McDermott+ Check-Up – June 27, 2025
THIS WEEK’S DOSE
Senate Reconciliation Process Continues. Republicans are adjusting language to comply with Senate rules and appease various wings of the party.
HHS Secretary Kennedy Testifies at House Energy and Commerce Health Subcommittee. Secretary Kennedy was there to address the US Department of Health and Human Services (HHS) fiscal year (FY) 2026 budget request, which contains a large restructuring effort.
House Ways and Means Committee Holds Hearing on Digital Health Data. The conversation highlighted the role of wearable technology.
Senate HELP Committee Considers CDC Director Nomination. Dr. Susan Monarez is nominated to be Centers for Disease Control and Prevention (CDC) director.
House Appropriations Committee Advances FDA Spending Bill. The bill includes significant cuts to the US Food and Drug Administration (FDA), among other provisions.
House Budget Committee Examines Waste and Fraud. The focus was on the dignity of work and the utility of work requirements.
CMS Releases ACA Program Integrity Final Rule. The Centers for Medicare and Medicaid Services (CMS) rule related to Affordable Care Act (ACA) marketplaces was largely finalized as proposed, although it is only effective for plan year 2026.
CMS Announces Industry Commitment to Fix Prior Authorization. Participating health insurers voluntarily pledged to implement six changes to their prior authorization practices.
Office of Science and Technology Policy Issues Guidance on Science Standards. The guidance implements an executive order on the same subject.
Major SCOTUS Rulings Released. The Supreme Court of the United States (SCOTUS) released opinions related to Planned Parenthood, the US Preventive Services Task Force (USPSTF), and nationwide injunctions.
CONGRESS
Senate Reconciliation Process Continues. Language from committees has been undergoing the “Byrd Bath,” which is when the majority and minority parties bring their disputes forward to the Senate parliamentarian over which provisions are “extraneous” and therefore not allowed to be included in the reconciliation bill. The parliamentarian is a non-partisan official who advises the Senate on rules and procedural issues. If she determines that a provision – large or small – does not meet the Byrd rule test, it can be struck from the bill. For more information on the Byrd rule, read our +Insight.
At the same time, Republican leadership has also been working to address other concerns that various Republican senators have with the bill. Senate Majority Leader Thune (R-SD) and House Speaker Johnson (R-LA) have received several letters about the Senate’s proposed changes to the House-passed bill, including a group of 16 moderate House Republicans expressing concern with the Senate’s Medicaid provisions related to the provider tax and state directed payments, and a group of 24 House Republicans asking to reinstate the health savings account provisions that were included in the House-passed bill. In an attempt to assuage worries about the coverage losses, House Budget Committee Chair Arrington (R-TX) and House Energy and Commerce Committee Chair Guthrie (R-KY) requested an additional analysis of the population that would become uninsured because of this bill. The Congressional Budget Office found that of the 7.8 million uninsured individuals in 2034:
4.8 million would be able-bodied adults, ages 19 – 64, who have no dependents and do not meet the proposed work requirements.
1.4 million would be individuals who would not meet proposed immigration status requirements.
2.2 million would become uninsured due to other provisions, including verification of eligibility proposals.
To understand the health provisions at risk from the Byrd Bath, view these press releases from the Budget Committee Democrats: Senate Finance Committee provisions and Senate HELP Committee provisions. Importantly, it is possible that the language can be modified to address the concerns of the parliamentarian in certain cases. That means the ultimate outcome of these provisions remains uncertain.
The changes include:
Provider Taxes. The parliamentarian ruled that this provision is subject to the Byrd rule. The Senate text stated that provider taxes would be frozen at current rates, but starting in 2027, Medicaid expansion states would see their hold-harmless threshold incrementally decrease from 6% to 3.5% by 2031.
Medicaid Spread Pricing. The parliamentarian ruled that this provision is subject to the Byrd rule. This section would have required Medicaid managed care contracts with pharmacy benefit managers to adopt state reimbursement methodologies for pharmacy reimbursement.
Immigration Status and Eligibility. Several provisions related to immigrant utilization of benefits were ruled subject to the Byrd rule, including provisions that limited eligibility for Medicaid, advanced premium tax credits, and Medicare for certain legal non-citizens, required Medicaid eligibility checks for immigration status, and lowered Medicaid federal matching funds for states that use their own funds to provide Medicaid to undocumented immigrants.
Cost-Sharing Reduction Payments. A provision prohibiting federal cost-sharing reduction payments to qualified health plans that cover abortion services was ruled subject to the Byrd rule.
AI Moratorium. In the original Senate language, the 10-year moratorium on state enforcement of artificial intelligence (AI) laws and regulations was made a condition of receiving federal funds for the construction and deployment of broadband and AI infrastructure. To ensure Byrd rule compliance, the Senate Commerce Committee added language that sets aside $25 million of the federal funds for states to negotiate master services agreements and makes other conforming amendments. Though this appears to have satisfied the parliamentarian, there is still disagreement among Republican senators about this provision, so its fate remains uncertain.
Public Service Loan Forgiveness (PSLF) for Doctors and Dentists. The parliamentarian ruled that a provision changing the PSLF Program so that payments made by doctors and dentists during their residency would no longer count toward loan forgiveness was subject to the Byrd rule.
Gender-Affirming Care. A provision prohibiting Medicaid and CHIP coverage of gender-affirming care was ruled subject to the Byrd rule.
Not related to the Byrd rule, lawmakers have started discussion of a rural health fund to address concerns about the bill’s Medicaid impacts on rural hospitals. Whether such a fund will be included is still not known, but a version that provided $15 billion to states across five years has been circulating.
Though a deal seems far away, Republicans remain determined to meet the July 4th self-imposed deadline to send the bill to the president. That means that if the Senate passes the legislation this weekend, the House will need to reconvene (during the scheduled July 4th recess) to consider the bill.
HHS Secretary Kennedy Testifies at the House Energy and Commerce Health Subcommittee. The hearing focused on the administration’s FY 26 budget request. Republican members largely praised Kennedy’s efforts to restructure HHS, reduce bureaucratic inefficiencies, and return focus to patient-centered care. They strongly supported the expansion of digital health tools, telemedicine, AI, and regenerative medicine as means to modernize healthcare delivery. Democratic members expressed deep concern over the politicization of science and the restructuring of expert advisory committees, particularly tied to vaccine policy and public health guidance, and they criticized HHS for a lack of transparency and responsiveness, citing numerous unanswered letters and oversight requests. Kennedy emphasized the need to realign healthcare incentives toward outcome-based and value-based care, aiming to reduce chronic disease and improve overall health outcomes.
House Ways and Means Committee Holds Hearing on Digital Health Data. During the hearing, witnesses urged continued support and investment in healthcare technology and wearable products, while members of both parties expressed concerns regarding the privacy of health data. Democrats also used the opportunity to discuss the impact H.R. 1 would have on Americans’ access to healthcare and healthcare technology, while Republicans emphasized the low costs associated with them and noted the positive impact they could have on rural communities.
Senate HELP Committee Considers CDC Director Nomination. During the nomination hearing, the president’s nominee, Dr. Susan Monarez, emphasized CDC’s new focus on emerging threats and communicable disease. She expressed support for Secretary Kennedy’s mission to make America healthy again and reduce rising chronic disease rates, as well as for integrating new technologies, including AI, to improve healthcare, but noted the need for monitoring and safeguards. Democrats expressed concerns about agency restructuring, HHS Secretary Kennedy’s leadership, and the elimination of specific programs related to lead poisoning, smoking, and global health. They also focused on the impact of cuts to the Medicaid program and changes to the Advisory Committee on Immunization Practices (ACIP). Republicans primarily focused on chronic disease, AI, and health technology, and restoring public trust in the CDC, while a few members also expressed concerns about ACIP.
House Appropriations Committee Advances FDA Spending Bill. The final committee print, which included appropriations for agriculture, rural development, FDA, and related agencies, passed 35 – 27, along party lines, with all Republicans voting in favor. Six amendments were adopted and, of those, three were introduced by Democrats and passed with bipartisan support; these included amendments related to youth vaping and tobacco use education, maternal health services, and infant formula access. During the hearing, Democrats argued that the bill’s significant cuts to FDA, the Supplemental Nutrition Assistance Program, and the Special Supplemental Nutrition Program for Women, Infants, and Children would be detrimental to the health of Americans. They also stated that cuts to grants for telemedicine would harm rural communities and criticized the use of FDA resources to review mifepristone. Republicans supported the bill, arguing that it is fiscally responsible and will help reduce the federal deficit. To view the bill summary, report, amendments, and roll call votes, refer to the committee webpage.
House Budget Committee Examines Waste and Fraud. In the hearing, witnesses presented sharply contrasting views; some emphasized the need to curb fraud and prioritize the needy, while others warned that work requirements and administrative hurdles would harm working families, reduce access to care, and enrich private contractors at taxpayer expense. Members were similarly split. Democrats argued that H.R. 1 would strip healthcare and nutrition assistance from millions of working Americans, disproportionately harming low-income families, children, and older Americans, while delivering tax breaks to the wealthy and increasing bureaucratic burdens. Republicans contended that the current structure of Medicaid and SNAP is unsustainable, rife with fraud and abuse, and in need of reform through work requirements and eligibility verification.
ADMINISTRATION
CMS Releases ACA Program Integrity Final Rule. While the final rule was largely finalized as proposed, the rule modifies policies on a temporary basis to provide some flexibility to state-based marketplaces. Key policies include:
Temporary provisions (effective through 2026):
Ending availability of the monthly special enrollment period (SEP) for individuals with household incomes below 150% of the federal poverty level.
Requiring all marketplaces to reinstitute pre-enrollment verifications of eligibility for SEPs and require further verifications of income when there is no tax data available for verification.
Eliminating the fixed-dollar and gross percentage-based premium payment thresholds, allowing issuers to only adopt the net percentage-based threshold.
Permanent provisions:
Standardizing the annual open enrollment period starting with the 2027 plan year so that it ends by December 31 for all health insurance exchanges. (This has been shortened to December 15 in the proposed rule. The final rule clarifies that it will be December 15 for the federal marketplaces, but state-based marketplaces have the option to extend through December 31.)
Updating the methodology for calculating the premium adjustment percentage to establish a premium growth measure that captures premium changes, in both the individual and employer-sponsored insurance markets, for the 2026 plan year and beyond.
Requiring that when an enrollee does not proactively verify their ongoing eligibility for a fully subsidized plan, marketplaces must continue to re-enroll that individual into the same plan but must also reduce the amount of advance payment of the premium tax credit by $5.
Adding sex-trait modification to the list of items and services that may not be covered as essential health benefits beginning in plan year 2026.
Amending the definition of “lawfully present” to exclude Deferred Action for Childhood Arrivals recipients for purposes of enrolling in marketplace coverage.
Again, as noted above, many of these changes are only effective for plan year 2026. H.R. 1 (the House reconciliation bill) codifies all of the provisions permanently. The Senate version of reconciliation has no such provisions included at this time. We are watching to see if the Senate now chooses to codify the rule for 2027 and beyond in the budget reconciliation bill, which would produce additional savings that could help offset potential losses from the Byrd rulings.
The press release can be found here, and the fact sheet can be found here. See table 7 in the final rule (linked above) for a quick “cheat sheet” on the policy changes in the rule.
CMS Announces Industry Commitment to Fix Prior Authorization. To help streamline and speed up the prior authorization process, health insurance industry leaders committed to a voluntary pledge:
Standardizing electronic prior authorization submissions using Fast Healthcare Interoperability Resources (FHIR®)-based application programming interfaces.
Reducing the volume of medical services subject to prior authorization by January 1, 2026.
Honoring existing authorizations during insurance transitions to ensure continuity of care.
Enhancing transparency and communication around authorization decisions and appeals.
Expanding real-time responses to minimize delays in care with real-time approvals for most requests by 2027.
Ensuring medical professionals review all clinical denials.
Following this announcement, Secretary Kennedy and CMS Administrator Oz hosted a roundtable and held a press conference to highlight the pledge. While the commitments are voluntary, CMS noted that the reforms complement ongoing regulatory efforts and that the agency reserves the right to pursue additional regulatory actions if necessary.
OSTP Issues Guidance on Science Standards. In a memo, OSTP provided guidance on implementing executive order (EO) 14303, “Restoring Gold Standard Science,” to federal department and agency heads. The memo defines the key tenets of gold standard science outlined in the EO and specifies that agencies should work to implement these tenets while minimizing administrative burden through the use of AI and other technologies. It also requires that, by August 22, 2025, agencies submit to OSTP and post on their website a report outlining their implementation plans, which must include:
Descriptions of how the agency is addressing each of the tenets.
Development of standardized metrics and evaluation mechanisms to assess adherence to these tenets and their impact on scientific quality.
Plans for providing training and resources to ensure agency personnel understand and adhere to the tenets.
Discussion of how technology will be leveraged.
Descriptions of any challenges encountered in implementation.
Annual agency reports will then be due to OSTP by September 1 of each year.
COURTS
Major SCOTUS Rulings Released. This week, SCOTUS issued rulings for the rest of the cases in the current term. Several had significant implications for healthcare, the Trump Administration, and power of federal judges:
Kennedy v. Braidwood Management. In a 6 – 3 ruling, the Court held that the appointment of USPSTF members is consistent with the Constitution. The ACA requires insurers to cover USPSTF recommended preventive services with no cost sharing, which includes screenings for lung, cervical and colorectal cancers, as well as diabetes and statin medications to reduce the risk of heart disease and stroke. The opinion also stated that the HHS Secretary can review USPSTF recommendations before they take effect and can remove USPSTF members at will.
Trump v. CASA. In a case about President Trump’s EO prohibiting birthright citizenship, the justices ruled 6 – 3 along ideological lines to limit national injunctions to apply only to states, groups and individuals that sued. This opinion will have broad ramifications for almost all litigation on EOs, including nationwide injunctions on EOs related to gender-affirming care, the National Institutes of Health, and more.
Medina v. Planned Parenthood South Atlantic. At issue in this case was whether Medicaid beneficiaries have an individual right to challenge state Medicaid actions in federal court for failing to comply with the Medicaid “free choice of provider” provision – a requirement that beneficiaries may choose any willing and qualified provider. In a 6 – 3 ruling along ideological lines, the Court ruled that a South Carolina woman and Planned Parenthood did not have their civil rights violated and therefore do not have standing. Instead, litigants will need to go through an administrative process and, if necessary, state courts. This case, however, could have broader implications for Medicaid patient rights and will likely prompt other states to pursue similar efforts to defund Planned Parenthood.
QUICK HITS
GAO Publishes Reports on Medicaid. The US Government Accountability Office’s (GAO’s) first report, focused on Medicaid unwinding, found that of the 89 million completed redeterminations by states, about 27 million individuals were disenrolled during the first year and a half of unwinding. The second report evaluated the effectiveness of Medicaid managed care incentives for child screenings and treatment.
HRSA Announces Action on Drug Prices. The Health Resources Services Administration (HRSA) issued updated award terms for HRSA-funded health centers that require the centers to provide insulin and injectable epinephrine to low-income patients at or below the price paid by the center through the 340B Drug Pricing Program.
NEXT WEEK’S DIAGNOSIS
The Check-Up will be on hiatus next week for the Fourth of July holiday. Congress is also scheduled to be in recess, though that could be delayed or cancelled if reconciliation consideration is ongoing. We also await the release of the calendar year 2026 proposed rules from CMS, including the Physician Fee Schedule and Outpatient Prospective Payment System proposed rules.
All Things Chemical: First Six Months of the Trump Administration — A Conversation with James V. Aidala [Podcast]
This week, I was pleased to welcome back to the studio Jim Aidala, Senior Government Affairs Consultant at B&C and its consulting affiliate, The Acta Group (Acta®), to discuss the first six months of the Trump Administration. We have all been trying to take in and process the many Executive Orders, Presidential Directives, and other developments of all sorts coming out of the White House at a head-spinning pace, and assess their impacts on the industrial and agricultural chemical community and federal workforce. Jim is a keen observer of Presidential and executive level administrative action, having served as the Assistant Administrator of Toxics at The U.S. Environmental Protection Agency (EPA) and in other senior EPA leadership positions. We discuss Presidential actions, their impact on the EPA workforce, EPA actions to date, and a bit about the Make America Healthy Again (MAHA) Report’s “Make Our Children Healthy Again” Assessment and its impact on the pesticide community.
FDA Requesting Comments on Proposed Guidance Regarding 510(k) Transfers
On June 5, 2025, the U.S. Food and Drug Administration (“FDA”) issued draft guidance (the “510(k) Transfer Guidance”) related to the transfer of a Premarket Notification (510(k)) Clearance. The 510(k) Transfer Guidance discusses the FDA’s recommendations on handling the purchase, sale, or other transfer of a medical-device 510(k) clearance, and requests public comments. Stakeholder comments are due by August 4, 2025. Stakeholders submitting comments should consider the 510(k) Transfer Guidance from both a regulatory and transactional perspective.
The 510(k) Transfer Guidance reiterates that, under section 510(k) of the Federal Food, Drug, and Cosmetic Act (“FD&C Act”), and 21 C.F.R. Part 807, a person who introduces a non-exempt device into U.S. commercial distribution for the first time must obtain a 510(k) clearance; once obtained, that person becomes the singular “510(k) holder” for the device. Because only one entity can be the 510(k) holder at any given time, the transfer or sale of clearance does not create multiple holders; instead, it shifts holder status to the transferee.
The 510(k) Transfer Guidance clarifies that a transferee generally does not need to submit a new 510(k) if the underlying device has not undergone significant changes or modifications in design, components, manufacturing method, or intended use. Instead, the new holder must satisfy certain post-transfer administrative obligations, including updating the registration and listing information in the FDA establishment registration database. In the transaction context, companies should consider whether any manufacturing, supplier or other technical changes as part of the transaction warrant submission of a new 510(k), and whether these processes, or associated timing considerations, merit submitting comments for consideration by FDA.
Importantly, the 510(k) Transfer Guidance also emphasizes the importance of updating the Global Unique Device Identification Database (GUDID) when information such as the labeler’s name changes. These types of updates are similarly important in the transaction context, as labeling changes can take time and require planning. Failure to properly register, list, or update required GUDID information may render a device adulterated or misbranded.
Finally, the 510(k) Transfer Guidance distinguishes the responsibilities of various entities in the device supply chain, specifying which entities can use a 510(k) holder’s 510(k) number to list a device. Contract manufacturers, contract sterilizers, repackagers, and relabelers must use the cleared 510(k) number when listing, whereas initial importers may satisfy listing obligations by identifying the foreign manufacturer if they neither relabel nor repackage the device. The 510(k) Transfer Guidance emphasizes that, generally, the specification developer, not the contract manufacturer, is responsible for submitting the 510(k).
HRSA Announces New Requirements for FQHCs to Provide Insulin and Epinephrine at or below 340B Price
On June 24, HRSA announced that it had issued new grant award terms to its HRSA-funded health centers to provide insulin and injectable epinephrine at or below the 340B price paid by the health center for the drugs. HRSA encouraged health centers to “begin implementing these updated award terms immediately to ensure full compliance and maximize patient benefit.” The announcement comes in response to the Trump Administration’s April 14, 2025 Executive Order on “Lowering Drug Prices by Once Again Putting Americans First” (the “Executive Order”).[1] The Executive Order had instructed the Secretary of the Department of Health and Human Services to, within 90 days, ensure grants available under section 330(e) of the Public Health Services Act are conditioned upon health centers establishing practices to make insulin and injectable epinephrine available to low-income patients at or below the 340B price paid by the health center.
In a Q&A session hosted by HRSA on June 24, 2025, HRSA representatives clarified that this requirement does not currently apply to FQHC Look-Alikes, nor does it apply to any grantees that do not participate in the 340B Program. HRSA also stated that grantees would be required to report and demonstrate on their Form 1C (in conjunction with the annual Budget Period Progress Report (or “BPR”)) that they have the necessary practices and policies in place to comply with these requirements.
Although HRSA issued this condition to its grant terms, HRSA did not specify how HRSA grantees must implement this requirement. Thus, HRSA grantees must individually come up with internal practices and methods to ensure that low-income patients obtain the insulin or injectable epinephrine at the 340B price paid. Because 340B drug prices typically change on a quarterly basis, HRSA grantees should consider methods that update the patients’ cost of these drugs based on the mostly recent 340B price paid.
FOOTNOTES
[1] Exec. Order No. 14273, 90 Fed. Reg. 16441 (April 18, 2025).
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Elder Care Facilities Not Liable for Sales Tax on Purchase of Ingredients Used to Prepare Food for Residents
In a recent decision, the Louisiana First Circuit Court of Appeal held that nursing homes and adult residential care providers are not required to pay sales tax on their purchases of food ingredients used to prepare meals for residents. Camelot of North Oaks, LLC et al. v. Tangipahoa Parish School System, Sales and Use Tax Division, 2024 CA 0840 (May 22, 2025).
The Facts: Camelot of North Oaks, Kentwood Manor Nursing Home, and Summerfield of Hammond (collectively, the “Taxpayers”) are licensed Louisiana nursing homes and adult residential care facilities required by regulation to provide a “nourishing, palatable, well-balanced diet” to their residents. The Taxpayers contract with their residents to provide services to their residents, including three meals a day, for a lump-sum monthly fee. During the tax periods at issue, the Taxpayers purchased food ingredients, paid taxes on those purchases, and later sought refunds, claiming that the purchases were exempt from sales tax. The Taxpayers cited a statute which exempts sales of meals to residents of nursing homes and residential care providers from sales tax, La. R.S. 47:305(D)(2). The Tangipahoa Parish School System, Sales and Use Tax Division (the “Collector”) denied the refund claims, arguing that the food purchased by the Taxpayers were not “sold” to the residents, and therefore, the initial purchase could not qualify as a nontaxable sale for resale.
The Louisiana Board of Tax Appeals disagreed with the Collector, finding that the provision of meals to residents did constitute a sale and that the initial ingredient purchases were therefore nontaxable sales for resale.
The Decision: The Court began its analysis with La. R.S. 47:305(D)(2), which exempts “[s]ales of meals furnished . . . [t]o the . . . residents of nursing homes [and] adult residential care providers . . . .” The Court recognized that the Taxpayers’ sales of meals to residents would fall within the exemption, but the key issue was whether the Taxpayers “sold” the meals to their residents. The Court looked to the statutory definition of “retail sale,” which is “a sale to a consumer . . . for any purpose other than for resale in the form of tangible personal property . . . .” (Emphasis added). The Court concluded that the Taxpayers’ provision of meals to residents for consideration (as part of the monthly fee) constituted a sale and that the initial purchase of ingredients was therefore a nontaxable sale for resale. The fact that the meals were provided for a bundled fee, rather than being separately itemized, did not alter the character of the transaction as a sale.
The Concurrence: Chief Judge McClendon, in her concurrence, took a more streamlined approach, focusing on the two distinct transactions: (1) the purchase of ingredients by the Taxpayers, and (2) the provision of prepared meals to residents. The concurrence explained that the first transaction is a nontaxable sale for resale if the second transaction is a sale—regardless of whether the second transaction is itself exempt from tax. Because the residents paid consideration for the meals (as part of their monthly fee), the second transaction was a sale, making the initial purchase of ingredients a nontaxable sale for resale. The concurrence also noted that, while residents would normally bear the burden of sales tax as the ultimate consumers, the sale to residents was exempt under La. R.S. 47:305(D)(2). This interpretation of the statutes, the concurrence observed, furthers the public policy of minimizing the cost of meals to nursing home and adult care residents (presumably, if the Taxpayers’ purchase of the ingredients were taxable, the additional cost would be passed through to the residents).
The Takeaway: The main opinion’s focus on the exemption in La. R.S. 47:305(D)(2) is a red herring. The critical issue is not whether the sale by the Taxpayers to their residents was exempt, but whether it was a “sale” at all. The exemption is relevant to the taxability of the end transaction, but the initial purchase of ingredients is nontaxable as a sale for resale so long as the subsequent transaction is a sale—regardless of whether that sale is taxable or exempt. It is important to focus on each transaction in a series of transactions and to determine whether each is subject to tax. Under Louisiana law, a transaction may not be subject to tax, where, as in this case, it is “for resale,” or the transaction may not be subject to tax based on a specific statutory exemption, such as La. R.S. 47:305(D)(2).
General Mills and Kraft Heinz Announce Voluntary Phase Outs of Synthetic Color Additives
On June 17, 2025, General Mills announced its plans to remove certified color additives from all of its U.S. cereals and what the company referred to as its K-12 school portfolio by summer 2026. Certified color additives authorized for use in food in the United States are found in FDA’s color additive regulations, specifically 21 CFR part 74, subpart A.
The same day, Kraft Heinz similarly pledged to remove the certified color additives from its U.S. portfolio before the end of 2027. Jeff Harmening, chairman and CEO of General Mills, calls the company’s scheduled change an example of meeting “evolving consumer needs.”
These moves come a few months after the U.S. Food and Drug Administration (FDA) and the Department of Health and Human Services (HHS) encouraged the food industry to phase out the use of certified color additives (see previous blog here). FDA has not initiated any formal regulatory process to revoke the authorizations for synthetic color additives, but instead will likely continue to encourage voluntary phase outs and possibly state bans (see here).
New Jersey Court Allows Product Liability Claims Against Cannabis Retailers
Dispensaries and retailers may face potential liability under the New Jersey Product Liability Act (NJPLA) for alleged design defects or failure to warn.
Hypothetical and speculative future losses are not sufficient to allege an ascertainable loss under the New Jersey Consumer Fraud Act (NJCFA).
New Jersey’s innocent seller statute provides a strong defense, if its requirements are followed.
In the Monmouth County (N.J.) Superior Court, a judge denied a motion to dismiss product liability claims brought by a track and field athlete who alleged that consumption of high-potency, THC-based products led the plaintiff to experience psychotic episodes and attempt suicide. The plaintiff claimed that the retailers “knew or should have known” the risks and failed to adequately warn consumers.
Overview of Claims
The plaintiff sued numerous CBD/THC dispensaries and stores carrying similar products in Monmouth County, alleging claims for: (1) violation of the New Jersey Product Liability Act (NJPLA) for design defect and failure to warn; (2) violation of the New Jersey Consumer Fraud Act (NJCFA); and (3) punitive damages.
The core allegation was that dispensaries and retailers did not adequately disclose the alleged potential dangers associated with consumable edibles and disposable vape devices. Specifically, the plaintiff alleged that defendants failed to disclose that consumption of “high-potency THC concentrates” could result in “hallucinations or psychosis.”
Court’s Ruling on Motion to Dismiss
The retailer defendants moved to dismiss the plaintiff’s NJPLA claims, citing immunity under New Jersey’s innocent seller statute (N.J.S.A. 2A:58C-9). Under this statute, a product retailer who did not exercise significant control over the design, manufacturing, packaging or labeling of the product, is immune from liability if the retailer files an affidavit identifying the product’s manufacturer, with certain exceptions.
The court held that the retailer’s affidavits under the statute were deficient for two reasons: (1) there was insufficient evidence that the manufacturers could be served or satisfy a judgment; and (2) the affidavits did not present sufficient evidence that the retailers were without knowledge of the alleged defects in the products.
The retailers also argued for dismissal of the NJPLA claims, stating the complaint failed to identify any product defect or allege that the products were the proximate cause of the plaintiff’s alleged injuries. The court, applying New Jersey’s liberal standard at the motion to dismiss stage, held that the plaintiff’s complaint alleged sufficient facts to support the NJPLA claims.
The retailers also sought dismissal of the NJCFA claims on the basis that the plaintiff failed to allege an ascertainable loss. The plaintiff argued that the allegations of “hypothetical future pain and suffering, and hypothetical future medical expenses” were sufficient to plead an ascertainable loss. The court held that potential future endorsements or winnings from his professional athletic career were too speculative and were “not quantifiable or measurable damages.” Therefore, the plaintiff failed to allege a claim under the NJCFA.
Finally, the court dismissed the plaintiff’s claim for punitive damages, noting that under New Jersey law, punitive damages are a remedy, not an independent cause of action. The court clarified that while there is no separate claim for punitive damages, the plaintiff may seek such damages if they ultimately prevail on NJPLA claims.
Takeaways
Cannabis has been legal in New Jersey since the state’s Constitution was amended after the 2020 election. This decision serves as a reminder that despite legalization, cannabis retailers may still face product liability claims under certain tort theories. Compliance with the requirements of New Jersey’s innocent seller statute is key when seeking the benefits of its immunity from liability.
FDA Opens Public Comment Period for Chemical Post-Market Assessment Regulation
On June 18, 2025, FDA announced its proposed “method for post-market assessments of chemicals in the food supply.” This “Post-market Assessment Prioritization Tool” will give chemicals an overall score that will be used to rank each post-market chemical assessment in order of priority. We previously reported on FDA’s proposed systematic process for post-market assessment of chemicals in foods, which had its comment period extended to January 21, 2025.
According to FDA’s proposed method, a chemical’s overall score will be calculated from a Multi-Criteria Decision Analysis (MCDA) which will use four Public Health Criteria and three Other Decisional Criteria. The Public Health Criteria are toxicity, change in exposure, effects on a susceptible subpopulation (e.g., children), and availability of new scientific information. The Other Decisional Criteria are external stakeholder attention, other government decisions, and public confidence in the U.S. food supply.
The total score of the Public Health Criteria is given equal weight to that of the Other Decision Criteria, as they both get a score of 1-9 and then the two are averaged to calculate the chemical’s overall score. FDA’s press release points to how the Environmental Protection Agency (EPA) similarly prioritizes certain substances for risk evaluation, though notably the EPA criteria are already specified in the Toxic Substances Control Act (TSCA) § 2605(b)(1)(B) and are “without consideration of costs or other nonrisk factors.”
The proposed prioritization method will be open to public comments until July 18, 2025 under Docket No. FDA-2025-N-1733. In a departure from past practice, there is no Federal Register notice announcing the establishment of this docket for receipt of public comments, only a link in FDA’s announcement to the docket on www.regulations.gov. By way of contrast, see FDA’s August 2024 Federal Register notice announcing a public meeting and soliciting public comment on FDA’s Post-Market Assessment of Chemicals in Food (89 Fed. Reg. 65633, Aug. 12, 2024).
Texas Governor Signs ‘Make Texas Healthy Again’ Bill Mandating Food Warning Labels
On June 22, 2025, Texas Governor Greg Abbott signed SB 25 into law to require on-pack warning labels for food and beverage products that contain any of the substances listed within the bill, including titanium dioxide and FDA approved food colors such as Red 40. As we previously reported, the Texas House passed SB 25 on May 26, 2025, with bipartisan support and backing from the Department of Health & Human Services Secretary Robert F. Kennedy, Jr.
The law adds Sections 431.0815, 431.0816, and 431.0817 to Subchapter D, Chapter 431 of the Texas Health and Safety Code. The law requires companies to either remove or place a warning label “in a prominent and reasonably visible location” on any product that contains any of the 44 listed substances. The warning label must read: “WARNING: This product contains an ingredient that is not recommended for human consumption by the appropriate authority in Australia, Canada, the European Union, or the United Kingdom.” This requirement applies to food product labels “developed or copyrighted” on or after January 1, 2027. In addition to seeking an injunction, the Attorney General may impose a civil penalty of up to $50,000 per day for each individual food product that violates this requirement.
Notably, Section 431.0815 states that a warning label must disclose the use of any of the listed substances “if the [FDA] requires the ingredient to be named on a food label and the ingredient is used in a product intended for human consumption.” This language was included following an amendment made by Representative Lacey Hull on May 25, 2025.
The law will take effect on September 1, 2025. Although the law is specific to products sold in Texas, it is expected to create widespread implications for the food and beverage industry.
Alcohol Consumption Limit Expected to be Removed from Dietary Guidelines
Sources have reported to Reuters that the U.S. government intends to remove its recommendation within the Dietary Guidelines for Americans (DGA) that adults limit alcohol consumption to one or two drinks per day. Instead, the DGA, 2025-2030 are expected to include a generalized 1-2 sentence statement that encourages Americans to drink in moderation or limit alcohol intake.
The DGA are updated every five years by the US Department of Agriculture (USDA) and the US Department of Health and Human Services (HHS). The Guidelines have advised drinking no more than one to two drinks per day since 1990. The guidelines are still under development and subject to change, so it is unclear what effect the finalized recommendations will have on the alcoholic beverage industry.
Science Over Bias, a coalition of beer, wine, and spirits interests, released a statement to Reuters and other media members saying the Dietary Guidelines for Americans has not yet been published and should be based on “sound scientific evidence” and “free from bias.”
California Delays NOP Requirements for Compostable Products
Earlier this month, the California Department of Resources Recycling and Recovery (CalRecycle) sent a letter to the Biodegradable Products Institute (BPI) that effectively delays, until June 30, 2027, a key requirement for “compostable” and “home compostable” products set to take effect next year. California’s AB 1201 required that after January 1, 2026, products labeled “compostable” or “home compostable” must not only pass tests specified under the law but must also be “an allowable agricultural organic input under the requirements of the United States Department of Agriculture [(USDA)] National Organic Program [(NOP)].” Although this requirement applies to any material that meets AB 1201’s broad definition of a “product,” the law principally affects plastic and plastic-coated products. To assure that products meeting California’s current compostability standards can continue to be labeled “compostable” or “home compostable” in California, BPI submitted a petition in 2023 to the National Organic Standards Board (NOSB) seeking recognition for compostable plastic and plastic-coated products under the USDA NOP. That petition is still pending. CalRecycle’s letter to BPI grants an extension for “products that contain synthetic substances that otherwise satisfy all requirements for lawfully being labeled ‘compostable,’ including the requirement that products meet an ASTM standard specification pursuant to section 42357(a)(1). This extension shall expire as of June 30, 2027.” Absent this action, many companies would have had to remove current “compostable” labels for their products at a time when other laws – notably SB 54, California’s Extended Producer Responsibility (EPR) law for packaging – require that products meet source reduction, recyclability, or compostability requirements by specific deadlines.
CalRecycle’s extension allows plastic and plastic-coated products that currently meet all requirements for being labeled “compostable” or “home compostable” in California, save for formal recognition by the USDA NOP, to continue to be sold in that state without changes to labels until June 30, 2027. After that date, companies must revise labeling for their “compostable” and “home compostable” products sold in California that are not listed as an allowable agricultural organic input under the requirements of the USDA NOP, unless CalRecycle grants a further exemption. On this point, CalRecycle explained that before June 30, 2027:
CalRecycle will evaluate whether to renew exemptions for products that would become compliant with PRC section 42357(g)(1)(B) pursuant to regulations then under consideration. CalRecycle may determine regulations to be under consideration if there is a pending NOSB rulemaking recommendation to the NOP, the NOP has decided to initiate rulemaking but has not yet done so, or the rulemaking process is underway. A renewed extension shall continue while such regulations remain under consideration but shall not extend beyond January 1, 2031.
CalRecycle’s action is good news for companies selling covered compostable products in California. However, the compostability legal landscape remains fractured, with some different – and inconsistent – state laws. Although other states have not adopted California’s added NOP obligations, states like Washington, Colorado, and others have their own restrictions for labeling and marking “compostable” products. CalRecycle’s 18-month extension is a positive step for many companies who have invested in compostable and home compostable products. Nevertheless, businesses offering compostable packaging and products nationally must be familiar with all applicable compostability requirements in developing their labeling and marketing materials.
IYKYK: How a Few Words in the Next Farm Bill May Change the Future of Alcohol and Cannabis
These are remarkable times in what has been a remarkable, albeit relative to other industries, remarkably short life cycle for the cannabis industry.
In such times, I am reminded of Rudyard Kipling’s words about how to face trying times:
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise
Make no mistake about it: Many are losing their heads about cannabis and blaming the cannabis industry. Many are doubting the cannabis industry and hating it. Can the cannabis industry keep its head, trust itself, wait, and not give way to hating during the most consequential debate about cannabis that has ever occurred in Congress?
So, what are the implications for the cannabis – and tangentially but directly the alcohol – worlds moving forward? Let’s dive in.
What Is the Farm Bill and Why Does It Matter?
First, a brief note on the most important piece of federal legislation regulating cannabis that Congress has passed in the last decade and is currently updating. The Farm Bill is a complicated, fascinating, and consequential piece of legislation. It governs everything from farm subsidies to food stamps to school nutrition and, as of 2014, even hemp.
I have written thousands of words and used many pop culture references to describe the debates about cannabis in statehouses around the country just this year. But it’s time to address the elephant in the room: Specifically, Congress is currently considering proposals that would render much of that discussion moot as it debates the hemp provisions of the upcoming Farm Bill. The consequences could hardly be more substantial for the cannabis and alcohol industries.
What’s This “Loophole” People Are Talking About?
If you’re an old hand in the cannabis space, you know what I’m talking about. If you’re just dipping your toes into this discourse, get ready to hear the term “loophole” to describe the growth of the American consumable hemp industry.
We’ve written in detail about the “loophole,” including most recently here:
Shortly after Congress created this separate definition of hemp, savvy (and, in some instances, unsavory) operators concluded that Congress had created a loophole of sorts that would allow for products that contained cannabinoids from the cannabis plant – even those with psychoactive or intoxicating effects – as long as the concentration of delta-9 THC on a dry weight basis is not more than 0.3%. It was this interpretation of the Farm Bill, replicated in the 2018 version, that led to the proliferation of consumable products containing delta-8 THC, delta-10 THC, and the like.
Ergo, the loophole.
Maybe this is all semantics. The current consumable hemp industry probably falls within the common understanding of a loophole, so maybe it depends on how any given critic or supporter of hemp uses the term “loophole.” Some use it derisively to minimize the legitimacy of the consumable hemp industry. Others recognize that Congress chose to use certain terminology and hemp operators should not be punished for following the law as written.
So, Which Is It?
On one hand, I very much doubt that most members of Congress gave a moment’s thought to the implications of the specific words used governing hemp in the 2018 Farm Bill. That is likely a result of the hemp provisions being two pages in a bill that was over a thousand pages long and the lack of understanding at the time how that language could lead to a new and now thriving industry.
On the other, this new and thriving industry is exactly what they allowed. And that brings us to the central question facing Congress as it considers the future of hemp policy in America: Having allowed for a new and thriving industry to develop over the past almost seven years – intentionally or not and explicitly or not – should Congress simply close the “loophole” and shut down the consumable hemp industry or should it allow certain consumable hemp operators to continue to do business under a much more stringent regulatory regime?
This is not a simple question. There are serious people on both sides of the issue, and there are seemingly nonserious people involved as well (hey, we get what we vote for).
Having permitted the development of the consumable hemp industry, intentionally or ignorantly, Congress now faces a simple yet extraordinarily important question: Should we simply close the “loophole” entirely and essentially end the consumable hemp market? Or should we acknowledge certain reliance interests by hemp operators and choose to keep a consumable hemp market in place and then enact strong regulations in as a guardrail to ensure that any such products are safe and available only to adults?
We previously wrote:
And that brings us to the next Farm Bill and what it may portend for intoxicating hemp products. Though the cannabis portion of the bill will make up a tiny percentage of the Farm Bill’s text and there are enormous consequences to so many other provisions of the massive legislation, one would be wrong to assume there isn’t a street fight occurring in Washington between marijuana operators and hemp operators. Tens of millions of dollars – at least – are being spent on lobbying efforts to influence federal cannabis policy. Lawmakers are regularly fielding questions from constituents and their local media about the proliferation of hemp in its various forms. This is going to come down to the wire, and the specific language (likely with tweaks imperceptible to the average American and even many in Congress) will have enormous consequences for the cannabis industry in America. Truly, the devil – ahem, ghost – will be in the details.
So, What Will Happen to the “Loophole”?
We have written:
At the end of the day, I suspect Congress will land on some sort of compromise that allows for at least some versions of intoxicating hemp products. If true, I would expect Congress to direct some agency or agencies to adopt regulations governing the manufacturing, testing, marketing, and sales of such products. Operators targeting children or making health claims aimed at vulnerable populations are in the most jeopardy, and purveyors of novel cannabinoids and high-THC products should be concerned as well. Low-THC products, including the increasingly popular hemp beverages, seem to have occupied a different place in the public eye and may be codified, albeit subject to more definite regulation.
If I’m right, marijuana operators won’t be completely satisfied, but neither will hemp operators. Maybe I’m just crazy enough to believe Congress can find a compromise.
Recent developments have cast doubt on my prediction – even though I stand by it:
On June 5, 2025, the House Agriculture Appropriations Subcommittee voted to send a markup for an FY2026 appropriations bill to the full committee. The full House Appropriations Committee began consideration of the draft bill on June 11 but postponed a final vote. Among its many provisions, the draft bill includes a provision that effectively would prohibit the commercial production, sale, and distribution of certain hemp-derived cannabinoid products.
…
The draft appropriations bill would expand on the existing statutory definition of hemp to include industrial hemp products and exclude hemp-derived cannabinoid products (§759). The provision would define these two terms as follows:
Industrial hemp would be defined to mean hemp grown for “non-cannabinoid” uses, including for fiber or for grain/seed (e.g., use as a whole grain, oil, cake, nut, or hull) or for immature plants (e.g., microgreens or other edible hemp leaf products), as well as hemp grown for research purposes or as a viable seed to produce industrial hemp.
Hemp-derived cannabinoid product would be defined to mean “any intermediate or final product derived from hemp (other than industrial hemp), that … contains cannabinoids in any form; and … is intended for human or animal use through any means of application or administration, such as inhalation, ingestion, or topical application.”
Excluding hemp-derived cannabinoid products from the federal definition of hemp would prohibit production and sale of certain hemp-derived cannabinoids, derivatives, and extracts. Excluded cannabinoids would cover also non-naturally occurring and synthesized or manufactured compounds. The proposed provision would make other changes to the hemp definition by changing the allowable limits of THC — the leading psychoactive cannabinoid in the cannabis plant — to be determined on the basis of its total THC, including tetrahydrocannabinolic acid (THCA), instead of delta-9 THC.
When Will Congress Act?
Never an easy question and if I knew when Congress was going to act on any particular piece of legislation, I would be tanning on a beach instead of writing cannabis blog posts.
Here’s what we know. The 2018 Farm Bill was set to expire on September 30, 2023, in keeping with the general tradition of farm bills governing four to five years before a new farm bill was enacted. September 2023 has obviously long passed, and yet there has not been a new farm bill passed by Congress (or even voted on by both chambers of Congress). Instead, Congress has passed a series of continuing resolutions that allowed provisions of the 2018 Farm Bill to remain in place pending a new farm bill.
As of this writing, the House of Representatives seems to be more focused on the next farm bill than the Senate. As discussed above, the House Appropriations Committee is currently considering a proposed farm bill. If that bill is voted out of committee, the next step would be the full House floor, assuming that House leadership chooses to take that step. Once on the House floor, there will be opportunities for the full House to propose amendments to the bill before voting on it. If, for the sake of this discussion, the House of Representatives passes a farm bill, it will go to the Senate for its consideration.
In the Senate, there is a companion farm bill proposal that will need to travel a similar path – from subcommittee(s) to committees(s) and then for approval by the full Senate. If the full Senate approves the bill and it’s not identical to the House version – and that is almost certain to be the case given the complexities of a farm bill – it will go to a conference committee of House and Senate members. If that conference can agree to a single bill, it must then be passed by the full House and full Senate before it is sent to the president for signature.
We’ve miles to go before anything goes to the president. It would be a surprise if a bill left Congress in 2025 and far more likely to do so in 2026.
Does This Impact the Marijuana Industry?
Whether you believe congressional action on hemp will be a net positive or negative to the marijuana industry likely depends on whether you believe hemp and marijuana are operating in a zero-sum game or whether you believe that a regulated consumable hemp market will create a sort of rising tide effect that will socialize cannabis as a whole to the general public and, as a result, a liberalization of hemp will benefit marijuana companies. For those in the former camp, the concern is that cannabis consumers will choose to purchase cannabis from hemp operators because there are fewer rules and regulations that can make the buying experience at a marijuana dispensary more cumbersome than at a hemp shop. The latter camp believes that hemp can be a way for an average American to become introduced to the cannabis plant through products such as low-dose beverages and then grow more comfortable incorporating other cannabis products – including, where appropriate, marijuana – into their regular routines.
For the latter camp to have any real credibility, it should concede that hemp and marijuana should be placed on as close to a level playing field as possible.
For those who believe every sale of a consumable hemp product is a missed opportunity by the marijuana industry, their reluctance to allow more consumable hemp is understandable. I happen to believe that a more robust hemp industry — albeit stringently regulated as never before — will benefit both sides. In my view, let the people determine that regulated hemp-derived cannabis products marketed to adults are a pathway towards a broader understanding of the cannabis plant generally and how regulated hemp and marijuana can both play a role to the other’s benefit.
Does This Impact the Alcohol Industry?
When it comes to alcohol, I think it’s a simpler but more complicated question. There is compelling evidence that all age markets, but particularly the coveted younger adult market, are turning to cannabis over alcohol. This trend is particularly true when it comes to cannabis-derived edibles (“gummies”) and cannabis-infused beverages. Gummies have been successful and prevalent for a number of years (likely as legacy products from the cannabis prohibition era), and cannabis beverages have exploded onto the broader consumer market with eye-popping financial projections.
When it comes to distributors and retailers, it’s possible they don’t necessarily have a horse in the race. If hemp beverages are legitimized and regulated, they can allocate their offerings according to consumer demand; if alcohol continues to lose market share to hemp beverages, they can offer more hemp beverages to offset the decreased demand for alcoholic beverages. And if hemp beverages are illegal, they can go back to pushing alcohol as king.
Conclusion
There is nothing short of the future of the cannabis industry and anyone who does business with or against the cannabis industry at stake. And make no mistake, that includes companies ranging from hemp and marijuana operators to gas stations and grocery stores and to companies providing ancillary services to all of the above (including yours truly).
Rarely are there instances where Congress considers legislation that could, with the stroke of a presidential pen, destroy an entire industry. And perhaps its even more rare that we can see it happening in real time and recognize the consequences. Perhaps that’s why the battle is so fierce – it truly is an existential question for many cannabis stakeholders.
As Congress considers various proposals, I hope it will keep in mind the words of Robert Plant:
Yes, there are two paths you can go by, but in the long run
There’s still time to change the road you’re on.
Thanks for stopping by.
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