IRA Developments to Watch in the EV and Battery Supply Chain for 2025
The incoming Trump Administration’s approach to the Inflation Reduction Act (IRA) and tax policies is generating significant interest within the electric vehicle (EV) sector.
Generally, reports indicate that some Republican politicians, including individuals connected with the Trump Administration, intend to repeal or limit certain IRA tax incentives. US Congress could limit tax incentives by capping a tax credit, for example, or narrowing the activity or outputs eligible for a tax credit.
However, Republican states have invested substantial amounts into projects that benefit from IRA tax incentives. Accordingly, the repeal or limitation of many of the IRA tax incentives could negatively affect Republican constituents, and the Republican-controlled Congress and Trump Administration may seek to avoid such a result.
While exact policy directions are still unfolding, here are some critical areas to follow.
Key Points to Watch in 2025
1. Changes to EV Tax Credits
Reports indicate that Trump’s transition team aims to eliminate the $7,500 consumer tax credit for EV purchases, which was enacted as part of the IRA.
However, other reports suggest that Republicans might leave the IRA largely untouched because Republican states and constituencies have largely benefited from the IRA.
Modifications to the EV tax credits could make EVs more expensive for consumers, potentially slowing adoption and affecting industry growth. The outcome will depend on legislative negotiations and pressures from various constituencies.
2. FEOC Restrictions
Under the IRA, Foreign Enemy of Concern (FEOC) restrictions prevent taxpayers from claiming the $7,500 consumer tax credit if certain critical minerals contained in the EV battery of the purchased EV were extracted, processed, or recycled by an FEOC. Reports indicate that the Trump Administration may extend such FEOC restriction to other IRA tax incentives.
For example, it has been suggested that Congress impose FEOC restrictions on the IRA tax credit available to manufacturers under Section 45X (Advanced Manufacturing Production Credit).
Revisions to the FEOC restrictions under the Trump Administration might impact trade dynamics.
3. FEOC Equity Thresholds
The FEOC restriction limits eligibility for the $7,500 consumer tax credit for EV purchases if certain critical minerals contained in the battery of such EV were extracted, processed, or recycled by a foreign entity that is owned by, controlled by, or subject to the direction of another entity connected with certain foreign governments (generally, China, Russia, Iran, and North Korea). A foreign entity is owned by, controlled by, or subject to the direction of another entity if 25% or more of the entity’s board seats, voting rights, or equity interests are held by the other entity.
The Trump Administration may choose to maintain or adjust the current 25% equity threshold for FEOC entities.
If the Trump Administration opts to make the FEOC rules more stringent or tightens other investment regulations for FEOC entities, the Trump Administration may prevent such FEOC entities from benefitting from certain IRA tax incentives.
Investments by these entities in free trade agreement countries or the United States could face additional scrutiny or restrictions, although the extent of permissible equity stakes in such ventures remains uncertain and could be influenced by broader trade considerations, national security, and economic priorities. The Trump Administration’s stance on China and related economic strategies will significantly influence these policies.
4. National Security and IRA Coverage
Changes to the IRA’s coverage of components and constituents, particularly in the context of battery-related products, could be influenced by national security considerations. The Trump Administration might prioritize restrictions on Chinese-made energy storage systems (ESS) and related components due to their strategic importance in critical infrastructure and grid security.
The new Republican Congressional majority could seek amendments through tax reform aiming to address these concerns, potentially modifying or phasing out certain IRA incentives related to clean energy and battery production.
As discussed above, the Trump Administration may seek to impose FEOC restrictions on certain IRA incentives and may cite to national security concerns as a reason for imposing restrictions at certain points in the supply chain through changes to these incentives. However, specific policy directions will also depend on the Trump Administration’s assessment of risks and priorities at the time of such legislative developments.
Mississippi Gaming Commission Meeting Report (January 2025)
January 16 Meeting
The Mississippi Gaming Commission held its regular monthly meeting on Thursday, January 16, 2025, at 9:00 a.m. at the Bolton State Building – D.F.A. Auditorium in Biloxi, Mississippi. Executive Director Jay McDaniel and Chairman Franc Lee, Commissioner Kent Nicaud and Commissioner Jeremy Felder were all in attendance. The following matters were considered:
LICENSING
The Commission approved the issuance of a license to the following:
New Palace Casino, L.L.C. d/b/a Palace Casino, as an Operator
FINDINGS OF SUITABILITY
The Commission approved findings of suitability for the following persons or entities:
Robert Joseph Granieri – Land Holdings I, LLC d/b/a Scarlet Pearl Casino Resort
Alan Wayne Ellingson – Crown MS Gaming Inc.
Satvinder Bhens – BetMGM, LLC
Parag Mahesh Vora – HG Vora Capital Management LLC
HG Vora Capital Management LLC — Greater than 5% Shareholder of PENN Entertainment, Inc.
OTHER APPROVALS
The Commission approved the following additional items:
Biloxi Capital LLC – Site Approval—Deferred
End of Other Approvals
FDA Revokes Authorization for the Use of Red Dye No. 3 in Food and Ingestible Drugs
On 15 January 2025, the US Food and Drug Administration (FDA) announced that it will revoke the color additive authorization for use of FD&C Red No. 3 in food (including dietary supplements) and ingestible drugs. This ban responds to a 2022 color additive petition submitted by several interested parties and filed by FDA in 2023.
In support of the revocation, FDA is relying on the Delaney Clause of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 379e(b)(5)(B)), which requires FDA to ban color additives that are found to cause or induce cancer in humans or animals. Specifically, FDA is invoking the Delaney clause as a result of data that shows FD&C Red No. 3 causes cancer in male rats via a sex- and species-specific hormonal mechanism. In fact, according to the preamble of the final rule, “the carcinogenicity of FD&C Red No. 3 was not observed when tested in other animals including female rats and either sex of mice, gerbils, or dogs.” In other words, there is no demonstrable link between consumption of the food additive and cancer in any animal other than male rats, and most importantly, between consumption of the food additive and cancer in humans. The Delaney clause nevertheless requires the revocation of the clearance for FD&C Red No. 3 based on the male rat carcinogenicity data.
Food manufacturers will have until 15 January 2027 to reformulate products containing FD&C Red No. 3, whereas drug producers will have until 18 January 2028. California’s ban on FD&C Red No. 3 in food (along with three other additives) under AB 418 goes into effect a few weeks before FDA’s ban, on 1 January 2027.
New Jersey Guidance on AI: Employers Must Comply With State Anti-Discrimination Standards
On January 9, 2025, New Jersey Attorney General Matthew J. Platkin and the Division on Civil Rights issued guidance stating that New Jersey’s anti-discrimination law applies to artificial intelligence. Specifically, the New Jersey Law Against Discrimination (“LAD”) applies to algorithmic discrimination – discrimination that results from the use of automated decision-making tools – the same way it has long applied to other forms of discriminatory conduct.
In a statement accompanying the guidance, the Attorney General explained that while “technological innovation . . . has the potential to revolutionize key industries . . . it is also critically important that the needs of our state’s diverse communities are considered as these new technologies are deployed.” This move is part of a growing trend among states to address and mitigate the risks of potential algorithmic discrimination resulting from employers’ use of AI systems.
LAD’s Prohibition of Algorithmic Discrimination
The guidance explains that the term “automated decision-making tool” refers to any technological tool, including but not limited to, a software tool, system, or process that is used to automate all or part of the human decision-making process. Automated decision-making tools can incorporate technologies such as generative AI, machine-learning models, traditional statistical tools, and decision trees.
The guidance makes clear that under the LAD, discrimination is prohibited regardless of whether it is caused by automated decision-making tools or human actions. The LAD’s broad purpose is to eliminate discrimination, and it doesn’t distinguish between the mechanisms used to discriminate. This means that employers will still be held accountable under the LAD for discriminatory practices, even if those practices rely on automated systems. An employer can violate the LAD even if it has no intent to discriminate, and even if a third-party was responsible for developing the automated decision-making tool. Essentially, claims of algorithmic discrimination are assessed the same way as other discrimination claims under the LAD.
The LAD prohibits algorithmic discrimination on the basis of actual or perceived race, religion, color, national origin, sexual orientation, pregnancy, breastfeeding, sex, gender identity, gender expression, disability, and other protected characteristics. The LAD also prohibits algorithmic discrimination when it precludes or impedes the provision of reasonable accommodations, or of modifications to policies, procedures, or physical structures to ensure accessibility for people based on their disability, religion, pregnancy, or breastfeeding status.
Unlike the New York City law that restricts employers’ ability to use automated employment decision tools in hiring and promotion decisions within New York City and requires employers to perform a bias audit of such tools to assess the potential disparate impact on sex, race, and ethnicity, there is no audit requirement under the LAD. However, the Attorney General’s guidance does recognize that “algorithmic bias” can occur in the use of automated decision-making tools and recommends various steps employers can take to identify and eliminate such bias, such as:
implementing quality control measures for any data used in designing, training, and deploying the tool;
conducting impact assessments;
having pre-and post-deployment bias audits performed by independent parties;
providing notice of their use of an automated decision making tool;
involving people impacted by their use of a tool in the development of the tool; and
purposely attacking the tools to search for flaws.
This new guidance highlights the need for employers to exercise caution when using artificial intelligence and to thoroughly assess any automated decision-making tools they intend to implement.
Tamy Dawli is a law clerk and contributed to this article
FTC Announces Final Junk Fees Rule Applying to Live-Event Tickets and Short-Term Lodging
On December 17, 2024, the U.S. Federal Trade Commission (FTC) announced its final “Junk Fees Rule” (the “Final Rule” or “Rule”) to prevent certain practices related to pricing in the live-event ticketing and short-term lodging industries. The Final Rule requires businesses that offer a price for live-event tickets or short-term lodging to disclose the total price, inclusive of mandatory charges, and to do so more prominently than other pricing information. The Final Rule also prohibits businesses from misrepresenting fees or charges in any offer, display, or advertisement for live events and short-term lodging. Notably, the Final Rule does not prohibit any one type of fee, nor does it prohibit specific pricing practices, such as itemization of fees or dynamic pricing. Instead, the Rule focuses on ensuring that fees are clearly disclosed.
The FTC’s stated aim in passing the Final Rule is to curb perceived unfair and deceptive pricing practices in these two industries, specifically so-called “bait-and-switch” pricing that hides the total price of tickets and lodging by omitting mandatory fees and charges from advertised prices and misrepresenting the nature, purpose, amount, and refundability of fees or charges. The FTC pointed to evidence that these practices are prevalent in these two industries, where most transactions occur online. The FTC emphasizes that “truthful, timely, and transparent pricing” “is critical for consumers” and claims this rule will allow American consumers to make better-informed purchasing decisions in these instances.
The Rule was published in the Federal Register on January 10, 2025, and is slated to go into effect 120 days later, putting its effective date as May 10, 2025. It is possible, however, that the incoming Administration will seek to change the rule or delay its effective date.
FTC Rulemaking Leading to Final Rule
The Final Rule is the culmination of the rulemaking process that the FTC initiated in November 2022, when it announced an Advanced Notice of Proposed Rulemaking under Section 18 of the FTC Act, to address certain purportedly unfair or deceptive acts or practices involving fees. The FTC specifically sought public comment on the prevalence of certain practices related to what it labeled “junk fees” and the costs and benefits of a rule that would require upfront inclusion of mandatory fees whenever consumers are quoted a price. After posing a series of questions to solicit data and commentary, the FTC received more than 12,000 comments in 90 days.
One year later, the FTC published a Notice of Proposed Rulemaking, which proposed a rule that prohibited misrepresenting the total price of goods or services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees. The proposed rule was not industry-specific; rather, it would have applied broadly to businesses across the national economy. The FTC then received 60,000 more comments on its proposed rule, most of which were supportive. The FTC interpreted this feedback as confirmation of the prevalence of the types of fee-related practices the FTC sought to address. The FTC estimated that its proposed rule would save consumers up to 53 million hours per year of wasted time spent searching for the total price of live-event tickets and short-term lodging, equating to more than $11 billion over the next decade.
In March 2024, the Biden Administration launched an interagency initiative, co-chaired by the FTC and U.S. Department of Justice, called the “Strike Force on Unfair and Illegal Pricing.” The Strike Force seeks to combat unfair and illegal pricing and lower prices for all Americans. Shortly after the announcement of the Strike Force, the FTC held a public hearing on its proposed rule while it continued to consider comments, leading to the announcement of the Final Rule last month.
Final Rule
The Final Rule prohibits hidden fees and makes it an unfair and deceptive practice for “any Business to offer, display, or advertise any price” of live-event tickets or short-term lodging without clearly and conspicuously disclosing the total price. Under Section 5 of the FTC Act, a representation, omission, or practice is “deceptive” if it is likely to mislead consumers acting reasonably under the circumstances and is material to consumers; that is, it would likely affect the consumer’s conduct or decisions regarding a good or service. Price, for example, is a material term. A practice is considered “unfair” under Section 5 if it causes or is likely to cause substantial injury, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by benefits to consumers or competition.
As an example, in the commentary to the rulemaking, the FTC says that bait-and-switch pricing, where the initial contact with a consumer shows a lower or partial price without including mandatory fees, violates the FTC Act even if the total price is later disclosed.
The Final Rule specifies that the “total price” is the “maximum total of all fees or charges a consumer must pay for any good(s) or service(s) and any mandatory Ancillary Good or Service” (any additional goods or services offered as part of the same transaction). Government charges, shipping charges, and fees for ancillary goods or services may be excluded under the rule.
The total price must be displayed more prominently than any other pricing information. If a final amount is displayed before the consumer completes the transaction, it must be disclosed as prominently as the total price.
The total price also must be displayed clearly and conspicuously, which means easily noticeable (“difficult to miss”) and easily understandable by ordinary customers. The clear-and-conspicuous requirement also covers audible communications. In addition to the total price, a business must display clearly and conspicuously the nature, purpose, and amount of any optional fee or charge that has been excluded from the total price, what the fee or charge is for, and the final amount of payment for the transaction.
The Final Rule goes beyond disclosure: It affirmatively prohibits misleading fees. Under the Final Rule, it is unlawful to misrepresent any fee or charge in an offer, display, or advertisement for live-event tickets and short-term lodging, including the nature, purpose, amount, or refundability of any fee or charge and what it is for.
State Laws and Regulations on Fees
The Final Rule does not preclude state laws that are more restrictive pertaining to unfair or deceptive fees or charges, except to the extent such laws or regulations are inconsistent with the Final Rule (and then only to the extent of the inconsistency). According to the FTC, a state law or regulation is not inconsistent with the Final Rule if the protection it affords is greater than the protection under the rule.
Numerous states have passed laws aiming to increase transparency in pricing and fees, including California, Colorado, Connecticut, Maryland, Minnesota, New York, and Tennessee. Further, some states have provisions that violations of Section 5 of the FTC Act also constitute deceptive practices under their state consumer protection statutes. The Final Rule thus augments the government scrutiny of fee-related practices and conduct that businesses may receive.
Takeaways and the Future of the Final Rule
Once the Final Rule becomes effective, when businesses advertise or display a price for live-event tickets or short-term lodging, they must display the total price — including any mandatory fees — and ensure any explanations for fees or charges are truthful and not misleading. Businesses have discretion to list optional fees. For businesses that have not previously been subject to state laws or regulations, the Final Rule will now apply to those businesses.
Despite the Final Rule’s narrow applicability to live-event tickets and short-term lodging, the FTC made clear it has not given up on other industries. The FTC emphasized it may address unfair and deceptive practices in other industries, as discussed in its Notice of Proposed Rulemaking, but will do so using its existing Section 5 authority.
The Final Rule was approved with a 4–1 vote, with Republican Commissioner Holyoak voting for the rule and incoming Republican FTC Chair Andrew Ferguson dissenting. Although the agency under new leadership could look to withdraw the Final Rule, under the Administrative Procedure Act, the FTC would need to publish a notice in the Federal Register explaining the reasons for the withdrawal, allow opportunity for comment, and consider those comments before repealing the Final Rule. Although incoming administrations in the past have imposed moratoriums on regulations under development, the Final Rule has been published in the Federal Register, and a moratorium likely would not impact the rule going into effect. The incoming administration, however, might choose to delay the effective date of the Final Rule. The Final Rule also falls within the window for review under the Congressional Review Act, creating another potential avenue for its repeal.
Separately, on January 14, 2025, the Consumer Financial Protection Bureau (CFPB) released a report titled “Strengthening State-Level Consumer Protections.” In the report, the CFPB encourages states to continue to go after “junk fees,” citing the FTC’s Final Rule and the FTC’s findings on the prevalence of certain practices. The CFPB provides proposed language for states to consider adding to their “state prohibitions on unfair, deceptive, and/or abusive acts or practices.” The CFPB’s recommended statutory language is industry-agnostic, meaning more states may look to adopt broad fee-related rules.
Like the FTC’s recent rule on non-compete agreements, the Final Rule may be subject to potential legal challenge, including by industry groups and trade associations. The landscape for disclosure of fees continues to evolve, and businesses should watch for developments at both the federal and state level.
The Lobby Shop: Awaiting Trump’s Second Inauguration: GOP Challenges, Party Divisions, and What Lies Ahead [Podcast]
In the Lobby Shop’s first episode of 2025, co-hosts Liam Donovan, Caitlin Sickles and Dylan Pasiuk convene to analyze the political environment ahead of President-elect Trump’s second inauguration. The group explores the challenges facing Speaker Johnson in a very narrowly divided Congress, the enduring influence of Trump on the Republican Party and the Democrats’ growing sense of resignation in legislative struggles. The discussion also highlights the ongoing confirmation hearings and the outsized role of figures like Elon Musk in shaping party dynamics. As they look ahead to the next administration, the hosts wonder what these developments mean for Republicans’ leadership and direction.
McDermott+ Check-Up: January 17, 2025
THIS WEEK’S DOSE
House Committees Organize, Senate Committees Begin Nomination Hearings. House healthcare committees held organizing meetings and announced subcommittee assignments, while Senate committees held nomination hearings for President-elect Trump’s appointees, although none (yet) in the healthcare space.
Senate Committee on Homeland Security & Governmental Affairs Holds OMB Director Nomination Hearing. The Office of Management and Budget (OMB) director confirmation hearing focused on Russell Vought’s previous positions, and mentions of healthcare issues were mostly related to veterans.
Senate Special Committee on Aging Holds Hearing on Improving Wellness Among Seniors. The hearing highlighted programs and policies that can improve seniors’ quality of life.
CMS Announces Next 15 Drugs to be Negotiated in Medicare Part D. The prices for the 15 drugs, which include the anti-obesity medications Ozempic, Rybelsus, and Wegovy, must be negotiated and announced by September 1.
HHS, DEA Issue Two Regulations on Telemedicine Prescribing of Controlled Substances. The regulations, one final and one proposed, from the US Department of Health and Human Services (HHS) and the US Drug Enforcement Administration (DEA) address requirements and pathways for certain providers to prescribe controlled substances via telehealth.
CMS Finalizes NBPP for 2026. The Centers for Medicare & Medicaid Services (CMS) finalized much of what was proposed, including enhanced enforcement against agents and brokers.
CMS Releases Advance Notice for 2026 MA and Part D Payment Policies. The annual Medicare Advantage (MA) and Part D payment update would increase MA revenue by 4.33% in 2026 compared to 2025.
CONGRESS
House Committees Organize, Senate Committees Begin Nomination Hearings. Various committees, including House Ways and Means and House Energy and Commerce, held organizational meetings this week and solidified subcommittee assignments. Reps. Buchanan (R-FL) and Doggett (D-TX) will continue as chair and ranking member, respectively, of the Ways and Means Health Subcommittee. Reps. Carter (R-GA) and DeGette (D-CO) are the new chair and ranking member, respectively, of the Energy and Commerce Health Subcommittee. The Senate Finance and Health, Education, Labor, and Pensions (HELP) Committees have not yet released subcommittee assignments.
The Senate held nomination hearings for Trump appointees this week, including hearings for secretary of defense nominee Pete Hegseth and attorney general nominee Pam Bondi. Nomination hearings for healthcare appointees, including HHS secretary nominee RFK Jr. and CMS administrator nominee Mehmet Oz, are not yet scheduled. RFK Jr. will testify before both the Senate Finance and HELP Committees, although only the Finance Committee will vote to advance his nomination. Committees typically provide a week’s notice before a nomination hearing, so health-related hearings will likely begin no earlier than the week of January 27.
Senate Committee on Homeland Security & Governmental Affairs Holds OMB Director Nomination Hearing. During the hearing, Republicans predominately praised nominee Russell Vought’s previous work as OMB director under Trump’s first Administration and emphasized that they looked forward to working with him again. Democrats pressed Vought on some of his previous positions. With respect to health-policy-focused questions, Democrats asked if he would commit to distributing funds appropriated for SUPPORT Act programs, because they stated that he previously supported withholding funds for funded programs that required reauthorization. Democrats also raised concerns about potential cuts to Veterans Affairs disability benefits.
Senate Special Committee on Aging Holds Hearing on Improving Wellness Among Seniors. The hearing included witnesses from a local police department, research centers, and nonprofits who highlighted that physical and dietary interventions at an earlier age can improve health and longevity and lower costs. Democratic members focused on how lowering prescription drug costs and implementing food programs would benefit seniors, while Republican members focused on addressing financial scams and the costs of implementing programs for older Americans.
ADMINISTRATION
CMS Announces Next 15 Drugs to be Negotiated in Medicare Part D. On the Biden Administration’s last full business day, CMS announced the second round of 15 drugs that will be negotiated in Medicare Part D starting in 2027. Notably, Medicare will negotiate prices for Ozempic, Rybelsus, and Wegovy. Per the Inflation Reduction Act, drugs were selected based on total gross covered prescription drug costs under Medicare Part D. Drug companies with a selected drug will have until February 28 to decide if they will participate in negotiations. However, if a company opts to not participate in the negotiation process, they will face a significant penalty in the form of an excise tax on the sales of that drug, potentially reaching up to 95% of the drug’s U.S. sales.
It is unclear how the incoming Trump Administration will handle both these negotiations and the MA/Part D Technical Rule, released in late November, that proposes to expand coverage of anti-obesity medications in Medicare and Medicaid. Under the Inflation Reduction Act, the final prices for these 15 drugs must be negotiated and announced by September 1, 2025. A fact sheet can be found here, and information about the first round of negotiated drug prices can be found here.
HHS, DEA Issue Two Regulations on Telemedicine Prescribing of Controlled Substances. The agencies released a final rule, Expansion of Buprenorphine Treatment via Telemedicine Encounter, which establishes requirements for the prescription of certain controlled substances via telemedicine and audio-only telemedicine for treatment of opioid use disorder. The final rule requires a DEA-registered practitioner to review the patient’s prescription drug monitoring program data for the state in which the patient is located during an audio-only telemedicine encounter. Additional prescriptions can be issued via other forms of telemedicine as authorized under the Controlled Substances Act, or after an in-person medical evaluation is conducted.
The DEA also released a proposed rule, Special Registrations for Telemedicine and Limited State Telemedicine Registrations, which would establish three special registrations that create a pathway for certain healthcare professionals to prescribe certain controlled substances via telemedicine. The special registration would only apply where the prescribing practitioner has never conducted an in-person medical evaluation of the patient prior to the issuance of the prescription. Comments are due 60 days from publication. For more information on the special registration proposed rule, check out our +Insight.
CMS Finalizes NBPP for 2026. The Notice of Benefit and Payment Parameters (NBPP) finalizes changes to health plans participating on the Affordable Care Act (ACA) Marketplace, as well as new requirements for Marketplaces themselves, agents, brokers, web-brokers, direct enrollment entities, and assisters that help Marketplace consumers. Most proposed policies were finalized and include the following:
Agents and Brokers: CMS enhanced enforcement, including to suspend an agent’s or broker’s ability to transact information with the Exchange. CMS also updated the model consent form that agents, brokers, and web-brokers can use to obtain and document consumer consent.
Grace Periods: CMS will allow health plans to adopt a fixed-dollar payment threshold of $10 or less, adjusted for inflation, under which plans would not be required to trigger a grace period or terminate enrollment for enrollees who fail to pay the full amount of their portion of premium owed.
Failure to File and Reconcile: CMS will require Exchanges to provide notice to consumers and tax filers who have failed to file and reconcile their advanced premium tax credit for two consecutive years.
Plan Options: CMS finalized updates to standardized plan options and non-standardized plan option limits, including requiring issuers to offer multiple standardized plan options within the same product network type, metal level, and service area to better differentiate these plans from one another to reduce the risk of duplicative offerings.
It is unclear how the incoming Trump Administration will handle these policies and whether any will be altered prior to the start of 2026. The final notice was effective January 15, 2025. A fact sheet is available here.
CMS Releases Advance Notice for 2026 MA and Part D Payment Policies. The Advance Notice is released on an annual basis and includes proposed updates to the capitation and risk adjustment methodologies used to calculate payments to MA plans, as well as other payment policies that impact Part D. Key proposals include:
Overall Payment Update: CMS proposed payment updates that would result in an estimated 4.33% increase in MA revenue in 2026 compared to 2025. CMS noted that this percentage translates to an increase of more than $21 billion in MA plan payments from 2025 to 2026.
Risk Adjustment: CMS proposed to complete the three-year phase-in of the Part C Risk Adjustment Model by calculating 100% of the risk scores using only the 2024 CMS-HCC model.
Part C and D Star Ratings: CMS provided a list of eligible disasters for adjustment and lists measures that will be included in the Part C and D improvement measures and Categorical Adjustment Index for the 2026 Star Ratings. CMS is considering additional ways to simplify and refocus the measure set on clinical care, outcomes, and patient experience of care measures, and is considering adding geography to the Health Equity Index reward.
Comments are due by February 10, 2025, which is after President-elect Trump’s inauguration. It is unclear how the incoming Trump Administration will handle the rate notice and whether these policies and payment rates will ultimately be implemented for 2026. The fact sheet can be found here, and a press release can be found here.
QUICK HITS
ASPE Issues Report on Medicare Part D Out-of-Pocket Cap. The HHS Assistant Secretary for Planning and Evaluation (ASPE) found that about 11 million Part D enrollees are expected to reach the $2,000 annual out-of-pocket cap enacted by the Inflation Reduction Act. Read the full report here.
FTC Releases Second Interim Report on PBMs. The Federal Trade Commission (FTC) report on pharmacy benefit managers (PBMs) focuses on specialty generic drug costs and follows the July 2024 first interim report on PBMs. Read the press release here.
HHS Summarizes Public Comments on Consolidation in Healthcare Markets RFI. The report highlights themes from public comments in response to a March 2024 request for information (RFI). The report calls for more ownership transparency and greater disclosures of private equity acquisition activity in healthcare markets; more enforcement action to inhibit mergers and acquisitions; and increased data sharing across federal, state, and local agencies.
CMS Releases Snapshot of Accountable Care Initiatives. The snapshot highlights that 53.4% of traditional Medicare enrollees are in an accountable care relationship in 2025, an increase of 4.3% from 2024. Read the fact sheet here.
CMS Issues Draft 2026 Part D Redesign Program Instructions. The instructions provide information about changes to the structure of the Part D standard benefit that were mandated by the Inflation Reduction Act. Comments are due by February 10, 2025. A fact sheet is available here.
CMS Releases Updated Guidance on Medicaid/CHIP Children’s Continuous Eligibility. The guidance replaces previously issued guidance on the topic, clarifying policies related to implementation in the Children’s Health Insurance Program (CHIP) and for incarcerated youth. The requirement to provide 12 months of continuous eligibility to children under the age of 19 was effective January 2024.
OIG Raises Concerns About FDA Accelerated Approval Pathway. An HHS Office of Inspector General (OIG) report recommended that the US Food and Drug Administration (FDA) modify the accelerated approval pathway to define specific factors that would require the accelerated approval council to advise on certain drug applications, and ensure appropriate documentation of meetings with sponsors in drug approval administrative files.
CMS Releases Guidance on Improving HIV Testing, Prevention, and Care Delivery in Medicaid/CHIP. The guidance provides strategies and opportunities for state Medicaid programs based on the latest scientific evidence and aims to help address access issues raised by two recent OIG reports.
HHS Declares Public Health Emergency, Provides Resources in California. In response to wildfires in southern California, HHS and CMS will provide resources and flexibilities, including extending the Marketplace Open Enrollment period and compiling a Medicaid disaster toolkit for states. Read the press release here.
MedPAC Holds January 2025 Meeting. The Medicare Payment Advisory Commission (MedPAC) meeting included votes on draft recommendations for updating payments for physicians, hospital inpatient and outpatient services, skilled nursing facility services, home health agency services, inpatient rehabilitation facility services, outpatient dialysis services, and hospice services. Sessions also discussed coverage limits on stays in freestanding inpatient psychiatric facilities; cost-sharing for outpatient services at critical access hospitals; and status reports on Part D, MA, and ambulatory surgical center services.
NEXT WEEK’S DIAGNOSIS
President-elect Trump will be inaugurated on January 20. With the new Administration, we expect immediate executive orders and other actions that may impact healthcare. The House and Senate will be in session next week. The Senate HELP Committee will hold an organizational meeting on January 21. Nomination hearings for Trump’s healthcare appointees could begin the week of January 27.
DOL Clarifies That FMLA Paid Leave Substitution Rules Apply When Employees Receive State or Local Paid Leave Benefits
As more states implement paid family leave programs, employers increasingly are faced with questions about how these state programs interact with Family Medical Leave Act of 1993 (FMLA) regulations. A recent opinion letter from the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) provides important guidance on this issue.
In an opinion letter dated January 14, 2025, the WHD clarified whether FMLA regulations on the “substitution of paid leave in 29 C.F.R. § 825.207(d) apply when employees take leave under state paid family leave programs.”
Quick Hits
The DOL’s Wage and Hour Division clarified that in the same way employers cannot require the substitution of accrued employer-provided paid leave benefits when employees receive compensation from disability plans and workers’ compensation programs, employers may not unilaterally require employees to substitute accrued employer-provided paid leave benefits when employees receive compensation from state or local paid family or medical leave programs.
The Wage and Hour Division also reiterated that the substitution provision would apply that if an employee’s FMLA-qualifying leave is unpaid.
The DOL Opinion Letter
On January 14, 2025, the WHD issued an opinion letter regarding the FMLA “substitution rule” applicability when employees are receiving state paid family leave benefits. The WHD concluded that the substitution rule did apply and that employers could not require employees to use accrued paid leave when employees were receiving paid family leave benefits. The WHD recognized in its opinion that FMLA regulations did not address the issue directly.
The FMLA provides unpaid job-protected leave for eligible employees for qualifying reasons like childbirth, personal health conditions, or caregiving for a sick family member. Under the FMLA substitution regulation, an employee may elect or an employer may require the employee to “substitute” accrued employer-provided paid leave benefits for any part of the unpaid FMLA leave. Allowing an employee to substitute accrued paid leave helps mitigate an employee’s wage loss.
The WHD consistently has taken the position that neither the employer nor the employee unilaterally can require or elect substitution of employer-provided accrued paid leave during a FMLA absence in which the employee receives disability or workers’ compensation benefits because the employee is on paid, not unpaid, leave. However, an employee and employer mutually may agree, subject to state law requirements, that employees may supplement or “top off” benefits from a disability or workers’ compensation program so that employees receive up to 100 percent of their normal wages.
Because the FMLA only provides unpaid leave, several states have implemented their own paid family and medical leave programs. These programs vary from state to state, but generally provide employees with partial income replacement benefits during their leave for qualifying reasons that often overlap with the qualifying reasons for leave pursuant to the FMLA.
The WHD drew a parallel between paid family leave programs and employer-provided disability and workers’ compensation programs. The opinion letter explained that the FMLA substitution provision does not apply for compensated leave designated as FMLA-qualifying leave regardless of whether an employee receives compensation from either an employer-provided disability or workers’ compensation program, or a state or local family and medical leave program. Accordingly, an employer cannot require that employees use accrued employer-provided paid leave benefits during a FMLA leave when the employee is receiving state or local family and medical leave program benefits.
The WHD’s position is consistent with many states’ approaches to the required substitution issue. For example, California prohibits employers from forcing employees to use PTO/vacation when receiving California Paid Family Leave benefits. Similarly, the Colorado Paid Family and Medical Leave Insurance (FAMLI) program prohibits employers from requiring employees to use or exhaust any accrued vacation leave, sick leave, or other paid time off prior to or while receiving FAMLI benefits, although they mutually may agree to do so. In Massachusetts, employers must allow, but may not require, employees receiving Paid Family and Medical Leave (PFML) benefits to supplement or “top off” their PFML benefits with available employer-provided accrued paid leave.
DEA Releases Long-Awaited Telehealth Special Registration Proposal, but Adoption Is Uncertain
On January 15, 2025, the US Drug Enforcement Administration (DEA) released a proposed rule entitled Special Registrations for Telemedicine and Limited State Telemedicine Registrations. This proposed rule would establish three special registrations, creating pathways for telehealth practitioners to prescribe, and online platforms to dispense, certain controlled substances via telemedicine after flexibilities expire on December 31, 2025. However, it is unclear whether the incoming Trump administration will move forward with the proposed approach for special registration.
IN DEPTH
WHY IT MATTERS
Current federal telehealth-focused controlled substance prescribing flexibilities, initially invoked in response to the COVID-19 public health emergency (PHE), will expire December 31, 2025.
Absent the flexibilities, current law would require telemedicine providers to perform an in-person medical evaluation of a patient prior to prescribing a controlled substance, with certain limited exceptions. One such exception is for providers who hold a “special registration,” the details of which were left within the DEA’s purview. This is the first time the DEA has proposed a special registration since the passage of the Ryan Haight Online Pharmacy Consumer Protection Act of 2008, when it was originally required.
The proposed rule would establish three types of special registrations for telemedicine:
Telemedicine Prescribing Registration, authorizing qualified clinician practitioners to prescribe Schedule III – V controlled substances via telemedicine
Advanced Telemedicine Prescribing Registration, authorizing qualified specialized clinician practitioners (e.g., psychiatrists and hospice care physicians) to prescribe Schedule II – V controlled substances via telemedicine
Telemedicine Platform Registration, authorizing covered online telemedicine platforms, in their capacity as platform practitioners, to dispense Schedule II – V controlled substances.
Special registrants would be required to maintain a State Telemedicine Registration (issued by the DEA) for every state in which the special registrant treats patients, unless otherwise exempted.
The proposed rule would also impose detailed requirements for practice standards, prescription information, and documentation, including requirements related to prescription drug monitoring program (PDMP) checks, use of audio-video technology, restrictions on Schedule II controlled substances, data reporting to the DEA, identity verification, clinician credentialing, and record retention.
The proposed rule was released just days before the incoming Trump administration takes office. Whether the new administration will allow the proposed rule to remain open for public comment or take a different approach remains unclear.
BACKGROUND
Under the Ryan Haight Act, a telemedicine provider is required to perform an in-person medical evaluation of a patient prior to prescribing a controlled substance, with certain limited exceptions. One such exception is for providers who hold a “special registration.” The Ryan Haight Act requires the DEA to establish the circumstances and procedures under which a special registration may be issued. In the more than 16 years since the act’s passage, the DEA has failed to implement such a process, even though Congress imposed a deadline of October 2019 in the 2018 SUPPORT for Patients and Communities Act for the promulgation of final regulations.
In March 2020, in response to the PHE, the DEA invoked flexibilities that allow for prescribing controlled substances via telemedicine without an initial in-person visit. The current extension of the flexibilities, pursuant to a November 2024 rule, authorizes all DEA-registered practitioners to prescribe Schedule II – V controlled medications via telemedicine without an initial in-person examination through December 31, 2025.
Stakeholders had hoped that the DEA would permanently adopt flexibilities for telemedicine prescribing of controlled substances after the PHE, including finally adopting a special registration process. In February 2023, the DEA and the Substance Abuse and Mental Health Services Administration proposed two rules: the general telemedicine rule and the buprenorphine rule. The two proposals would have established additional potential pathways for prescribing certain controlled substances in limited quantities via telemedicine without an initial in-person medical examination while also imposing detailed recordkeeping requirements. Notably, the proposed rules did not include a special registration process for telemedicine providers.
The DEA received a record 38,000 comments in response to the February 2023 proposed rules, including comments from federal lawmakers. Many stakeholders pointed out that the requirement for an in-person evaluation would make it more challenging for certain patients – those facing significant barriers to accessing care without telemedicine – to continue receiving the controlled medications they need. Subsequently, the DEA issued temporary rules in May 2023 and October 2023 extending the telemedicine flexibilities through December 31, 2024, and stated that it anticipated releasing a final rule addressing telemedicine prescription of controlled substances in fall 2024. In November 2024, the DEA further extended the flexibilities through December 31, 2025, stating that the extension would give it time to promulgate proposed and final rules on telemedicine prescribing and “ensure a smooth transition for patients and practitioners that have come to rely on the availability of telemedicine for controlled substance prescriptions.”
THE PROPOSED RULE
The DEA stated that it has determined that the best course of action to ensure patient access to care while maintaining sufficient safeguards to detect and protect against the diversion of controlled substances is to establish and maintain a separate special registration process for telemedicine.
The special registration would only apply where the prescribing practitioner intends to prescribe controlled substances and has not conducted an in-person medical evaluation of the patient prior to the issuance of the prescription. The proposed special registration would not be applicable to practitioner-patient relationships in which there has been a prior in-person medical evaluation of the patient by the practitioner. The special registration also would not apply to the other forms of the practice of telemedicine authorized under the Ryan Haight Act, including those authorized under the 2025 Expansion of Buprenorphine Treatment via Telemedicine Encounter final rule.
THREE REGISTRATION TYPES
The DEA proposes three types of special registrations for telemedicine. To be eligible for a special registration, the applicant would need to demonstrate a legitimate need for a special registration. An applicant for a special registration also would be required to already have one or more DEA registrations to prescribe (if a clinician practitioner) or dispense (if a platform practitioner), unless otherwise exempt.
The Telemedicine Prescribing Registration would authorize qualified clinician practitioners to prescribe Schedule III – V controlled substances via telemedicine.
The DEA determined that clinician practitioners have a legitimate need to prescribe Schedule III – V controlled substances when they anticipate treating patients for whom requiring an in-person medical evaluation prior to prescribing could impose significant burdens on bona fide practitioner-patient relationships (e.g., severe weather conditions, living in remote or distant areas, or having communicable diseases).
The Advanced Telemedicine Prescribing Registration would authorize qualified specialized physicians and board-certified mid-level practitioners to prescribe Schedule II – V controlled substances via telemedicine.
To be eligible for an advanced telemedicine prescribing registration, physicians and board-certified mid-level practitioners would need to demonstrate a legitimate need for a telemedicine prescribing registration, as described above, as well as a legitimate need for the prescribing of Schedule II controlled substances. Balancing concerns for vulnerable populations and the high potential for abuse of Schedule II controlled substances, the DEA determined that only the following seven categories of specialized physicians and board-certified mid-level practitioners have a legitimate need for the advanced telemedicine prescribing registration:
Psychiatrists
Hospice care physicians
Palliative care physicians
Physicians rendering treatment at long-term care facilities
Pediatricians
Neurologists
Mid-level practitioners and physicians from other specialties who are board-certified in the treatment of psychiatric or psychological disorders, hospice care, palliative care, pediatric care, or neurological disorders unrelated to the treatment and management of pain.
Clinician practitioners would be required to furnish information on the special registration application that demonstrates their specialized training – for example, board certification, specialized training, or the percentage of their overall practice that falls within one of the specialized practices). Mid-level practitioners would be required to be board-certified. The DEA seeks input on whether other types of practitioners should be included if they can demonstrate specific training and expertise in managing conditions that are traditionally treated with Schedule II controlled substances, and on alternative methods to ensure that practitioners seeking to prescribe Schedule II controlled substances have the appropriate training and expertise to do so safely.
The Telemedicine Platform Registration would authorize covered online telemedicine platforms to dispense Schedule II – V controlled substances through a clinician practitioner possessing either a telemedicine prescribing registration or an advanced telemedicine prescribing registration.
The DEA notes that the term “dispense” in the Controlled Substances Act means “to deliver a controlled substance to an ultimate user, which includes the prescribing and administering of a controlled substance” and encompasses “not only the physical act of handing out medications, but the broader process of providing medications to patients under the direction of a licensed healthcare provider.” The DEA also notes that by serving as intermediaries for the prescribing of controlled substances, covered online telemedicine platforms qualify as “practitioners” engaged in dispensing.
The DEA proposes to define “covered online telemedicine platform” as an entity that facilitates connections between patients and clinician practitioners via an audio-video telecommunications system for the diagnosis and treatment of patients that may result in the prescription of controlled substances, but is not a hospital, clinic, local in-person medical practice, or insurance provider, and meets one or more of the following criteria:
The entity explicitly promotes or advertises the prescribing of controlled substances through the platform.
The entity has financial interests, whether direct incentives or otherwise, tied to the volume or types of controlled substance prescriptions issued through the platform, including but not limited to ownership interest in pharmacies used to fill patients’ prescriptions or rebates from those pharmacies.
The entity exerts control or influence on clinical decision-making processes or prescribing related to controlled substances, including but not limited to prescribing guidelines or protocols for clinician practitioners employed or contracted by the platform; consideration of clinician practitioner prescribing rates in the entity’s hiring, retention, or compensation decisions; imposing explicit or de facto prescribing quotas; or directing patients to preferred pharmacies.
The entity has control or custody of the prescriptions or medical records of patients who are prescribed controlled substances through the platform.
The DEA states that this definition is intended to limit the special registration requirements to only those direct-to-consumer online telemedicine platforms that play a substantial and integral role as intermediaries in the remote dispensing of controlled substances. The DEA notes that ownership and operation of the online or digital system or platform on which the virtual visit takes place are not mandatory criteria within the proposed definition of a covered online telemedicine platform. Similarly, an entity solely operating a platform or system that merely provides the technological service or conduit for a telemedicine encounter to occur, without the presence of one of the additional four factors, would not constitute a covered online telemedicine platform. The definition of covered online telemedicine platform also explicitly excludes certain types of entities whose primary business operations do not rely on, or center around, telemedicine services, including hospitals, clinics, insurance providers, and local in-person medical practices (defined as medical practices where less than 50% of the prescriptions for controlled substances collectively issued by the practice’s physicians and mid-level practitioners are issued via telemedicine in any given calendar month).
The DEA has determined that covered online telemedicine platforms, in their capacity as platform practitioners, have a legitimate need to dispense Schedule II – V controlled substances when they:
Anticipate providing necessary services to introduce or facilitate connections between patients and clinician practitioners via telemedicine for the diagnosis, treatment, and prescription of controlled substances
Are compliant with federal and state regulations
Provide oversight over clinician practitioners’ prescribing practices
Take measures to prioritize patient safety and prevent diversion, abuse, or misuse of controlled substances.
STATE TELEMEDICINE REGISTRATIONS
The DEA would also require the special registrant to maintain a state telemedicine registration for every state in which the special registrant treats patients, unless otherwise exempted. This registration would be issued by the DEA and not by individual states and would operate as an ancillary credential, contingent on the special registration held by the special registrant.
Both clinician practitioners and online telemedicine platforms would be subject to this requirement.
APPLICATION PROCESS
Creation of Form 224S, Form 224S-M, and Fees
The DEA proposes issuing a new registration application, Form 224S, Application for Special Registration for Telemedicine Under the Controlled Substances Act, tailored for special registrations. The registration would last for three years. The registration fee would be $888 for any one of the three types of special registration. The fee for the platform practitioner state telemedicine registration would be $888 for each state in which a state telemedicine registration is sought; however, the clinician practitioner state telemedicine registration would be discounted to $50 for each state in which the clinician practitioner seeks a state telemedicine registration. The DEA notes in its discussion that fees for the state telemedicine registration for clinician practitioners would be discounted to account for the expected lower volume of telemedicine that would be conducted by clinician practitioners compared to covered online telemedicine platforms.
Registrants would be required to notify the DEA within 14 business days of any modification or changes to the information provided in their original application (Form 224S) via a new form, Form 224S-M. For example, if a clinician holding a special registration began employment with a new direct-to-consumer online telemedicine platform not previously disclosed on the clinician’s original Form 224S, the clinician would be required to submit a Form 224S-M.
Physical Location Requirement
All applicants would be required to designate one of their existing 21 U.S.C. 823(g) registered locations as the registered location/physical address (special registered location) of their special registration. The special registered location would serve as the physical point of contact for DEA inquiries and compliance actions. As discussed below, records arising from telemedicine encounters under the special registration would be required to be maintained at the special registered location.
Additional Disclosures
The applicant would be required to provide certain disclosures and attestations on Form 224S, which the DEA states will “enhance transparency, patient safety, and anti-diversion efforts”:
Platform practitioners applying for the telemedicine platform registration would be required to attest to all employment, contractual relationships, or professional affiliations with any clinician special registrant and online pharmacy, and their respective registration numbers. Likewise, clinician practitioners applying for the telemedicine prescribing registration or the advanced telemedicine prescribing registration would be required to attest to all employment, contractual relationships, and professional affiliations, including but not limited to those with covered online telemedicine platforms (and the respective online telemedicine platform’s telemedicine platform special registration number, if applicable).
Clinician practitioners and platform practitioners would be required to attest that they have devised and are committed to maintaining anti-diversion policies and procedures.
Clinician practitioners applying for the advanced telemedicine prescribing registration would be required to disclose their practice specialties.
For each type of special registration, applicants would be required to attest to their legitimate need on their special registration application.
PRACTICE STANDARDS
Under the proposed rule, registrants would be required to adhere to certain practice standards, such as:
Prescription Origination Within the United States. A clinician special registrant must be physically present in the United States when conducting a telemedicine encounter and issuing a special registration prescription. The clinician also would be required to hold the proper licensure and authorization within the state and territory where the practitioner is located when the telemedicine encounter takes place.
Electronic Prescribing for Controlled Substances (ECPS). All special registration prescriptions must be issued through ECPS.
PDMP Adherence. For the first three years after enactment of the special registration process, clinician special registrants would be required to check the PDMPs for the state or territory where the patient is located, the state or territory where the clinician practitioner is located, and any state or territory with PDMP reciprocity agreements with either the state or territory where the patient is located or the state or territory where the clinician practitioner is located. After three years, all clinician special registrants would be required to verify the identity of the patient and run a nationwide PDMP check of all 50 states and any US district or territory that maintains its own PDMP (referred to as the nationwide PDMP check).
If there is no mechanism to perform the nationwide PDMP check after three years, individual special registrants would continue to be required to perform PDMP checks of the states in the three categories described above. Individual special registrants would only be able to issue special registration prescriptions for Schedule II controlled substances to patients located within the same state as the individual special registrant.
The DEA acknowledges that it is currently unlikely that any one healthcare provider has access to all PDMPs nationwide but recognizes that current efforts to standardize, centralize, and interconnect PDMP data are making headway.
Audio-Video Telecommunications. A clinician special registrant would be required to utilize both audio and video components of an audio-video telecommunications system to prescribe under the special registration framework for every telemedicine encounter, whether for an initial visit or subsequent visit or follow-up.
Schedule III – V Special Registration Prescriptions for Opioid Use Disorder. Clinician special registrants would be allowed to issue special registration prescriptions for, and platform special registrants would be allowed to dispense, Schedule III – V controlled substances approved by the US Food and Drug Administration (FDA) for the treatment of opioid use disorder (OUD) through the use of an audio-only telecommunications system, provided that the treatment was initiated through the use of an audio-video telecommunications system. Currently, the only Schedule III – V narcotic drug approved by the FDA for the treatment of OUD is buprenorphine.
The DEA acknowledges that the Expansion of Buprenorphine Treatment via Telemedicine Encounter final rule allows a DEA-registered practitioner without a special registration to issue a prescription for a Schedule III – V controlled substance approved by the FDA for the treatment of OUD via audio-only or audio-video telemedicine for an initial consecutive six-month supply. Following the initial six-month supply, practitioners may prescribe the controlled substance by other forms of the practice of telemedicine authorized under the Controlled Substances Act (such as pursuant to a special registration) or after conducting an in-person medical evaluation.
Schedule II Controlled Substance Prescriptions. The DEA proposes two requirements for special registration prescriptions for Schedule II controlled substances, indicating that it anticipates imposing one or both requirements based on stakeholder comments.
The first proposed requirement would require that the clinician special registrant be physically located in the same state as the patient when issuing a special registration prescription for a Schedule II controlled substance.
The second proposed requirement would require that the average number of special registration prescriptions for Schedule II controlled substances constitute less than 50% of the total number of Schedule II prescriptions issued by the clinician special registrant in their telemedicine and non-telemedicine practice in a calendar month.
Schedule II Controlled Substance Prescriptions for Minors. In addition to the proposed requirements for Schedule II controlled substances described above, clinician special registrants who are pediatricians or board-certified in pediatric care prescribing Schedule II controlled substances to a minor would be required to prescribe in the presence of the minor’s parent or guardian.
State Law Considerations. When issuing a special registration prescription, a special registrant must comply with the laws and regulations of the state in which the special registrant is located and the state in which the patient is located during the telemedicine encounter.
PRESCRIPTION REQUIREMENTS AND “RED FLAG” CONSIDERATIONS
All prescriptions for controlled substances, whether issued via telemedicine or on the basis of an in-person encounter, are required to include the elements specified in 21 CFR 1306.05(a): signature of the prescriber; issue date; patient’s full name and address; drug details (name, strength, dosage form, and quantity); directions for use; and the practitioner’s name, address, and DEA registration number. The special registration proposed rule would require two additional elements for special registration prescriptions:
The special registration numbers of the clinician practitioner and, if a platform practitioner facilitated the prescription, the platform practitioner
The state telemedicine registration numbers of the clinician practitioner and, if a platform practitioner facilitated the prescription, the platform practitioner (unless exempt from the state telemedicine registration requirements).
The DEA indicates that the inclusion of the special registration number would allow pharmacists to determine if the clinician practitioner has the authority to prescribe a Schedule II controlled substance under the special registration while the inclusion of the state telemedicine registration numbers would allow pharmacists to verify that patients are only being prescribed special registration prescriptions by special registrants authorized to practice in the specific state where the patient is located. The DEA notes that pharmacists occasionally encounter what they may perceive as “red flags” for certain telemedicine prescriptions, which can stem from the nature of telemedicine itself, where patients may receive prescriptions from prescribers located at distances far away (both inside and outside the state where the patient is located). The geographical distance can raise doubts about the legitimacy of the prescription and could lead pharmacists to question its validity and refuse to fill the prescription. The DEA suggests that by verifying state telemedicine registration numbers, pharmacists would receive a level of assurance that a special registration prescription is legitimate when it originates from a prescriber located a significant distance from the patient.
DOCUMENTATION REQUIREMENTS
The special registration proposed rule includes the following documentation requirements:
Patient Verification and Photographic Record. Clinician special registrants would be required to establish and maintain photographic records for patient verification. The DEA would require that these records be maintained for two years from the date of the telemedicine encounter.
If the patient does not consent to their photo being captured, the clinician special registrant (or a delegated employee or contractor under the special registrant’s direct supervision) would be allowed to accept a copy of the patient’s federal or state government-issued photo identification card or other forms of documentation provided by the patient.
Special Registration Telemedicine Encounter Record. Clinician special registrants would be required to maintain a record of the date and time of the telemedicine encounter, the address of the patient during the telemedicine encounter, and the home address of the patient. The DEA would require that these records be maintained for two years from the date of the telemedicine encounter.
Credentialing and Clinician Records. Platform special registrants would be required to maintain and update records related to clinician special registrants with whom they enter and maintain a covered platform relationship, including:
Verification of the clinician special registrant credentials, including but not limited to records on education, training, board or specialty certifications, and special registration number and state telemedicine registration number(s)
The employment contract and any other contract between the platform special registrant and the clinician special registrant
Any disciplinary actions or sanctions, or documentation of complaints, disputes, or incidents involving the practice of telemedicine.
Platform special registrants would be required to maintain and update these records every two years and make them readily available to the DEA.
Data Reporting. Pharmacies dispensing special registration prescriptions would be required to report monthly aggregated special registration prescription data on Schedule II controlled substances and certain Schedule III – V controlled substances. Special registrants would be required to report annually aggregated information about their telemedicine practice, including the number of new patients they treat through telemedicine and the total number of special registration prescriptions for Schedule II controlled substances and certain Schedule III – V controlled substances dispensed for the preceding year.
Recordkeeping at the Special Registration Location. The proposed rule would require that records arising from telemedicine encounters under the special registration framework be kept at the special registered location. The DEA acknowledges that, given telemedicine’s nationwide reach – where a special registrant could serve patients in any state – it would pose an unreasonable administrative burden to require the special registrant to maintain records in every state where telemedicine patients are located.
NEXT STEPS AND INCOMING TRUMP ADMINISTRATION
Stakeholders will have 60 days to comment after publication of the special registration proposed rule in the Federal Register. The DEA encourages input on appropriate implementation timelines, or on-ramps for phased or gradual adoption, to help ensure a smoother transition when the final rule takes effect. Practitioners, pharmacies, and industry stakeholders are encouraged to provide their input on the time necessary to operationalize the proposed requirements.
However, the upcoming administration change may affect when – or if – the special registration proposed rule is adopted. Once in office, President-elect Donald Trump is expected to sign an executive order pausing many of the rules proposed by the Biden administration. It is unclear if this rule will be included. Because this proposed rule is a long-awaited attempt by the DEA to create a special registration, the incoming administration may choose to keep the proposed rule open in order to review public comments on the proposed approach. These comments could help inform future rulemaking. If the proposed rule remains open for public comment, stakeholders should consider providing feedback to help educate and inform the new administration on this approach.
Department of the Treasury and the Internal Revenue Service Issue Final Regulations on Section 45V Clean Hydrogen Production Tax Credit
On 3 January 2025, the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) released final regulations (Final Rules) implementing the Section 45V Clean Hydrogen Production Tax Credit (Section 45V tax credit) pursuant to the Inflation Reduction Act of 2022 (IRA). These much-anticipated Final Rules arrive over a year since the holiday-adjacent publication of the proposed regulations on 26 December 2023 (Proposed Rules). Treasury and IRS received approximately 30,000 written comments on the Proposed Rules and conducted a three-day public hearing that included testimony from over 100 participants. Adding to this long saga, the Biden Administration in its waning days has attempted to build upon the Final Rules and promote clean hydrogen production well into the future, announcing a US$1.66 billion loan guarantee by the Department of Energy (DOE) for Plug Power to produce and liquify clean hydrogen fuel. However, these actions come within days of the new Trump Administration and a Republican-controlled Congress, casting some uncertainty over the future of the Final Rules, DOE spending, and, more generally, the Section 45V tax credit.
In the Final Rules, Treasury and IRS made numerous modifications to the Proposed Rules—including notable changes to the controversial “three pillars” (incrementality, deliverability, and temporal matching) of the Energy Attribute Certificate (EAC) framework—largely in an effort to provide flexibility in response to industry concerns without sacrificing the integrity of the credit, while at the same time addressing concerns that substantial indirect emissions would not be taken into account. The Final Rules enable tax credit pathways for hydrogen produced using both electricity and certain methane sources, intending to provide investment certainty while ensuring that clean hydrogen production meets the IRA’s lifecycle emissions standards.
The Final Rules, and primary differences between the Proposed and Final Rules, are discussed below.
EAC Requirements for Electrolytic Hydrogen Production – The Three Pillars
Under both the Proposed and Final Rules, EACs are the established means for documenting and verifying the generation and purchase of electricity to account for the lifecycle greenhouse gas emissions associated with hydrogen production. Under this framework, a taxpayer must acquire and retire qualifying EACs to establish, for purposes of the Section 45V tax credit, that it acquired electricity from a specific electric generation facility (and therefore did not rely on electricity sourced via, e.g., the regional electric grid). Like in the Proposed Rules, the Final Rules require that taxpayers seeking to use EACs attribute electricity use to a specific generator that meets certain criteria for temporal matching, deliverability, and incrementality.
Incrementality
As in the Proposed Rule, the Final Rules define electric generation as “incremental” if the generator begins commercial operations within 36 months of the hydrogen facility being placed in service, or is uprated within that period. Treasury and IRS declined to extend the 36-month time frame for eligibility, but, within that 36-month time frame, Treasury and IRS provided more pathways for eligibility. The expanded pathways are as follows:
Uprates
The Final Rules modify the uprate rules to provide additional flexibility to taxpayers in determining “uprated” production capacity from generation facilities. The Final Rules provide that the term “uprate” means the increase in either an electric generating facility’s nameplate capacity (in nameplate megawatts) or its reported actual productive capacity.
Restarted Electric Generation Facilities
Under the Final Rules, EACs can meet the incrementality requirement with electricity from an electric generation facility that is decommissioned or is in decommissioning and restarts. The Final Rules clarify that these facilities can be considered to have additional capacity from a base of zero if that facility was shut down for at least one year.
Qualifying Nuclear Reactors
The Final Rules allow EACs to meet the incrementality requirement with electricity produced from a qualifying nuclear reactor up to 200 MWh per operating hour per reactor. A qualifying nuclear reactor is a “merchant nuclear reactor” or a single-unit plant that competes in a competitive market and does not receive cost recovery through rate regulation or public ownership.
Qualifying States
The Final Rules allow EACs to meet the incrementality requirement if the electricity represented by the EAC is produced by an electric generating facility physically located in a “qualifying state,” i.e., a state that has stringent clean energy standards (for now, California and Washington), and the hydrogen production facility is also located in the qualifying state.
Carbon Capture and Sequestration (CCS)
As authorized by the Final Rules, the “CCS retrofit rule” allows an EAC to meet the incrementality requirement if the electricity represented by the EAC is produced by an electric generating facility that uses CCS technology and the CCS equipment was placed in service no more than 36 months before the hydrogen production facility.
Temporal Matching
The Final Rules maintain the proposed hourly-matching requirement, which requires that the electricity represented by the EAC be generated in the same hour as the hydrogen facility’s use of electricity to produce hydrogen. The Proposed Rules required hourly matching to go into effect in 2028, but the Final Rules have delayed this requirement until 2030. Annual matching is required through 2029. The Final Rules note that this two-year postponement does not prohibit a hydrogen producer from voluntarily implementing hourly matching prior to 2030. Changes in the Final Rules also provide additional flexibility by allowing hydrogen producers to deviate from the annual aggregation of emissions to an hourly basis so long as the four kg CO2e per kg of hydrogen is met on an aggregate annual basis for the facility. This affords a hydrogen producer the ability to optimize the tax credit amount when it is unable to secure EACs during all hours of operation, without suffering severe penalties in the form of lower credit amounts across the entire year. Additionally, each electrolyzer is considered to be an individual qualified facility, which allows a producer to allocate EACs across electrolyzers and time periods to optimize tax credit values for a site.
Reliance Rule
In the Final Rules, Treasury and IRS declined to include a “reliance rule” (i.e., grandfathering) that would allow facilities that meet certain milestones (such as beginning of construction, being placed in service, or commencing commercial operations) by a certain date to continue to use annual matching instead of hourly matching.
Energy Storage
The Final Rules allow hydrogen producers and their electric suppliers to use energy storage, such as batteries, to shift the temporal profile of EACs based on the period of time in which the corresponding electricity is discharged from the storage device. The storage system must be located in the same region as both the hydrogen production facility and the facility generating the electricity to be stored. Storage systems need not themselves meet the incrementality requirement, but the EACs that represent electricity stored in such storage systems must meet the incrementality requirement based on the attributes of the generator of such electricity. EAC registries must be able to track the attributes of the electricity being stored.
Deliverability
As in the Proposed Rules, the Final Rules provide that an EAC meets the deliverability requirement if the electricity represented by the EAC is generated by a facility that is in the same region as the hydrogen production facility. Also, as in the Proposed Rules, the Final Rules establish that, for the duration of the Section 45V tax credit, “region” for purposes of deliverability will be based on the regions delineated in the DOE’s National Transmission Needs Study. Those regions are based on the balancing authority to which the electric generating source and the hydrogen facility are both electrically connected. The table published in the Final Rules is the authoritative source regarding the geographic regions used to determine satisfaction of the deliverability requirement.
Dynamic Deliverability Regions
Treasury and IRS intend to update the regions in future safe harbor administrative guidance published in the Internal Revenue Bulletin.
Interregional Connections
The Final Rules allow some flexibility on interregional delivery, acknowledging that interregional electric transfers commonly occur. Accordingly, the Final Rules allow an eligible EAC to meet the deliverability requirement in certain instances of actual cross-region delivery where the deliverability of such generation can be tracked and verified. The Final Rules provide specific rules to meet this standard.
Eligibility for Methane-Based Hydrogen Production
The Final Rules also provide pathways for receiving Section 45V tax credits for hydrogen production using biogas, renewable natural gas (RNG), and fugitive sources of methane (collectively, natural gas alternatives). Most notably, the Final Rules dispense with the “first productive use” requirement proposed in the draft regulations, which would have required that the RNG or biogas used to produce hydrogen was not previously used, likening this requirement to the incrementality requirement of the Three Pillars for electrolytic hydrogen. Instead, the Final Rules rely on “alternative fates,” which refer to the assumptions used to estimate emissions from the use or disposal of natural gas alternatives were it not for the natural gas alternative’s new use of producing hydrogen. Under the Final Rules, alternative fates are determined on a categorical basis, rather than adopting a single alternative fate for all natural gas alternatives or adopting alternative fates on an entity-by-entity basis. The alternative fate associated with natural gas alternatives feeds into the “background data” that is entered into the 45VH2-GREET Model. The 45VH2-GREET Model uses that background data to calculate the estimated lifecycle greenhouse gas emissions associated with the specific hydrogen production process.
Alternative Fates, as Applied to Sectors
For landfills, coal mine methane, and wastewater sources, flaring is considered the primary alternative fate. For animal waste, the alternative fate is based on a national average of all animal waste management practices for the sector as a whole. For fugitive methane from fossil fuel activities other than coal mining, the alternative fate is the emissions that would otherwise be generated from productive use.
Venting
The Final Rules reject venting as an alternative fate across all sources of natural gas alternatives because it does not account for the prevalence of flaring and productive use, nor does it address the risk of induced emissions due to the incentives provided by the Section 45V tax credit. In taking this position, Treasury and IRS recognize that venting will likely be increasingly prohibited at local, state, and federal levels.
It is worth noting that Treasury’s failure to issue actual draft regulations for a methane-pathway 45V tax credit could increase the likelihood of a successful legal challenge to the 45V Final Rules. It is unclear at this time whether Treasury’s solicitation of comments in response to the questions the agency posed related to RNG as a viable pathway to secure the 45V credit is sufficient to satisfy proper notice-and-comment requirements under the Administrative Procedure Act. The Biden Administration’s inclusion of Final Rules related to RNG could be part of a strategic effort aimed at minimizing attacks against the Final Rules by bringing RNG developers to the table.
Other Considerations
Determining Lifecycle Greenhouse Gas Emissions Rates
The Final Rules clarify that the annual determination of the tax credit amount is made separately for each hydrogen production process conducted at a hydrogen production facility during the taxable year. The Final Rules clarify that “process” means the operations conducted by a facility to produce hydrogen (for example, electrolysis or steam methane reforming) during a taxable year using one primary feedstock. CCS equipment that is necessary to meet the 45V emissions thresholds is considered part of the facility for purposes of the credit.
Construction Safe Harbor
The Final Rules allow taxpayers to make an irrevocable election to treat the 45VH2-GREET Model available on the date of construction commencement of the hydrogen production facility as the applicable 45VH2-GREET Model.
Third-Party Disclosure Requirement
As in the Proposed Rules, the Final Rules require that an unrelated third party certify the annual verification report submitted as part of the election to treat qualified property as energy property for purposes of the Section 45V tax credit.
Effective Date
The Final Rules become effective immediately upon their publication in the Federal Register.
Outlook
There is still a great deal of political uncertainty surrounding the Section 45V tax credit due to the incoming Trump Administration and Republican-controlled Congress, which could nullify these regulations through the Congressional Review Act or reduce or eliminate the credits by modifying or rolling back the IRA as part of the budget reconciliation process. There is additionally the potential for litigation challenges to the Final Rules under the new Loper Bright standard for judicial review of agencies’ interpretations of statute.1
Regardless, the Final Rules attempt to lay a foundation for hydrogen development for years to come. Barring political disruption, the Final Rules settle many uncertainties that may have acted as an obstacle to investment in the clean hydrogen sector and the progress of planned projects, including the DOE-funded hydrogen hubs. The Final Rules also generate new questions. As noted above, these Final Rules are effective immediately upon publication in the Federal Register. The immediate effectiveness and rollout of the Final Rules could contribute to the momentum needed to keep these rules and relevant IRA provisions in place even as administrations change. Strong industry reliance upon these rules may make it less politically palatable or practical to uproot and discard them entirely.
Footnotes
1 For more information on the U.S. Supreme Court’s decision in Loper Bright Enterprises v. Raimondo and how it impacted administrative law, see the following:
The Post-Chevron Toolkit | HUB | K&L Gates
The End of Chevron Deference: What the Supreme Court’s Ruling in Loper Bright Means for the Regulated Community | HUB | K&L Gates
Massachusetts Launches Online Portal for Filing Workforce Demographic Data
Massachusetts recently opened the portal that certain employers must use to submit their workforce demographic data to the state by February 3, 2025.
Quick Hits
A new law in Massachusetts requires employers to report their workforce demographic data to the state each year.
The state just opened the online portal for submitting the data.
The deadline to file the data is February 3, 2025.
The federal government requires certain employers to submit workforce demographic data in a report, called an EEO-1 form, each year. Under a new state law, the Francis Perkins Workplace Equity Act, Massachusetts employers with one hundred or more employees (and which are subject to EEO-1 reporting obligations) must send their most recent EEO-1 report to the state each year.
The state recently opened a new portal that employers must use to submit their data.
The site does not require login information, but it allows the direct upload of the reports through the provided link. The instructions direct filers to make sure the uploaded file name contains the legal name of the filing entity and the type of report being filed, such as EEO-1 reports.
The instructions provide contact information for several agencies that can answer questions concerning the implementation and interpretation of the filing requirement.
The Massachusetts Executive Office of Labor and Workforce Development (EOLWD) recently published guidance in the form of frequently asked questions (FAQs) to help employers comply with the workforce demographic reporting requirements.
Although this notice shows the filing deadline is February 1, 2025, the EOLWD has said that filings will be accepted through February 3, 2025. Employers do not need to include pay data this year.
Next Steps
Massachusetts employers may wish to make the necessary preparations to file the required reports with the state before the deadline using the newly opened online portal. As a reminder, EOWLD has stated that employers need only file the most recent EEO-1 reports they have. The filing platform for the 2024 EEO-1 reports has not opened yet.
A Wait Until the Deal Closes: The Antitrust Agencies Send a Strong Message About the Dangers of Gun-Jumping
One of the most common questions clients have after a merger or acquisition has been signed is, “When can we start on combining the operations and doing business?” And one of the most challenging pieces of counseling is to help a client understand the antitrust compliance principle that until a deal closes, the parties must compete as separate and independent entities. While merging companies may plan the integration of their operations, they may not actually integrate their operations or otherwise coordinate their competitive behavior before the transaction has closed without risking a “gun jumping” violation.
Gun-jumping violations can be triggered under two laws: (1) §1 of the Sherman Act, which prohibits agreements in restraint of trade (such as price fixing and market allocation); and (2) the Hart-Scott-Rodino Act (HSR Act), which requires parties to certain transactions to submit a premerger notification form and observe the necessary waiting period(s) prior to closing their transaction and the transfer of beneficial ownership.
While there have been a number of gun-jumping enforcement actions over the years, the Federal Trade Commission (FTC) and the Antitrust Division of Department of Justice (DOJ) (collectively, the “Antitrust Agencies”) made it clear recently that these types of violations will be scrutinized and penalized. The Antitrust Agencies imposed a record $5.6 million civil penalty on three crude oil suppliers for engaging in gun-jumping in violation of the HSR Act.1
According to the complaint, XCL Resources Holdings, LLC (XCL) and Verdun Oil Company II LLC (Verdun) filed an HSR for their $1.4 billion acquisition of EP Energy LLC (EP).2 However, prior to the expiration of the HSR waiting period, XCL and Verdun assumed control of a number of EP’s key operations including but not limited to managing EP’s customers and coordinating pricing strategies. These and other actions effectively transferred beneficial ownership to the buyers before the deal closed, in violation of the HSR Act.
The enforcement action is the largest civil penalty ever imposed for a gun-jumping violation in history. Moreover, the Antitrust Agencies imposed a number of antitrust compliance and monitoring obligations on the buyers.
[1]https://www.ftc.gov/news-events/news/press-releases/2025/01/oil-companies-pay-record-ftc-gun-jumping-fine-antitrust-law-violation and https://www.justice.gov/opa/pr/oil-companies-pay-record-civil-penalty-violating-antitrust-pre-transaction-notification
[2]https://www.ftc.gov/system/files/ftc_gov/pdf/complaintforcivilpenaltiesandequitablereliefforviolationsofthehartscottrodinoact.pdf