legal challenges, the administration’s actions have had immediate impacts on HHS agencies, largely falling into three broad buckets: (1) funds, (2) the workforce, and (3) agency communications.

• Delayed and canceled funding. Every HHS agency is facing changes to its funding landscape. The delays, pauses, and expected cancellations of federal funding to scientific pursuits change both the agencies’ ability to operate and their ability to support the industry, institutional, and educational groups that are direct and indirect beneficiaries of those funds. NIH—whose core functions include grantmaking—has faced efforts to cap the indirect cost reimbursement rate and prevent the federal register publications required for certain NIH funding to proceed. In March, NIH began to terminate grants for projects studying gender and other topics. NIH is the largest public funder of biomedical and behavioral research, generating $92.89 billion in economic activity in FY 2023 and supporting more than 300,000 researchers. While the grantmaking freeze, federal register freeze, and gag order on NIH employees prevented them from reviewing applications and issuing funds—creating a backlog of applications to review now that the review process is beginning to reactivate—many of the adverse effects to NIH will be felt in the healthcare and research sectors.

Termination of contracts between agencies and industry, such as a February 7 announcement that DOGE had “canceled 62 [HHS] contract[s] worth $182 million,” directly impacts the healthcare sector. Both the agency and private parties to such contracts face disruption to predictability and the flow of previously-contracted-for goods and services. Healthcare businesses in contractual agreements with federal health agencies should carefully review the terms, duration, and contingencies in their agreements and prepare for potential changes to federal contracting behavior in this area.

• Workforce Reductions. One of the most severe impacts on HHS overall stems from the Trump Administration’s actions to cut down the federal workforce. On March 7, 2025, HHS informed members of Congress that 2,908 HHS employees had been fired, factoring in 591 employees who had been rehired. This includes 1,130 employees fired at NIH, 499 at CDC, and 424 at FDA. At FDA, the medical device, food, and tobacco divisions were subject to large cuts. Many of these jobs were funded by industry user fees, which account for nearly half of the agency’s $7.2 billion budget. After industry insiders argued that the terminations could lead to longer review times, slowing regulatory approvals for medical devices, food ingredients, and other products necessary for developing complex products, FDA quietly reinstated some employees, including many in the medical device division. It is unclear if other HHS agencies will follow suit. On March 16, a federal judge in Maryland ordered the Trump administration to temporarily reinstate thousands of federal employees terminated in recent weeks, including those at HHS. Just over a week later, on March 27, RFK, Jr. presented his restructuring plans for HHS which include firing over “10,000 full-time employees spread across agencies tasked with responding to disease outbreaks, approving new drugs, providing insurance for the poorest Americans and more.” The proposed “cuts would eliminate about one-quarter” of the HHS workforce and five of the department’s ten regional offices.

• Disrupted Agency Communication. On January 21, the acting HHS Secretary instructed the heads of its 13 health agencies to stop all public messaging until February 1, and the freeze de facto continued past that date. The communications freeze reportedly impacted a wide variety of communications, including the CDC’s weekly public health reports, updates on the bird flu, delays or cancellations of scientific research publications, and communications between HHS agencies and clinicians seeking guidance. Other actions, such as the executive order requiring removal of information promoting “gender ideology” have impacted scientific data distribution, including the removal of data from the CDC’s website. Entities that regularly rely on HHS agency communications should prepare for the possibility of disruptions to information streams moving forward and adjust their business models accordingly.

Looking Forward: A Changing Landscape for the Private Sector

Though the Trump administration’s executive actions are directed to the public sector, the changes are being felt in the private sector and will require ongoing monitoring.

• Research and development pipelines. Because HHS’s agencies operate at every stage of the bench-to-bedside continuum, the administration’s actions are likely to impact the entire research and development pipeline. For example, delays in NIH funding and approval may mean that data from certain animal studies or clinical trials could be rendered unusable, and workforce reductions at the agencies are likely to result (and in some cases already have resulted) in delays and suspension of applications. Concerns have been raised that this may restrict the pipeline for researchers who would otherwise work in NIH-funded settings and in the private sector.

• Public-private partnerships and agreements. Private firms’ and HHS agencies’ work intersects at many points, including through partnerships and contracts. The interrelationships between publicly funded research and private innovation means that private companies’ products are refined through publicly supported clinical trials and programming (for example, use of a medical device as part of a treatment regimen). As noted, those trials and programs may be disrupted. HHS has also indicated it may walk back contracts between private sector firms and the government, as illustrated by a recent announcement that HHS is reevaluating a $590 million bird flu vaccine contract with Moderna.

• Company valuations. Instability in research development pipelines and in existing agreements between the private sector and government has contributed to concerns around company valuations. Some impacts have been immediate. For example, reporting on HHS’s reevaluation of its contract with Moderna resulted in a sharp drop in the company’s stock price. In addition, “Gilead stock tumbled [on March 19] on reports the Health and Human Services Department could slash federal funding for HIV prevention.” Valuation drops are also likely to demonstrate impacts aside from stock prices. For example, HHS contraction may be particularly impactful for smaller start-ups, which often receive funding from NIH.

• Other impacts on firm functions. Although changes to HHS may prove particularly complex for firms in the health sector, policies relating to immigration, tariffs, international data sharing, and other impacts must also be considered for a holistic understanding of potential risks. For example, tariffs could have a significant impact on the availability and cost of drugs and medical devices for U.S. companies and consumers. In particular, a large percentage of generic drugs and active pharmaceutical ingredients (“APIs”) used to manufacture drugs for U.S. consumers are produced abroad.

Impacts to Universities

Academic research institutions rely heavily on NIH funding and may face unique impacts if that funding remains in a state of instability. Withholding of grant funding could impact researchers at universities in the long and short term.

Due to the communications freeze, no new grant applications have been approved or funded. Although some study sections have been permitted to move forward, applications will continue to exist in limbo until advisory council meetings are held again. Universities also must wrestle with the uncertain future for pending research funding applications. As of late February, more than 16,000 grant applications seeking a share of $1.5 billion in new funding have been delayed.

Advisory councils are mandated by law to meet three—or in some specific instances, four—times per year, which results in “funding cycles” that universities can expect throughout the year. As applications get pushed to the next funding cycle, universities will have to cover expenses to avoid lab closures and layoffs in the interim. Already, certain schools have paused hiring, are reassessing graduate student admissions, or have rescinded offers for graduate school students.

This publication is for general information purposes only. It is not intended to provide, nor is it to be used as, a substitute for legal advice. In some jurisdictions it may be considered attorney advertising.