McDermott+ Check-Up: May 16, 2025
THIS WEEK’S DOSE
Key House Health Committees Advance Reconciliation, Bill Held Up in Budget Committee. The Energy and Commerce Committee and Ways and Means Committee passed their recommendations for reconciliation out of committee, but the Budget Committee failed to advance the bill today and is currently scheduled to reconvene at 10pm on Sunday, May 18, 2025.
HHS Secretary Kennedy Testifies in Congress. The House Appropriations Committee and Senate Health, Education, Labor, and Pensions (HELP) Committee held hearings on the US Department of Health and Human Services (HHS) budget.
Senate Judiciary Committee Discusses PBM Reform. Committee members widely agreed on the need for pharmacy benefit manager (PBM) policy change.
House Judiciary Subcommittee on Administrative State, Regulatory Reform, and Antitrust Holds Hearing on Medical Residency. The hearing examined the structure and legal implications of the National Resident Matching Program and evaluated its antitrust exemption.
Senate Finance Committee Advances Trump HHS Nominees. The nominations for deputy secretary of HHS and assistant secretary of legislation of HHS now move to the Senate floor.
Trump Signs EO on Drug Prices. The executive order (EO) seeks to implement most-favored nation pricing.
CMS Releases Proposed Rule on MCO Taxes. The Centers for Medicare & Medicaid Services (CMS) proposal would address state-imposed “provider taxes” on managed care organizations (MCOs).
HHS Agencies Issue RFIs. The requests for information (RFI) focus on possible deregulatory actions and the health technology ecosystem.
HHS Identifies Documents for Recission. The recission was enacted upon publication.
CMS Innovation Center Releases Strategic Framework. The strategy outlines how the center intends to structure current and future value-based care models.
CONGRESS
Key House Health Committees Advance Reconciliation, Bill Held Up in Budget Committee. On May 13, 2025, and into the next afternoon, the House Energy and Commerce Committee held a 26.5 hour markup of its budget reconciliation committee print, which included sweeping policy changes to Medicaid enrollment process, eligibility, and financing, as well as a Medicare physician payment adjustment, PBM reform, and changes to the Medicare prescription drug negotiation program and the Affordable Care Act (ACA). At the same time, the House Ways and Means Committee held a 15.5 hour markup of its budget reconciliation committee print. The Ways and Means package included provisions related to paid leave, CHOICE health plans (now called ICHRAs), health savings accounts, and research, as well as significant changes to ACA Exchange enrollment. Both committees successfully advanced their committee prints along party lines and did not adopt any amendments.
Energy and Commerce Committee: The House budget resolution instructed the House Energy and Commerce committee to find a minimum of $880 billion in savings. On May 11, 2025, Democrats released a memo from the Congressional Budget Office (CBO) estimating that the Energy and Commerce reconciliation recommendations related to Medicaid, the expiration of expanded premium tax credits, finalizing the 2025 Marketplace Integrity and Affordability Proposed Rule, and the Marketplace provisions that extend beyond codifying the proposed rule would increase the number of people without health insurance by at least 13.7 million by 2034. CBO noted on May 12, 2025, that the budget reconciliation text would exceed the savings target and reduce deficits by more than $880 billion over 10 years. On May 13, 2025, CBO released a new set of preliminary scores for certain Medicaid provisions listed in the bill, which in total would save $625 billion over 10 years. The scores also estimate that a total of 7.6 million individuals would become uninsured by 2034, including 1.4 million people without verified citizenship, nationality, or satisfactory immigration status. These are the figures congressional Republicans have cited. CBO has not yet provided final scoring for the package, and particular provisions are still without a score as well. That analysis is expected in the coming days.
During the Energy and Commerce Committee the markup, Democrats offered 246 health-related amendments, many of which were ultimately withdrawn. They largely focused on extending the enhanced advanced premium tax credits (APTCs), preventing the Medicaid policies that would reduce coverage from going into effect, addressing prescription drug prices, and preserving access to home- and community-based services. Republicans did not offer any amendments. The amendments can be found here, and the committee’s section-by-section summary can be found here.
Ways and Means Committee: The budget resolution instructed the House Ways and Means Committee to produce policies that would not raise the federal deficit by more than $4 trillion if the spending cuts in the overall bill totaled less than $1.5 trillion, or by more than $4.5 trillion if the bill achieved $2 trillion in savings. The Joint Committee on Taxation found that the Ways and Means Committee’s proposed tax provisions would increase the deficit by $3.18 trillion, meeting the goals stated in the resolution.
Throughout the markup, Democrats spoke out against the Medicaid provisions being considered in the House Energy and Commerce Committee and encouraged the Ways and Means Committee to extend the enhanced APTCs. Democrats argued that if the bill was supposed to help working Americans, healthcare improvements needed to be a key part of the legislation and tax breaks for the wealthy shouldn’t be financed by taking healthcare away from lower- and middle-class working Americans. Republicans offered no amendments. Their talking points focused on how the tax package was designed to limit tax liability of working Americans and restrict provision of government benefits to US citizens only, not individuals in the country illegally.
Budget Committee: Speaker Johnson (R-LA) aims to pass the reconciliation package on the House floor before Memorial Day. Once all the committees of jurisdiction have completed their work, the House Budget Committee is tasked with pasting together the various committee prints into a single reconciliation package. That is largely a perfunctory role as they have no authority to make any changes. The Budget Committee met today, May 16, 2025, to do that work. Ultimately, a vote was held to decide if the committee should vote on the package, which failed in a 16–21 vote due to a hardline conservative push to enact larger spending cuts. When voting no, Reps. Clyde (R- GA), Roy (R-TX), Brecheen (R-OK), and Norman (R-SC) cited concerns that the federal spending reductions, particularly the Medicaid cuts, do not go far enough. Rep. Smucker (R-PA) also voted no, clarifying that the no vote was so that the committee could procedurally bring the bill back up later. Specifically, conservatives are unhappy about the Medicaid work requirement provisions. As written, the work requirements do not begin until 2029, and conservatives want to shorten that timeline.
The Budget Committee is currently scheduled to reconvene at 10pm on Sunday, May 18, 2025, to vote on the bill, and the Rules Committee is expected to meet on Wednesday, May 21, 2025, to prepare the bill for floor debate. Republican leadership continues to work behind the scenes to resolve remaining differences related to Medicaid and other issues, such as disagreement on the state and local tax deduction (SALT).
HHS Secretary Kennedy Testifies in Congress. In the House Appropriations Committee hearing, Kennedy defended the cuts outlined in President Trump’s skinny budget request and heard concerns from both Republicans and Democrats about some of his policies, such as removing fluoride from drinking water. In the Senate HELP Committee hearing, Kennedy faced questions from a bipartisan group of senators about his previous statements on vaccine safety and efficacy. In both committees, Kennedy defended workforce and program cuts from the Department of Government Efficiency.
Senate Judiciary Committee Discusses PBM Reform. The hearing examined the role of PBMs and how current practices impact drug pricing, access to medication, and local pharmacies. Republican and Democratic senators expressed concerns over low reimbursement rates to local pharmacies, lack of transparency, and the impact of vertical integration on drug affordability. Several witnesses emphasized the need to reform PBMs and recommended that future policies prioritize patients over profit.
House Judiciary Subcommittee on Administrative State, Regulatory Reform, and Antitrust Holds Hearing on Medical Residency. The hearing examined the structure and legal implications of the National Resident Matching Program and evaluated its antitrust exemption. The hearing also explored the role of the Accreditation Council for Graduate Medical Education (ACGME) in shaping residency program standards and access, and how the residency placement and accreditation system affects medical graduates and the broader physician labor market. Republicans portrayed the matching program and ACGME accreditation as monopolistic, opaque, hospital-centric, and contributing to physician shortages, wage suppression, and lack of resident autonomy. Democrats defended the matching program as an imperfect but functional solution to manage medical residency placements. They emphasized the need for increased public investment, particularly in expanding residency slots, supporting international medical graduates, and protecting research funding.
Senate Finance Committee Advances Trump HHS Nominees. The executive session considered the nominations of James O’Neill to be deputy secretary of HHS and Gary Andres to be assistant secretary of legislation of HHS. Both nominees advanced (see vote outcomes below), and their nominations will now move to the Senate floor.
James O’Neill’s nomination to be deputy secretary of HHS advanced by a vote of 14 – 13, along party lines.
Gary Andres’ nomination to be assistant secretary of legislation of HHS advanced by a vote of 19 – 8. Sens. Warner (D-VA), Whitehouse (D-RI), Hassan (D-NH), Warnock (D-GA), and Welch (D-VT) joined Republicans in voting yes.
ADMINISTRATION
Trump Signs EO on Drug Prices. President Trump’s “most-favored nation” EO seeks to equalize drug prices between the United States and other developed countries. It instructs federal agencies to take the following actions:
The US trade representative and the secretary of commerce will ensure foreign countries are not engaged in practices that lead to high drug prices in the United States.
The HHS secretary will facilitate direct-to-consumer purchasing programs for drug manufacturers that sell their products to US consumers at the most-favored nation price.
The HHS secretary, in coordination with other relevant agencies, will have 30 days to bring prices for pharmaceutical drugs in the United States in line with comparable developed nations. If significant progress toward most-favored nation pricing is not delivered at that time, HHS in conjunction with CMS must develop rulemaking to impose most-favored-nation pricing.
HHS and the US Food and Drug Administration (FDA) must consider certifying that the importation of certain prescription drugs from other developed countries is safe, and if such certification is made, FDA must create a waiver process to allow for the importation of prescription drugs.
Several federal agencies, including the Federal Trade Commission, the Office of the Attorney General, and the US Department of Commerce, are instructed to investigate any anticompetitive practices leading to higher prices.
FDA is instructed to review and potentially modify or revoke approvals granted for drugs that maybe be unsafe, ineffective, or improperly marketed.
A fact sheet can be found here. While EOs typically lay out the administration’s policy priorities, effectuating such policies requires additional actions, including potential rulemakings.
CMS Releases Proposed Rule on MCO Taxes. Federal law requires state-imposed “provider taxes,” which include MCO taxes, to be uniform and broad based, meaning it must be applied at the same level and to all MCOs in the state, not just Medicaid MCOs. However, a state can apply to CMS for a waiver from this requirement if the net impact of the tax is generally redistributive and the amount of the tax is not directly correlated to Medicaid payments. With its proposal, CMS aims to close what it considers a loophole to prohibit states from taxing Medicaid MCOs at a higher rate than non-Medicaid MCOs. CMS identified eight taxes in seven states that would be affected by this proposal, if finalized. We understand those states to be California, Illinois, Massachusetts, Michigan, New York, Ohio, and West Virginia.
Key proposals include:
Prohibiting states from explicitly taxing Medicaid units at higher tax rates than units of other payors and better implementing the mandate that a tax be generally redistributive.
Defining terms used in the regulation, including “Medicaid taxable unit” and “non-Medicaid taxable unit” to prohibit states from using overly vague language.
Specifying that noncompliant states that received their most recent waiver approval within two years of the effective date of the final rule would not be eligible for a transition period. Noncompliant states that received waiver approval more than two years prior to the effective date of the final rule would have a transition period of at least one full state fiscal year to adjust the tax to come into compliance.
Read the press release here and the fact sheet here. Comments are due on July 14, 2025.
The House reconciliation bill reported by the Energy and Commerce Committee includes a similar but not identical provision.
HHS Agencies Issue RFIs.
In conjunction with FDA, HHS asked the public to help identify any opportunities to produce cost savings, increase efficiency, and catalyze health and economic innovation through deregulation, with the goal of addressing regulations that are “unnecessary, inconsistent with the law, overly burdensome, outdated, out of alignment with current EOs, or otherwise unsound.” Read the press release here. Comments are due on July 14, 2025.
CMS and the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health IT requested input from the public regarding the digital health products market for Medicare beneficiaries, as well as the current state of data interoperability and the broader health technology infrastructure. Responses may be used to further efforts to cultivate this market, increase beneficiary access to effective digital capabilities, and increase data availability. Read the press release here. Comments are due on June 15, 2025.
HHS Identifies Documents for Recission. In a final rule, HHS rescinded the following four documents, effective immediately:
“Extension of Designation of Scarce Materials or Threatened Materials Subject to COVID-19 Hoarding Prevention Measures; Extension of Effective Date with Modifications” (86 FR 35810, July 7, 2021), which designated health and medical resources in scare supply and necessary to respond to the spread of COVID-19.
“Opioid Drugs in Maintenance and Detoxification Treatment of Opiate Addiction; Repeal of Current Regulations and Issuance of New Regulations: Delay of Effective Date and Resultant Amendments to the Final Rule” (66 FR 15347, March 19, 2001).
“Practice Guidelines for the Administration of Buprenorphine for Treating Opioid Use Disorder” (86 FR 22439, April 28, 2021), which provided eligible physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified registered nurse anesthetists, and certified nurse midwives, who are state-licensed and registered by the DEA to prescribe controlled substances, an exemption from certain statutory certification requirements related to training, counseling, and other ancillary services.
“Notification of Interpretation and Enforcement of Section 1557 of the Affordable Care Act and Title IX of the Education Amendments of 1972” (86 FR 27984, May 25, 2021), which clarified that ACA Section 1557’s prohibition on discrimination included discrimination based on sexual orientation and gender identity.
CMS Innovation Center Releases Strategic Framework. The strategy outlines how the Innovation Center intends to structure current and future value-based care models, with an emphasis on prevention, individual engagement, and market-based mechanisms. The framework highlights the center’s plans related to:
Promoting evidence-based prevention.
Increasing model activity in Medicare Advantage, Medicaid, and prescription drug pricing.
Focusing on cost savings and financial accountability.
Expanding access to consumer-facing tools and data.
Increasing the role of independent and rural providers.
Emphasizing choice and competition.
QUICK HITS
CMS Releases Draft Guidance for Third Medicare Drug Price Negotiation Cycle. The guidance seeks to improve program transparency, further prioritize selection of prescription drugs with high costs to Medicare, and minimize any negative impacts of the negotiated maximum fair price on pharmaceutical innovation. Read the press release here and the fact sheet here. Comments are due on June 26, 2025.
FDA Begins Process of Removing Ingestible Fluoride Prescription Drug Products for Children. The agency has set a goal date of October 31, 2025, for completing a safety review and public comment period.
GAO Releases Reports on Caregiving, TRICARE. The first US Government Accountability Office (GAO) report recommends that HHS clarify when youth may qualify for support services. The second report provides information on the US Department of Defense’s processing of TRICARE claims from behavioral health providers.
NEXT WEEK’S DIAGNOSIS
Both chambers will be in session next week, as the House works to pass its budget reconciliation package before the Memorial Day recess. Budget hearings will continue, with HHS Secretary Kennedy testifying in front of the Senate Appropriations Labor-HHS Subcommittee. The House Oversight and Government Reform Economic Growth, Energy Policy, and Regulatory Affairs Subcommittee and Health Care and Financial Services Subcommittee will hold a joint hearing on the Inflation Reduction Act. Meanwhile, we await the president’s full budget request for FY 2026.
Reflections on the FDLI 2025 Annual Conference – Differing Tones, Shared Goals
From “gold standard science” to biopharma “GNC store”, this year’s Food and Drug Law Institute (FDLI) 2025 Annual Conference in Washington, DC, on May 15–16, a vital gathering for life sciences professionals, was full of sound bites, featured two standout sessions: Food and Drug Administration (FDA) Commissioner Dr. Martin A. Makary on Day 1 and Congressman (D-Mass) Jake Auchincloss on Day 2. Their talks, of course, revealed stark differences in approach—Dr. Makary’s forward-looking optimism and Mr. Auchincloss’s calls for concern—yet shared a commitment to advancing innovation and protecting the core of the agency. To be sure, much of what was said (aside from Dr. Makary’s now widely reported-on comment about a new vaccine framework) was not new, but there are a number of industry takeaways when viewed together and in the context of the conference itself.
FDA Commissioner Dr. Martin A. Makary: A Push for Integrity
Dr. Makary focused on restoring trust in the “brand” of the FDA and was empathetic to the people that do the every day work of the agency. He emphasized the difficulty coming in “after” the reductions in force, but pledged to “restore and rebuild” the culture to the best of his ability. This theme was spread throughout Dr. Makary’s remarks. He also stressed agency independence, advocating for policies like limiting advisory committee roles for industry employees to reduce conflicts of interest, but underscored “strong partnerships” with industry in appropriate ways, intimating positive views on user fee programs. Dr. Makaray’s vision includes accelerating approvals with randomized controlled trials and real-world evidence, while maintaining product safety. The “gold standard science and common sense”, in his view, is here to stay, and to be clear, according to Dr. Makary, there will be no reorganization of FDA.
Dr. Makary also spoke at length about the new AI initiative at FDA, announced last week and widely publicized, which will aim to incorporate AI tools for application reviews. The example case was for review of myriad scientific literature appendices in applications that can take days—now minutes—for reviewers to pour through. Dr. Makary also discussed cloud-based endpoints and industry collaboration to further modernize review processes, particularly for predictive toxicology in drug development. Near the end of the session, Dr. Makary teased the new “framework for vaccine makers”, without much more context, in the coming days. Overall, Dr. Makary’s focus on transparency and streamlined, evidence-based approvals signals a regulatory environment that values innovation but demands robust data.
Congressman Jake Auchincloss: A Call to Action
On Day 2, Mr. Auchincloss, a member of the Energy and Commerce Committee, took a more critical tone, framing the FDA’s challenges in both a local and global-political context. He dismissed modernization efforts like DOGE as “dumb,” and lamented HHS Secretary Robert F. Kennedy Jr.’s characterization of FDA personnel as industry “sock puppets.” Mr. Auchincloss urged Congress to provide “political top cover” for the FDA—and Dr. Makary—ensuring bipartisan support to shield the agency’s critical work from political interference, focus on science and public trust, and avoid erosion of public sentiment of the agency.
Mr. Auchincloss also highlighted very real and very present global competition, warning that China is “eating our lunch” in life sciences innovation, particularly in preclinical and phase 1 research. Focus on cutting budgets is contrary to this plight. He pushed for increased R&D investment—suggesting 6% of GDP—and further underscored that we need coordinated efforts across various agencies to “build” better than China in life sciences. On rare and pediatric disease topics, Mr. Auchincloss highlighted recent news about CRISPER therapies and projected that the bipartisan Give Kids a Chance Act would pass. Overall, Mr. Auchincloss’s remarks underscore the need to uphold health and human safety through good science in a politically charged landscape while advocating for policies that bolster U.S. competitiveness.
Takeaways and Common Ground
FDLI did a great job at juxtaposing these sessions—but the perspectives, on the whole, were not substantively opposed, and at times, seemed very much aligned. Both spoke supportively about the FDA’s “gold standard” and the importance of the global marketplace advantage that the US currently holds in the life sciences sector. It would not be a stretch to say that each speaker appears to support the notion that a strong FDA is a good thing. Each speaker also recognized that these are critical elements of the agency and should be protected at all costs. Reading between the lines, moreover, it would be fair to say that each speaker shares a view that the user fee process and engagement with industry is important and should not be scrapped, contrary to what has been reported elsewhere at HHS about the user fee systems.
Similarly, there was a mutual focus on innovation—whether it be AI or R&D investment more broadly—but to be sure, each speaker had their own view on which means of innovation was more important. Even on “efficiency,” the speakers did not seem too far apart. “Modern and efficient”, in Mr. Auchincloss’ words, seemed to match well with Dr. Makary’s view that some change was needed but drastic measures would be counterintuitive to the mission.
The FDLI 2025 Conference underscored that while regulatory and political leaders may differ in approach, their endgame—fostering innovation while protecting public health—aligns. That is also a good thing.
Focus, Fairness and Efficiency: DOJ Reveals Administration’s Plans for Enforcement of Corporate and White-Collar Crime
Key Takeaways
DOJ Criminal Division will prioritize enforcement in key areas, including health care fraud, trade and customs violations and national security-related financial crimes.
Companies that voluntarily self-disclose, cooperate and remediate may qualify for declinations, reduced penalties and shortened compliance obligations even where aggravating factors are present.
Corporate compliance agreements will generally be capped at three years, with early termination available based on remediation, risk reduction and program maturity.
Independent compliance monitors will be imposed only when necessary and must be narrowly tailored to limit burden and business disruption.
On May 12, 2025, the Head of the Department of Justice’s (DOJ) Criminal Division, Matthew R. Galeotti, issued a memorandum detailing the Division’s enforcement priorities and policies for prosecuting corporate and white-collar crimes under the Trump administration.
The memorandum describes the need for the Division’s policies to “strike an appropriate balance” between investigating and prosecuting criminal wrongdoing “while minimizing unnecessary burdens on American enterprise.” In accordance with this position, the memorandum describes areas that the Division will be particularly focused on investigating and prosecuting, while also emphasizing the Division’s willingness to reduce criminal and civil sanctions when corporations self-disclose and cooperate with the government.
Overall, the memorandum describes enforcement priorities and associated policies that align with the Trump administration’s focus on rooting out government waste and abuse, toughening U.S. policy on foreign trade and combatting national security concerns such as drug trafficking and foreign crime organizations, citing to several executive orders on these topics.
The Criminal Division’s “Areas of Focus” include:
Federal program fraud, waste and abuse—specifically health care fraud and procurement fraud;
Trade and customs fraud, including tariff evasion;
Fraud perpetrated through variable interest entities (VIEs), including schemes targeting elders, “ramp and dumps,” and other forms of market manipulation;
Fraud that victimizes U.S. investors, individuals and markets, such as Ponzi schemes, schemes targeting elders and servicemembers and fraud that threatens consumer health and safety;
Financial institutions that commit sanctions violations or enable transactions by Transnational Criminal Organizations (TCOs), drug cartels, hostile nation-states and/or foreign terrorist organizations;
Corporations that provide “material support” to foreign terrorist organizations, cartels and TCOs;
Complex money laundering schemes—specifically referencing “Chinese Money Laundering Organizations” and other organizations involved in laundering money used in the manufacturing of illegal drugs;
Violations of the Controlled Substances Act and the Federal Food, Drug, and Cosmetic Act, including the unlawful manufacture and distribution of products used to create counterfeit pills containing fentanyl and the unlawful distribution of opioids by medical professionals and companies;
Bribery that impacts U.S. national interests, undermines U.S. national security and harms the competitiveness of the U.S.; and
Crimes involving the use of digital assets—with cases impacting victims, involving cartels, TCOs, or terrorist groups or facilitating drug money laundering or sanctions evasion receiving the highest priority.
After outlining the Criminal Division’s investigation and prosecution priorities, the memorandum indicates that the Department will take a more relaxed approach to misconduct committed by corporations that are willing to report such conduct, cooperate with the government and take actions to remediate the misconduct. In fact, these are factors that Criminal Division prosecutors must now consider when determining whether to bring criminal charges against corporations.
The memorandum further states that the Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy will be revised to clarify additional benefits that are available to companies that self-disclose and cooperate with the government and will provide a “more easily understandable” path for declination and fine reductions. As part of this effort, the Criminal Division’s Fraud Section and Money Laundering and Asset Recovery Section have been instructed to review all existing corporate compliance agreements to determine if they should be terminated early. Facts that these Sections may consider when determining whether early termination is warranted include the duration of the post-resolution period, a substantial reduction in the company’s risk profile, the extent of remediation and maturity of the compliance program and whether the company self-reported the misconduct.
Additionally, Division attorneys must consider several factors when imposing terms for corporate compliance agreements, including the severity of the misconduct, the company’s degree of cooperation and remediation and the effectiveness of the company’s compliance program at the time of resolution. The memorandum provides that the terms of such agreements should not exceed three years “except in exceedingly rare cases,” and Division attorneys should assess these agreements regularly to determine if they should be terminated early.
Lastly, the memorandum provides policy changes with respect to the use of independent compliance monitors. Namely, the Division will only impose such monitoring when necessary, for example, when a company cannot be expected to implement an effective compliance program or prevent recurrence of the underlying misconduct, and the monitoring must be narrowly tailored to minimize expense, burden and interference with business.
Mr. Galeotti discussed these policy changes while speaking at the Securities Industry and Financial Markets Association’s Anti-Money Laundering and Financial Crimes Conference on May 13, 2025, stating that companies will now have a “clear path to declination” through self-disclosure, full cooperation with the government and timely remediation. Galeotti stated that even companies with aggravating circumstances may receive declination if the company’s cooperation and remediation outweigh these circumstances. Furthermore, Galeotti indicated that even companies that self-disclose after the government has become aware of their misconduct can still qualify for shorter-term compliance agreements, fine reduction and lessened monitoring.
Taken together, this memorandum and other guidance issued by DOJ under the direction of U.S. Attorney General Pam Bondi, indicate that the Department intends to treat corporate misconduct outside certain areas of focus with a lighter hand, incentivizing corporations to be transparent with the government and, as stated in the Division’s memorandum, “learn from their mistakes.”
“AI Policy Roadmap” Released by AdvaMed to Guide Regulators
On March 14, 2025, AdvaMed, the MedTech Association, released its AI Policy Roadmap (the Roadmap) outlining policy priorities for Congress and the U.S. Food and Drug Administration (FDA). The impetus for the Roadmap was the recognition of the important role that AI-enabled devices will play in improving the accuracy and efficiency of disease diagnosis, enabling higher quality treatments, and expanding access to health care and to innovative technologies. The Roadmap is broken down into three main policy priority areas: privacy and data access, FDA AI regulatory framework, and reimbursement and coverage.
Privacy and Data Access
The Roadmap contends that one component of AI-enabled devices that sets them apart from traditional technology is the need for large datasets to train and validate the algorithms underlying the devices. The need for large datasets creates two distinct challenges.
First, health care data is highly fragmented and generally stored in non-standardized formats. Health care data is not frequently shared across health systems, and there are very few commercial vendors that provide the services necessary to link and standardize this data.
The second significant challenge is the need to protect patient privacy and ensure that data security is prioritized. To this end, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires protection of certain types of personal health information, consent to use and/or disclose data, and strict deidentification requirements when personal health information is used. The need for high quality data measured against the need to protect patient privacy creates an inherent tension in policy priorities.
To mitigate this tension, the Roadmap provides three recommendations:
Congress and regulatory agencies such as the FDA should ensure data protection without stifling innovation.
Congress should evaluate the need to update HIPAA for the AI era and create clear guidelines specifically for data use in AI development.
Congress and regulatory agencies should develop appropriate guidelines around patient notice and authorization for the data used to develop AI.
The Roadmap strives to balance the need for a high volume of high quality standardized data with patient privacy by placing modernized consent and notification requirements at the center of the policy priorities. Recognizing the need for large datasets, the Roadmap emphasizes modernizing traditional privacy policies, such as HIPAA, to accommodate data use and collection for AI models.
FDA AI Regulatory Framework
The FDA regulates certain AI-enabled devices for safety and efficacy. However, AI-enabled devices require a different approach than FDA’s “traditional” medical device review model for those devices that undergo changes in an iterative fashion. For approved medical devices that evolve continuously, e.g., AI-enabled devices, developers must submit for FDA review any modification that could significantly affect the product’s safety or effectiveness, consistent with FDA-drafted guidance on the preapproval process for post-market changes – referred to as predetermined change control plans (PCCP). These post-market changes occur as algorithms continue to learn and validate against the data of the populations using the technology. The algorithms then adjust based on continued learning. While Congress passed legislation authorizing PCCP approval in 2022, comprehensive FDA PCCP guidance was only released in December of 2024. The complete pre- and post-market processes for AI-enabled devices are outlined in the FDA’s “Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations.”
The Roadmap’s recommendations suggest that FDA modernize regulations to align with the increasing shift from traditional medical devices to AI-enabled devices. Specifically, the Roadmap recommends that:
The FDA should remain the lead regulator responsible for overseeing the safety and effectiveness of AI-enabled medical devices.
The FDA should implement the existing PCCP authority to ensure it achieves its intended purpose of ensuring patients have timely access to positive product updates.
The FDA should issue timely and current AI guidance documents related to AI-enabled devices and to prioritize the development and recognition of voluntary international consensus standards.
The FDA should establish a globally harmonized approach to regulatory oversight of AI-enabled devices.
The Roadmap commends progress made by Congress and the FDA to modernize legislative and regulatory processes applicable to AI-enabled devices but urges continued focus on keeping pace with technological innovation. The focus of the policy recommendations is on streamlined, uniform regulations that are not overly burdensome and will not stifle innovation.
Reimbursement and Coverage
Finally, the third policy area addressed in the Roadmap is reimbursement and coverage as a critical component of increasing access to digital health technologies. Currently, reimbursement for AI-enabled devices has been considered on a device-specific basis, leading to incremental policy changes. The Roadmap suggests that Medicare, as the country’s largest health care payor supporting the medical needs of millions of Americans, could be instrumental in shifting this policy position. Further, Medicare policy initiatives heavily influence the coverage policies of private payors and state Medicaid plans. While the Roadmap acknowledges that there is no one single policy solution to increase accessibility to digital health technology through reimbursement, “accurately capturing the cost and value of [AI-enabled devices] is critical to ensuring appropriate reimbursement.”
Toward this end, the Roadmap provides five policy suggestions:
Congress should consider legislative solutions to address the impact of budget neutrality constraints, or restraining Medicare spending to a certain defined threshold, on the coverage and adoption of AI technologies.
The Centers for Medicare & Medicaid Services (CMS) should develop a formalized payment pathway for algorithm-based health care services to ensure future innovation and to protect access to this subset of AI technologies for Medicare beneficiaries.
To ensure future innovation and to protect access to algorithm-based health care services for Medicare beneficiaries, CMS should develop a formalized payment pathway for algorithm-based health care services.
Congress and the FDA should facilitate the adoption and reimbursement of digital therapeutics through legislation and regulation.
CMS should leverage its authority to test innovative alternative payment models to promote the ability of AI technologies to improve patient care and/or lower costs.
The development and adoption of AI-enabled devices to improve diagnosis, treatment, and patient care will be amplified by the adoption of appropriate reimbursement policies as health care providers and practitioners will be more readily able to learn about and use these health care tools. Sound reimbursement and coverage policies are an integral part of supporting innovation and development of AI-enabled health care devices.
Conclusion
In a recent press release, Scott Whitaker, AdvaMed CEO and President said about the release of the Roadmap, “The future of AI applications in medtech is vast and bright. It’s also mostly to be determined. We’re in an era of discovery… This is the right time to promote the development of AI-enabled medtech to its fullest potential to serve all patients, regardless of zip code or circumstance.” It is from this position of promoting new technology that AdvaMed urges Congress and the Food and Drug Administration to act in support of the development of AI-enabled medical technology.
Trump Administration Announces New Executive Order to Promote Domestic Production of Biopharmaceuticals
Key Takeaways
Regulatory Relief for U.S. Manufacturing: The EO streamlines FDA and EPA processes to encourage domestic pharmaceutical production.
Increased Scrutiny of Foreign Facilities: Foreign manufacturers face higher inspection standards and potential tariffs, raising supply chain risks.
Piece of the Puzzle: Manufacturing EO is paired with other executive orders on trade and bilateral trade agreements.
Uncertain Policy Landscape: Shifting regulations and trade policies create both opportunities and challenges for biopharma investment decisions.
On May 5, 2025, President Donald J. Trump signed an Executive Order (EO) titled “Regulatory Relief to Promote Domestic Production of Critical Medicines.” The order’s goal is to strengthen the U.S. pharmaceutical supply chain by streamlining regulatory processes, encouraging domestic manufacturing of pharmaceuticals and their inputs, and intensifying the inspection of pharmaceutical manufacturing facilities located outside of the United States.
The May 5 order is the carrot to accompany an expected tariff “stick” on pharmaceutical importations, which President Trump signaled would be forthcoming and appears to have materialized in the form of a just-announced most-favored-nation pharmaceutical pricing executive order. In addition, last month, the Trump Administration initiated a Section 232 investigation of pharmaceutical imports to determine whether imports of pharmaceuticals threaten to impair U.S. national security and therefore should be subject to tariffs or other measures. Taken together, the EO and proposed tariffs will make pharmaceuticals sourced outside the United States more expensive and, perhaps, subject to increased FDA-inspection scrutiny and potential supply disruptions.
The administration’s goal is to accelerate investment in U.S.-based manufacturing and thus onshore some of the manufacturing. This update provides a brief overview of the EO and discusses its potential short- and longer-term implications.
Key Provisions of the EO:
1. Streamlining FDA Regulations:
The EO tasks the United States Department of Health and Human Services (HHS) and U.S. Food and Drug Administration (FDA) with reviewing and eliminating duplicative or unnecessary regulations that hinder domestic pharmaceutical manufacturing.
The EO directs the FDA to maximize the timeliness and predictability of FDA review with the stated goal of accelerating the development of domestic pharmaceutical manufacturing of “pharmaceutical products, active pharmaceutical ingredients, key starting materials and associated raw materials.”
The EO instructs the FDA to work on expanding programs and guidance to provide early technical advice to domestic facilities before they are operational and to work to ensure domestic inspections “are prompt, efficient, and limited to what is necessary to ensure compliance with the Federal Food, Drug and Cosmetic Act (FDCA) and other Federal law.”
2. Enhancing Inspection of Foreign Manufacturing Facilities:
The EO directs the FDA to “develop and advance improvements to the risk-based inspection regime that ensures routine reviews of overseas manufacturing facilities involved in the supply of United States medicines.” The EO states that the increased inspections should be funded by increased fees on foreign manufacturing facilities.
The EO also directs the FDA to negotiate with countries to increase site inspections and increase the number of unannounced inspections of foreign manufacturing facilities that make pharmaceuticals or inputs to pharmaceuticals.
3. Environmental and Construction Permitting:
The EO instructs the Environmental Protection Agency (EPA) and the Army Corps of Engineers to review and streamline requirements and guidance documents related to permitting and building domestic manufacturing facilities, including by accelerating siting and permitting approvals.
Implications for Biopharma Leaders and Their Advisors
Go… But Ready and Steady? For leaders and lawyers considering investment in domestic manufacturing capabilities, the EO presents an opportunity, particularly if it offers a smoother, faster and more predictable route from investment to operation for domestic biopharmaceutical manufacturing facilities. However, even if the EO shortens the timeline from investment to commissioning of pharmaceutical manufacturing capacity, the timeline for developing and launching manufacturing facilities measures in years, not months. The Trump Administration’s policy framework, the EO and tariffs, have the benefit of quick implementation, but the drawback that they could be modified or undone by a stroke of the pen by this or another administration during the long lead time necessary to permit, build, inspect and commission new manufacturing facilities.
Good News for Biotech Investors Amidst Broader Uncertainty for Biopharmaceutical Investments. As our Polsinelli colleagues have noted, the HHS in general and the FDA in particular have been transformed in the first 100 days of the Trump Administration. The FDA has seen a reduction of approximately 3,500 employees to accompany a significant change in leadership and priorities. While the changes may create some new opportunities, there is a concern that the changes will bring delays in review and approval of new biopharmaceuticals, increase uncertainty and perhaps lead to executive oversight and prioritization that differs markedly from the past for certain types of therapies (e.g., vaccines). Some observers have correlated the policy changes to a decrease in venture-based funding to the biotech industry. This new EO may create incentives towards investment in manufacturing, but biotech companies and investors will be making decisions on manufacturing amidst broader uncertainty about whether new therapies that could be manufactured in new U.S. facilities will be approved on a timely basis.
Potential for Supply Chain Disruptions. The global supply chain for biopharmaceuticals is exceedingly complicated. Particularly for biologic medicines, the drug substance (i.e., Active Pharmaceutical Ingredients, or API) for any given drug might be made in a bioreactor in Country A. The drug product (i.e., excipients) might be made at a facility in Country B. Syringes or subcutaneous injection devices might be manufactured in Country C. Filling and finishing the drug into vials, syringes, or subcutaneous injection devices might occur in Country D. Moreover, due to the limited tight supply of manufacturing capacity and the limited shelf life of pharmaceuticals, biotech companies may schedule slots in third-party manufacturing facilities over a year in advance. If, as the EO contemplates, the FDA increases the frequency and intensity of manufacturing facility inspections outside the United States, there is a real chance for supply chain disruptions that could lead to stock-outs of pharmaceuticals. For instance, data from the Association for Accessible Medicines (AAM) suggests that only 13% of API is manufactured in the U.S., meaning that the U.S. is heavily reliant on ex-U.S. suppliers. For instance, 40% of finished doses are made in the U.S., including from APIs produced outside the U.S. See AAM Testimony on the Generic Global Supply Chain. Biotech executives and their counsel will do well to fortify their supply chains and seek reassurance from manufacturing partners that their foreign facilities are ready for enhanced FDA inspection.
Which Nations Find Favor? As we prepared this update on manufacturing, the Trump Administration announced a most-favored nation executive order on pharmaceutical pricing on May 12, 2025. “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” (MFN EO). The MFN EO authorizes the HHS to communicate price targets to pharmaceutical manufacturers within 30 days, to facilitate programs to allow U.S. patients to purchase medications directly from manufacturers, and to expand drug reimportation programs. Industry reactions have been swift, with Pharmaceutical Research and Manufacturers of America (PhRMA) CEO Stephen J. Ubl stating that “Importing foreign prices from socialist countries would be a bad deal for American patients and workers.” It is reasonable to expect that the MFN EO will be subject to litigation.
The MFN EO appears to be another layer in a multi-layered approach to tariffs on pharmaceuticals and biologics. On May 8, the Trump Administration announced a bilateral trade agreement with Great Britain. The ink is barely dry, but the White House’s fact sheet states that the agreement will “create a secure supply chain for pharmaceutical products.” May 8, 2025, White House Fact Sheet. In contrast, tariffs on Chinese imports remain high, and passage of the BIOSECURE Act, a bill pending in Congress, remains possible. The BIOSECURE Act would erect further barriers to biopharmaceuticals manufactured in China. In short, the Trump Administration’s policy on ex-U.S. foreign pharmaceutical manufacturing may become more complicated still, with certain countries granted more favorable tariff treatment and others disfavored or barred entirely.
Future Outlook and Industry Response
This EO intends to promote U.S.-based pharmaceutical manufacturing in the name of improving public health and protecting national security. The policy presents an opportunity for the U.S. biopharmaceutical industry over the medium and long term, but its implementation and effects, particularly amidst other policy changes, are hard to discern today. Change has been a constant in the Trump Administration. In the short term, stakeholders in the pharmaceutical industry should closely monitor regulatory developments and assess their supply chains to ensure that they are well-positioned to continuously meet the needs of patients and healthcare providers.
EAB Issues Consent Agreement and Final Order for TSCA Section 5 Violations
On May 5, 2025, the U.S. Environmental Protection Agency (EPA) Environmental Appeals Board (EAB) issued a consent agreement and final order between EPA and Cytonix, LLC (Cytonix). According to the consent agreement, in 2022, EPA inspectors discovered Cytonix’s potential noncompliance with requirements under Section 5 of the Toxic Substances Control Act (TSCA) for a manufactured chemical substance consisting of short-chain polyfluorinated materials (Chemical A) that was developed as a replacement for a chemical substance containing long-chain (C8) perfluorinated alkyl groups. In 2024, EPA identified potential TSCA Section 5 violations for manufacturing Chemical A prior to submitting a premanufacture notice (PMN) or a low volume exemption (LVE) application. According to Cytonix, it mistakenly believed Chemical A was included on the TSCA Inventory at the time of manufacture. As soon as Cytonix learned of the illegal manufacture, it immediately ceased manufacture and quarantined all of its existing stocks of Chemical A. Cytonix does not intend to process or use the quarantined existing stocks of Chemical A but seeks only to dispose of them under the terms of the consent agreement. Cytonix neither admitted nor denied the specific factual allegations. Cytonix agreed to pay a civil penalty of $190,525 for the alleged violations. The terms of settlement state that:
As a condition of the consent agreement, Cytonix shall consult the Interim Guidance on the Destruction and Disposal of Perfluoroalkyl and Polyfluoroalkyl Substances and Materials Containing Perfluoroalkyl and Polyfluoroalkyl Substances-Version 2 (2024) for analyzing disposal options of quarantined existing stocks of Chemical A that minimize potential environmental releases;
If Cytonix chooses to dispose of the existing quarantined stocks of Chemical A, Cytonix shall dispose of any unused portion of its existing stocks in accordance with applicable federal and state requirements. Cytonix should coordinate with the applicable state(s) where disposal may occur to determine if additional requirements or a preferred approach (e.g., incineration) should be considered before disposing of Chemical A; and
Cytonix shall submit documentation showing compliance with these terms of settlement within 30 days of disposal of all existing quarantined stocks of Chemical A containing PFAS and specify the disposal method used.
Drug Pricing: Trump Signs “Most Favored Nation” Executive Order
On May 12, 2025, President Trump signed the second drug pricing-related Executive Order (EO) of his current administration. While President Trump’s first drug pricing-related EO focused on lowering the cost of prescription drugs by continuing and modifying the negotiations initiated by the Inflation Reduction Act of 2022 and issuing directives for administrative agencies to initiate cost cuts, this EO focuses on global comparative pricing.
The EO states that while American citizens represent only 5% of the global population, they fund around 75% of global pharmaceutical profits, thus causing Americans to underwrite the lion’s share of drug research and development for the global population. The EO claims that this discrepancy is rooted in a global price discrimination “scheme” whereby Americans pay upward of three times the cost for pharmaceuticals when compared to other similarly situated nations. This practice is alleged to have arisen as the result of pharmaceutical companies fighting against the ability of both public and private payors to negotiate for better drug prices for American patients. The EO concludes that the current scheme offers foreign health systems a “free ride” at the cost of American’s “generosity.” In an effort to rebut this practice, the EO directs that Americans, as the largest consumer of pharmaceutical products, receive “most-favored nation” pricing for pharmaceuticals. Said differently, under the EO, Americans would receive the pharmaceutical pricing equivalent to the similarly situated country receiving the best pricing.
To address this discrepancy, the EO makes several directives including the following:
The Department of Health & Human Services (HHS) shall facilitate direct-to-consumer (rather than insurance-based) purchasing programs for pharmaceutical companies to sell their product at most-favored nation pricing.
United States Trade Representatives and the Secretary of Commerce shall ensure that foreign countries are not engaged in any unreasonably discriminatory drug-pricing practices or policies.
Within 30 days of the EO, the Secretary of HHS, Robert F. Kennedy, Jr., in combination with the Centers for Medicare & Medicaid Services shall establish “target prices” for pharmaceutical products in line with most-favored nation pricing.
Should pharmaceutical companies fail to make “significant progress” voluntarily bringing their prices to the most-favored nation target price, the Administration shall engage in rulemaking to enforce most-favored nation prices.
These rulemaking processes aimed at encouraging pharmaceutical companies to comply with offering the most favored nation pricing for their products to American consumers includes:
HHS certification that importation of prescription drugs from other countries pursuant to 804(j) of the Federal Food, Drug, and Cosmetic Act (FDCA) poses no additional risk to the health and safety of consumers as well as a clear pathway for importation of low-cost prescription drug alternatives from other similarly situated countries.
Secretary of Commerce pursuing enforcement of anticompetitive practices perpetuated by pharmaceutical companies.
Secretary of Commerce action regulating the export of drugs or precursor material for drug production.
Commissioner of Food and Drugs revoking approval for drugs that have been improperly marketed or deemed ineffective or unsafe.
Action by all agency heads to address “global freeloading and price discrimination against American patient.”
This is not the first time the Trump administration has addressed drug pricing relative to other similarly situated countries. In late 2020, the first Trump Administration proposed an Executive Order requiring Medicare Part B drug prices to align with most-favored nation pricing. This EO faced significant challenges in court and was ultimately dropped by the Biden Administration.
Though this current EO has received significant press, several questions remain unanswered including how target prices will be identified and the allowable timeframe for pharmaceutical companies to voluntarily make “significant progress.” PhRMA, a pharmaceutical industry lobby group, responded to the EO almost immediately, calling it a “bad deal for American patients.”
No Article III Appellate Standing Under the Sun
The US Court of Appeals for the Federal Circuit dismissed Incyte’s appeal of a Patent Trial & Appeal Board decision, holding that a disappointed validity challenger lacked appellate standing to challenge the Board’s final written decision. Incyte Corp. v. Sun Pharmaceuticals Industries, Inc., Case No. 23-1300 (Fed. Cir. May 7, 2025) (Moore, C.J.; Hughes, Cunningham, JJ.) (Hughes, J., concurring).
After the Board upheld the validity of challenged claims of a patent owned by Sun Pharmaceuticals in a post-grant review proceeding (PGR), Incyte appealed and sought a determination that the claims were unpatentable. Sun Pharmaceuticals challenged whether Incyte had Article III standing to support an appeal to the Federal Circuit based on a lack of injury-in-fact.
The Federal Circuit focused on its jurisdiction to hear the appeal as a threshold issue and whether Incyte, as the party seeking review, met its burden of establishing Article III standing at the time it filed its appeal.
As context, the Federal Circuit noted that standing requires a concrete, actual, or imminent injury that is traceable to the challenged conduct and likely to be redressed by the court’s decision. Incyte asserted it had standing to appeal based on potential infringement liability and under the competitor standing doctrine.
Addressing potential infringement liability, the Federal Circuit noted Incyte’s reliance on a supplemental declaration from an in-house business development leader submitted during briefing. Noting that Incyte’s Article III standing was “not self-evident,” the Court ruled that Incyte should have presented evidence prior to its reply brief and declined to consider the supplemental evidence. Incyte was on notice that its appellate standing was challenged, and that evidence of its standing should have been submitted at the earliest possible opportunity. Finding no good cause for the delay, the Court declined to exercise its discretion to consider Incyte’s supplemental evidence and, based only on earlier submitted evidence, found that Incyte failed to establish that it had “concrete plans for future activity” that would create a “substantial risk of future infringement.”
In its discussion of the competitor standing doctrine, which allows competitors to challenge patents that could harm their competitive position, the Federal Circuit found the doctrine inapplicable because Incyte failed to show it would suffer economic harm from the Board’s ruling on patent validity. Rather, the Board’s ruling upholding specific patent claims “does not, by the operation of ordinary economic forces, naturally harm a [challenger] just because it is a competitor in the same market as the beneficiary of the government action (the patentee).” As the Court explained, “it is not enough to show a benefit to a competitor to establish injury in fact; the party seeking to establish standing must show a concrete injury to itself.”
The Federal Circuit held that because Incyte had not shown it was currently engaged in or had non-speculative plans to engage in conduct covered by the challenged patent, it was unable to establish injury-in-fact.
In his concurrence, Judge Hughes stated that while Incyte lacked Article III standing, he believed that Federal Circuit precedent was “overly rigid” and “narrow.” It is Judge Hughes’ belief that:
In the context of appeals from administrative post-grant proceedings generally, and the facts of this case[,] present a circumstance in which I believe our precedent dictates an outcome inconsistent with the spirit of Article III standing. Our precedent on whether parties have standing to appeal to this court from an adverse administrative post-grant review is too restrictive and creates a special standing rule for patent cases. The existence of this narrower special rule is even more pronounced in the pharmaceutical space, where our precedent leads to the (in my opinion, improper) conclusion of no standing for the inventor of the underlying compound.
FDA Announces Expanded Use of Unannounced Inspections at Foreign Manufacturing Facilities
On May 6, 2025, the U.S. Food and Drug Administration (FDA) announced its intend to expand the use of unannounced inspections at foreign manufacturing facilities that produce food, as well as essential medicines and other medical products intended for American consumers. This builds upon FDA’s Office of Inspection and Investigations Foreign Unannounced Inspection Pilot program in India and China and aims to ensure that foreign companies will receive the same level of regulatory oversight and scrutiny as domestic companies.
FDA stated that it will also evaluate the agency’s policies and practices for improvements to the foreign inspection program, which will include clarifying policies for FDA investigators to refuse travel accommodations from regulated industry, including lodging and transportation arrangements.
FDA conducts approximately 12,000 domestic inspections and 3,000 foreign inspections each year in more than 90 countries, according to the FDA press release. While US manufacturers undergo frequent, unannounced inspections, foreign firms have often had weeks to prepare, though FDA supposedly found deficiencies more than twice as often than during domestic inspections.
Despite this announcement, anonymous FDA officials noted that the recent staffing cuts in FDA have made it harder for the inspections teams to keep up with demands.
FDA Assistant Commissioner for Inspections and Investigations Michael Rogers stated that, “FDA’s rigorous, science-based global inspections of manufacturing facilities ensure that the food and drug products that enter the US marketplace, and the homes of American consumers, are safe, trusted, and accessible. These inspections provide real-time evidence and insights that are essential for making fact-based regulatory decisions to protect public health.” Michael Rogers will be retiring from FDA on May 14, 2025.
FDA and HHS Announce Next Steps in “Operation Stork Speed”
FDA and the Department of Health and Human Services (HHS) have announced the next steps in “Operation Stork Speed,” a program intended to enhance the “quality, safety, and nutritional adequacy” of infant formula products, as we have previously blogged. FDA issued a Request for Information (RFI) to begin the required nutrient review process for infant formula, which must meet minimum and maximum levels of certain nutrients.
Through the RFI, FDA is seeking public input regarding “whether existing nutrient requirements should be revised based on the latest scientific data, including international,” as well as potential adjustments to existing levels, additional nutrients to consider, and how these changes may improve health outcomes. Comments will be due 120 days after the RFI is published in the Federal Register, which is scheduled for May 14, 2025.
FDA will also increase testing for heavy metals and other contaminants in infant formula and food for children and is encouraging companies to work with the Agency on “enhancing transparency and improving labeling clarity.” FDA intends to convene a publicly accessible expert panel in June as part of the Operation Stork Speed initiative.
Keller and Heckman will continue to monitor the program and other developments related to infant formula.
Hatch-Waxman or Not, Clinical Trials Aren’t Subject to Injunction
Analyzing the permissible scope of an injunction under the Hatch-Waxman Act, the US Court of Appeals for the Federal Circuit reversed the district court’s prohibitions on an open-label extension (OLE) of a then-running clinical trial and new clinical trials and remanded for further consideration of whether prohibiting a request for an additional indication was appropriate. Jazz Pharmaceuticals, Inc. v. Avadel CNS Pharmaceuticals LLC, Case No. 24-2274 (Fed. Cir. May 6, 2025) (Lourie, Reyna, Taranto, JJ.)
This appeal is one of several disputes between Jazz and Avadel regarding their competing sodium oxybate products. Jazz markets two such products: Xyrem, approved for treating excessive daytime sleepiness and certain cataplexy, and Xywav, which, in addition to Xyrem’s indications, also may be used for treating idiopathic hypersomnia. Avadel filed a § 505(b)(2) new drug application (NDA) to market its own product, Lumryz. During the pendency of the Lumryz application, Jazz obtained a patent and asserted that Avadel infringed it under 35 U.S.C. § 271(e)(2), part of the Hatch-Waxman Act, based on its filing of the Lumryz NDA. The patent was never Orange Book listed, so Avadel did not need to submit any patent certification.
The US Food & Drug Administration (FDA) approved Lumryz. Avadel launched the product, and Jazz amended its complaint to assert traditional § 271(a) – (c) infringement. Ultimately, Avadel and Jazz stipulated infringement, the patent was determined not invalid, and the jury awarded damages based on the post-launch infringement. After further proceedings, the district court permanently enjoined Avadel from seeking an idiopathic hypersomnia indication for Lumryz, offering an OLE phase of its then-running Lumryz idiopathic hypersomnia clinical trial, and against initiating new clinical trials. Avadel appealed, arguing that each of these restrictions was improper.
The Federal Circuit largely agreed with Avadel, reversing the first two prohibitions, and remanded the case back to the district court for further consideration of the prohibition against any new clinical trials. Turning first to the prohibition on new clinical trials, the Court held that initiating new trials for the purposes of submission to the FDA fell squarely within the Hatch-Waxman Safe Harbor for experimentation (under § 271(e)(1)) and thus could not be enjoined (per §271(e)(3)). Jazz unsuccessfully argued that Avadel had waived its Safe Harbor position, which required factual development.
Next, the Federal Circuit rejected the district court’s injunction against an OLE, concluding that the district court had not applied the Supreme Court’s four-factor eBay (2006) test for injunctions when deciding the appropriateness of such extraordinary relief. Refusing to determine whether an OLE extension qualified as safe-harbored activity in the first instance, the Court explained that only if such activity were deemed to be infringing on an appropriate record could it be enjoined.
Finally, with respect to prohibiting Avadel from seeking an idiopathic hypersomnia indication for Lumryz, the Federal Circuit concluded that the propriety of that restriction may turn on whether the infringement qualified under the Hatch-Waxman Act, reasoning that an injunction might run afoul of the § 271(e)(4) limitation on the scope of injunctive relief. Recognizing that this question turned on a significant issue not resolved by case law – whether and how the submission of an application with no corresponding Orange Book listing triggers the Hatch-Waxman Act’s applicability – the Court remanded for further development.
Practice Note: With the increased frequency of multiple rounds in innovator versus generic pharmaceutical litigation, parties are testing the boundaries of the Hatch-Waxman Act. The Jazz decision marks the most recent Federal Circuit decision elucidating the available remedies and causes of action under the Hatch-Waxman Act, leaving for another day the important question of what constitutes an infringing submission.
FDA Approves Three New Natural Food Colors
On May 9, 2025, the U.S. Food and Drug Administration (FDA) announced the approval of three new food color additives derived from natural sources. This development follows the agency’s late-April announcement of its intension to collaborate with industry stakeholders to phase out the use of petroleum-based synthetic food dyes. As part of this broader initiative, FDA had committed to authorizing new natural color additives and expediting the review process for others already under consideration.
The newly approved color additives include:
Galdieria extract blue, derived from the red algae Galdieria sulphuraria, was originally petitioned September 9 2021 (86 Fed Reg 50495). It is now approved for its use in a wide range of products including nonalcoholic beverages, fruit drinks, smoothies, juices, yogurt products, breakfast cereal coatings, candy, and other desserts.
Butterfly pea flower extract, originally approved in September 2021 for limited uses such as beverages and confections at 21 CFR 73.69, was petitioned for expanded use February 8, 2024 (89 Fed Reg 8537). It is now approved for expanded uses including ready-to-eat cereals, crackers, snack mixes, hard pretzels, and various forms of chips.
Calcium Phosphate, a white color additive derived from a naturally occurring mineral, was petitioned February 27, 2023 (88 Fed Reg. 12281) and has now been approved for use in ready-to-eat chicken products, white candy melts, doughnut sugar, and sugar for coated candies.
Notably, during the press hearing, the agency had indicated it would authorize four new color additives. However, only three were ultimately approved, with gardenia blue not included in the announcement for the newly authorized colors.