Prop 65 Year-End Highlights: 2024’s Key Regulatory Changes, Legal Battles, and Enforcement Trends
As businesses and legal professionals strive to keep pace with California’s ever-changing regulatory environment, Proposition 65 (“Prop 65”) remains a key focal point. Known for its stringent requirements on chemical exposure warnings, Prop 65 continues to evolve, driven by new legislation, court rulings, and regulatory updates.
Below is a summary of 2024’s most notable Prop 65 developments. Whether you’re a seasoned legal expert or new to the world of compliance, staying informed on these changes is crucial for safeguarding your business against potential liabilities.
Private Enforcement Actions Still On The Rise: Beware of PFOA
Prop 65 permits private actors to bring enforcement actions “in the public interest,” provided the private enforcers first issue a 60-day notice of intent to sue the alleged violator.[1] In 2024, 5,398 notices were filed with the California Attorney General’s Office by approximately 40 private enforcers—up from 4,142 notices in 2023, and the highest number filed in any year since Prop 65’s inception.[2]
Top targeted product categories included:[3]
Food and herbal supplements
Beauty/Personal Care/Hygiene/Cosmetics/Sanitizers
Top targeted chemicals included:
Metals (including lead, cadmium, mercury and arsenic)
Phthalates (chemicals used in plastic)
Diethanolamine
Claims related to PFOA (perfluorooctanoic acid) have also been on the rise, accounting for over 200 of the notices filed in 2024—up from 53 PFOA notices in 2023.[4] PFOA is a chemical in the “PFAS”[5] family that was used to make products stain resistant, heat resistant, and waterproof, and to reduce friction.
Changes to Short-Form Warnings
After years of debate and analysis, California has adopted new guidelines for short-form warnings. On October 27, 2023, California Office of Environmental Health Hazard Assessment (“OEHHA”) published a Notice of Proposed Rulemaking, proposing amendments to existing sections of the safe harbor warning regulations for short-form warnings.[6] On November 26, 2024, the Office of Administrative Law approved the rulemaking.
The final regulatory text can be viewed here.[7] Under the new regulations, a short-form warning for food or consumer product exposures must specify at least one chemical name for which the warning is being provided.
The effective date for the amendments is January 1, 2025. However, businesses may use the previous version of the short-form warning for consumer products through 2027.
Consumer Advocacy Group v. Gulf Pacific Rice Company: Plaintiff Appeals Following Big Win for Food Manufacturers Challenging Exposure Assessments In Food Prop 65 Cases
In 2014, Consumer Advocacy Group commenced an action against an alleged manufacturer/distributor/promoter/retailer of rice for failure to provide a Prop 65 warning regarding lead in the rice product, Consumer Advocacy Group, Inc. v. Gulf Pacific Rice Co. Inc., et al., Cal. Super. Ct. Case No. BC553427. Multiple actions were consolidated into JCCP No. 4816, Prop 65 Rice Product Cases.
In 2024, following a bench trial, the Los Angeles Superior Court entered final judgment in favor of defendant Gulf Pacific Rice Co., Inc., finding that the rice product in question did not require Prop 65 warnings.[8] The court relied on data from the U.S. Center for Disease Control and Prevention’s National Center for Health Statistics’ National Health and Nutrition Examination Survey (“NHANES”[9]) for calculating the lead exposure, concluding that the level of exposure to lead from the rice products did not exceed the Safe Harbor level, i.e., the Maximum Allowable Dose Level provided in Prop 65 regulations of .05 µg/day. Consumer Advocacy Group has appealed the decision in the Second District Court of Appeal, Case No. B338777. That appeal is pending.
Epps v. Walmart: Court Denies Motion to Approve Consent Judgment After Office of the Attorney General Opposes “Unreasonable” Attorneys’ Fees
The San Francisco Superior Court recently denied[10] a motion to approve a proposed consent judgment in a lead exposure case on the grounds that plaintiff Epps failed to demonstrate its request for $200,000 in attorneys’ fees was reasonable.
In its opposition,[11] the California Attorney General noted that plaintiff’s counsel had filed well over 300 similar notices involving lead exposures since 2020 and obtained a total of at least $7,079,750 in attorneys’ fees and costs from the lead cases they have settled to date. Because the matter was not litigated, involved many template documents and non-complex legal issues, and took under 4 months from the service of the notice to signing of the settlement, the California Attorney General argued that the plaintiff had failed to show that the settlement was reasonable under California law. The Court concurred, citing, inter alia, counsel’s “extensive communication with a seasoned plaintiff,” the many hours spent on research despite counsel’s experience with similar cases, and the low novelty and difficulty of the case.
Recent Uptick In Alcohol-Related Notices of Violation For Restaurants
In April 2024 and from August to November 2024, the same private enforcer issued 143 Prop 65 notices of violation to Santa Monica restaurants for failing to provide Prop 65 warnings to their patrons. To date, 5 notices have been resolved by way of $500 payments from the restaurants.
How Can We Help?
As regulations continue to evolve, understanding and addressing compliance challenges can mitigate the risk of costly claims and penalties. From auditing your Prop 65 practices to assisting with notices of violation and Prop 65 litigation, our seasoned attorneys can help your business navigate Prop 65’s dynamic regulatory landscape.
FOOTNOTES
[1] Cal. Health & Safety Code § 25249.7(d)(1).
[2] https://oag.ca.gov/prop65/60-day-notice-search
[3]https://www.cps.bureauveritas.com/newsroom/ca-proposition-6560-day-notice-summary-q3-2024; https://www.cps.bureauveritas.com/newsroom/ca-proposition-6560-day-notice-summary-q2-2024; https://www.cps.bureauveritas.com/newsroom/ca-proposition-6560-day-notice-summary-q1-2024
[4] https://oag.ca.gov/prop65/60-day-notice-search
[5] PFAS (per- and polyfluoroalkyl substances) are a group of synthetic chemicals that are used in many consumer and industrial products. They are also known as “forever chemicals” because they break down very slowly and can build up in the environment and in living things.
[6] Notice of Proposed Rulemaking and Announcement of Public Hearing: Amendments to Article 6, Clear and Reasonable Warnings Safe Harbor Methods and Content
[7] See also https://oehha.ca.gov/media/downloads/crnr/fsor112624approval.pdf
[8] March 15, 2024 Final Judgment, Consumer Advocacy Group, Inc. v. Gulf Pacific Rice Co. Inc., et al., Los Angeles Superior Court Case No. BC553427.
[9] NHANES is publicly available consumer use data and “is designed to be representative of the entire population in the United States, and to capture how often foods are consumed, when they are consumed and how much is consumed … .” March 15, 2024 Final Judgment, Consumer Advocacy Group, Inc. v. Gulf Pacific Rice Co. Inc., et al., Los Angeles Superior Court Case No. BC553427.
[10] September 26, 2024 Order Denying Epps’s Motion to Approve Consent Judgment, Epps v. Walmart Inc., San Francisco Superior Court Case No. CGC-24-614279.
[11] July 8, 2024 Memorandum In Support of Opposition of the California Office of the Attorney General, Epps v. Walmart Inc., San Francisco Superior Court Case No. CGC-24-614279.
FDA Issues First Marketing Authorization for Oral Nicotine Pouches
In a groundbreaking move, FDA has kicked off the year with its very first marketing authorization for an oral nicotine pouch product. On January 16, 2025, FDA authorized twenty ZYN nicotine pouch products, marketed by Swedish Match (a subsidiary of Philip Morris International), in two nicotine strengths, 3 mg and 6 mg. The newly authorized pouches come in the following flavor varieties, none of which are tobacco-flavored: Chill, Cinnamon, Citrus, Coffee, Cool Mint, Menthol, Peppermint, Smooth, Spearmint, and Wintergreen. Prior to this, FDA had issued marketing granted orders (“MGOs”) for other flavored oral tobacco products such as Swedish Match’s snus (mint smokeless tobacco) in 2015, and VERVE nicotine mints and chews in 2021 (which is not currently being marketed).
Section 910 of the Federal Food, Drug, and Cosmetic Act, as amended by the Tobacco Control Act, requires that for a product to receive a MGO, FDA must determine that permitting the product to be marketed would be appropriate for the protection of the public health (“APPH”). In making this determination, FDA is required to consider the risks and benefits to the population as a whole, including users and nonusers of tobacco products, and taking into account, among other things, the likelihood that those who do not use tobacco products will start using them. In doing so, FDA weighs any potential negative public health impacts (e.g., harm from initiation and use among nonusers, particularly youth) against the potential positive public health impacts (e.g., benefit from adult smokers completely switching or significantly reducing combustible cigarette use). For the APPH standard to be met, the benefits must outweigh the risks.
Actual use/switching, along with consumer perception and intentions study data, were, as FDA puts it, “key considerations” for issuing the marketing authorization for the Zyn pouches. Specifically, the Zyn Premarket Tobacco Product Application (PMTA) provided data from a 10-week prospective patterns of use study, in which participants recorded their daily tobacco product use, as well as a retrospective survey. The patterns of use data showed that nearly one-quarter of study participants using Zyn (i.e., 83 of 346) had completely switched from other tobacco product use to exclusive use of Zyn by the end of the study. These data were not differentially affected by characterizing flavor. In addition, data from the retrospective survey showed that prevalence of cigarette and moist snuff use declined after study participants began using the new products. Another key line of evidence supporting FDA’s APPH finding came from the applicant’s consumer perception and intentions study. The likelihood of use study sought to characterize participants’ perceptions and intentions towards using and purchasing Zyn. These study data supported that adults over the age of 24 who smoke cigarettes and intend to quit exhibited the highest intentions to purchase Zyn and that, by comparison, intentions to purchase Zyn was low among former and never tobacco users. Specifically, former and never-tobacco users reported low to no intention to purchase the products, and the majority found the products “not at all appealing.” Study data also demonstrated that nearly half of the adults who currently smoke cigarettes with intentions to quit found the new products’ variety of flavors to be “very or extremely appealing.”
Notably, the Zyn marketing authorization demonstrates that oral pouch applicants can make an APPH finding without having to assess comparative efficacy of their flavored products relative to a tobacco-flavored version of that product. Thus, despite FDA’s contentions in litigation, where it recently argued before the Supreme Court that the so-called “comparative efficacy” study was a statutory requirement (and thus, would apply to all flavored nicotine products, not just ENDS), FDA did not require a comparative efficacy study here, based on the published Order Letters and Decision Summaries.
With respect to flavors, FDA noted that the majority of the new products include characterizing flavors that are common in smokeless tobacco products (e.g., Cool Mint, Peppermint, Spearmint, and Wintergreen) and are not novel flavors likely to increase appeal to youth. Specifically, FDA stated that the new products include flavors that are common to the flavor varieties of smokeless tobacco products, as well as nicotine gum products authorized as nicotine replacement therapy (NRT). FDA concluded that the availability of the new products with these characterizing flavors contributes to the overall likelihood that users of more harmful products like cigarettes and moist snuff may be interested in trying and potentially switching to Zyn. FDA also stated that it expected youth initiation of Zyn to be relatively low based on the totality of the evidence related to appeal and intentions to use the new products. Further, FDA concluded that, while it views non-tobacco flavored tobacco products as being more appealing to youth than tobacco-flavored tobacco products, the concern about the appeal of flavors to youth is currently “partially alleviated” by the low overall nicotine pouch use rates by youth (which again indicates that the comparative efficacy study is not rooted in the statute). As part of its evaluation, FDA reviewed data regarding youth risk and found that youth use of nicotine pouches remains low despite growing sales in recent years. For example, the 2024 National Youth Tobacco Survey showed that 1.8% of U.S. middle and high school students reported currently using nicotine pouches. This was further supported by the consumer perceptions and intention study, in which roughly half the respondents who currently smoke with intention to quit found the variety of flavors to be “very or extremely appealing,” leading FDA to conclude that “[t]e fact that the new products come in a variety of characterizing flavors is appealing to current tobacco product users.”
Lower toxicological risk was another significant consideration in FDA’s APPH finding. The overall toxicological risk to the users of Zyn was found to be lower compared to cigarettes due to significantly lower harmful and potentially harmful constituents (HPHCs) of the new products compared to moist snuff and snus products, including the General Snus products for which FDA has issued marketing orders. Overall, among the 42 HPHCs analyzed in the Zyn pouches, levels of 36 were too low to be quantified. FDA’s toxicology review also concluded that adults who smoke and switch completely to Zyn are expected to experience a reduced risk of cancer, respiratory toxicity, and cardiovascular toxicity. In addition, based on evidence suggesting the potential for reduction in lung cancer risk following significant reduction in cigarettes-per-day (CPD), FDA concluded that Zyn may also pose a benefit to adults who switch and significantly reduce their cigarette use. Despite these reduced harm implications, FDA was careful to caution in its MGO announcement that the authorization does not allow the company to make reduced risk claims, which would require a separate modified risk tobacco product (“MRTP”) authorization.
Finally, FDA also found the abuse liability (i.e., the ability of the new tobacco product to promote continued use, addiction, or dependence) of the Zyn pouches to be lower than combusted cigarettes and similar to smokeless tobacco products.
Through the studies and assessments described above, PMI was able to demonstrate that through use of Zyn a substantial proportion of adult tobacco users were able to completely switch away from more harmful tobacco products to Zyn and that current tobacco users showed the highest intention to purchase Zyn. Collectively, findings from these studies, NYTS results, and other factors, such as lower-levels of HPHCs, helped to inform FDA in weighing the population-level benefits of Zyn against the potential risks of the product, leading to an APPH determination.
Will 2025 Continue Circuit Court Harmony in Nationwide Litigation Involving State Law Hemp Legislation, or Will a Circuit Split Emerge?
You’ve probably seen the reports of the United States Fourth Circuit Court of Appeals’ January 7, 2025 opinion upholding a Virginia law that regulates consumable hemp products. I planned to put up a blog post soon after the opinion was handed down, and I will still summarize the holding here. But the delay in writing allowed me to take a step back (and another step back), and view this in proper perspective: 2025 is going to be a huge year in the state law hemp legislation vs. hemp industry Farm Bill disputes that have been simmering over the last couple of years. Let me explain how this will soon boil over.
If you are still reading this, I suspect I don’t need to provide an overview of the 2018 Farm Bill and its impact on the hemp industry, notably on the consumable hemp product industry. If you want a refresher on that, you can read some of our older articles on the subject here and here. With that backdrop, more and more states have in recent years passed laws restricting the production and sale of consumable hemp products with each passing legislative session. And with each new piece of legislation comes a new legal challenge. Most of these cases start in a federal trial court, and over the last few years, we have seen those courts reach varying decisions although the majority uphold the restrictive state legislation. Appeals have followed, and this year, kicked off by the Fourth Circuit’s January 7 decision, should go a long way towards molding this little pocket of jurisprudence and potentially influencing how the Farm Bill is ultimately modified.
Fourth Circuit Upholds Consumable Hemp Restrictions
As the Fourth Circuit put it in its Northern Virginia Hemp & Agriculture, LLC v. Virginia opinion, Virginia “took action” to address its “marijuana problem” by passing a 2023 law that regulates the retail sale of hemp products based on their total THC level and limits the concentration of that level in products in a more restrictive manner than what was legal under federal law. — F.4th —-, 2025 WL 37238 (4th Cir. 2025). A lawsuit soon followed that sought injunctive relief under the usual constitutional arguments – the Supremacy Clause and Dormant Commerce Clause. The district court rejected the plaintiffs’ arguments, and the Fourth Circuit appeal followed.
Conceptually following the Seventh Circuit’s 2020 C.Y. Wholesale, Inc. v. Holcomb, 965 F.3d 541 (7th Cir. 2020) opinion, the Fourth Circuit affirmed the district court’s dismissal of the suit, detailing why each constitutional challenge failed. As for the Supremacy Clause, the court addressed each applicable preemption doctrine in turn (express, field, and conflict). Rejecting plaintiffs’ express preemption argument, the court concluded that “the plaintiffs’ argument overread” the Farm Bill’s notes stating that a state can’t prohibit the transportation or shipment of hemp or hemp products. Focusing on the Farm Bill’s plain language authorizing states to regulate the production of hemp more stringently than federal law, the court held that the plaintiff’s express preemption argument “crumbles.” And, based on that Farm Bill provision and further due to that law expressly designating states as the “primary regulatory authority over the production of hemp,” the court rejected plaintiffs’ field preemption argument. As for conflict preemption, the court disregarded plaintiffs’ argument that the total THC standard set forth in the Virginia bill conflicted with the Farm Bill’s definition of what constitutes legal hemp, concluding that “[w]hen the actual language of the statutes is considered, S.B. 903 is [neither] in direct conflict with the purpose of the Farm Bill [nor] does it pose an obstacle to its purpose.”
Plaintiffs’ dormant commerce clause faced the same fate. Holding that the Virginia law did not favor in-state entities to the detriment of out-of-state ones, the court noted that the total THC standard applied equally to resident and nonresident entities. The court also found that allegations of cost increases were both speculative and equally applicable to all entities, no matter where domiciled. This decision follows the Seventh Circuit (the only other circuit court addressing these precise challenges) in upholding state laws that regulate hemp products more restrictively than the Farm Bill.
Eighth Circuit Ruling Looms
We have discussed the Bio Gen LLC et al. v. Sanders case before here and here, which now awaits a ruling from the Eighth Circuit. The court heard arguments on September 24, 2024, and the Arkansas attorney general sent the court a letter on January 8 informing it of the Fourth Circuit’s decision. That letter follows a December 3, 2024 letter the AG sent informing the Eighth Circuit of an October 10, 2024 New Jersey federal court decision (Loki Brands, LLCv. Platkin, No. 24-9389, 2024 WL 4457485 (D.N.J. Oct. 10, 2024)) upholding a New Jersey law regulating hemp products in the state, in which the AG noted:
With that decision, one court of appeals [now two after the 2025 Fourth Circuit opinion] and a total of eight district courts spanning five other circuits – in Alaska, California, Hawaii, Iowa, South Dakota, Virginia, Wyoming, and now New Jersey – have rejection [sic] implied preemption challenges to laws like the one at issue here, with the district court below the sole outlier.
Will the Eighth Circuit affirm the lower court’s outlier ruling that sided with the hemp industry plaintiffs and enjoined the Arkansas law, or will the court follow the Fourth and Seventh circuits and reverse? We should have an answer very soon.
10th Circuit Ruling Expected in 2025
After a Wyoming court rejected constitutional challenges to a Wyoming law that prohibited hemp from containing “synthetic substances,” added certain psychoactive isomers to the definition of THC, and added delta-8 to the list of controlled substances, the plaintiff hemp businesses filed suit. Similar to the Fourth Circuit’s ruling discussed above, the U.S. district court in Wyoming concluded that the Farm Bill did not preempt the Wyoming law and that the law did not violate the Dormant Commerce Clause. The court also rejected a regulatory takings argument. The hemp companies appealed that ruling to the 10th Circuit where briefing concluded on January 2, 2025. Like the Arkansas attorney general, Wyoming’s AG informed the 10th Circuit of the Fourth Circuit’s recent opinion. The 10th Circuit case is Green Room, LLC v. Wyoming, Nos. 24-8053 & 24-8054.
Will the Fifth Circuit See a Similar Appeal in 2025?
During the 2024 legislative session, the Louisiana Legislature amended its hemp laws to restrict where certain hemp-derived products can be sold and their potency. The hemp industry quickly responded with litigation. That matter, Hemp Assoc. of La. v. Landry, No. 3:24-cv-00871, in the U.S. District Court for the Middle District of Louisiana, was filed on October 18, 2024. The plaintiffs alleged that the 2018 Farm Bill preempts the legislation and is unconstitutional on other grounds. The state disagreed and moved to dismiss, but on November 19, 2024, the state informed the court that it would stay the effective date of the new legislation so that the parties could fully brief the pending motions and the court could reach a decision. Under a January 8, 2025, order, briefing on defendants’ motion to dismiss the plaintiffs’ challenge to the Louisiana law will conclude on February 10, 2025, and a hearing on the motion is set for March 27, 2025.
What Does this All Mean?
With Congress again extending the reauthorization process for the Farm Bill, the judiciary branch is helping shape the future of the consumable hemp product industry. And, while we may not see any U.S. Circuit Courts of Appeals beyond those discussed above decide these issues in 2025, federal courts in other jurisdictions, including New Jersey, Iowa, and South Dakota, issued notable rulings on these same issues last year. Also, with new legislative sessions just ramping up in states across the country, we expect new state laws that, if history repeats itself at all, will lead to new court challenges that raise the same constitutional challenges that have been and are currently being adjudicated.
What Every Multinational Company Should Know About … Managing Import Risks Under the New Trump Administration (Part II): The Implications of President Trump’s “America First Trade Memorandum”
During his campaign, President Trump often stated that he would be implementing an “America First” international trade policy, which he said explicitly would include higher tariffs, potentially on imports from the entire world. On January 20, President Trump issued a presidential memorandum taking the first steps toward implementing this agenda. This “America First Trade Policy” memorandum directs that multiple federal agencies report back to him by April 1, 2025, on a number of potential measures designed to help implement “a robust and reinvigorated trade policy that promotes investment and productivity, enhances our nation’s industrial and technological advantages, defends our national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs, and businesses.”
While the memorandum mostly is cast as a request for informational trade reports, the best way to view this memorandum is as a potential roadmap to the international trade priorities of the new administration. The wide range of issues covered, including the causes of the U.S. annual trade deficits in goods, the economic and national security implications and risks of such deficits, a specific focus on all aspects of trade with China, and an evident desire to reshore significant amounts of goods produced abroad by U.S. companies indicate that nearly all aspects of U.S. international trade are under scrutiny.
As detailed in Part I of our three-part series on Managing Import Risks Under the New Trump Administration, many multinational companies are actively engaged in risk planning the potential impact of the new administration on their international supply chains. The issuance of this new memorandum underscores the urgency of proceeding along these lines. Thus, a thorough understanding of the potential implications of this new memorandum is essential for risk planning a response. Below we list the implications of each of the ordered study items:
“Addressing Fair and Unbalanced Trade”
The memorandum directs an investigation of the “causes of our country’s large and persistent annual trade deficits in goods,” as well as the national security implications of the same. This, as well as the other actions indicated in this section, calls on agencies to address unfair and unbalanced trade by investigating trade deficits, unfair practices, and currency manipulation, and to recommend appropriate measures to combat the same. The most likely implication of this report will be to start establishing a basis for increasing tariffs, potentially on many or all global trading partners.
The memorandum directs an assessment of the feasibility of establishing, and recommendations regarding the “best methods for designing, building, and implementing, an External Revenue Service to collect tariffs, duties, and other foreign trade-related revenues.” In other words, Trump is seeking guidance on the best way for the U.S. government to collect external trade revenue, including tariffs. While many commentators expressed puzzlement regarding the purpose of this new way of collecting tariffs — since Customs & Border Protection already is set up to collect these tariffs — it is possible that this request expresses dissatisfaction with CBP oversight of the use of Chinese parts and components for third-country assembly, which the new administration reportedly has viewed as an end-run around the Section 301 tariffs. It also could open the way to other ways of taxing non-U.S. companies that would fall outside of the collection of tariffs.
The memorandum directs early preparations for the trilateral United States-Mexico-Canada Agreement (USMCA) review, including an assessment of the “the impact of the USMCA on American workers, farmers, ranchers, service providers, and other businesses.” The focus on the USMCA raises questions about how these potential changes may impact U.S.-Mexico economic relations and Mexico’s role as an essential U.S. trading partner. If the U.S. finds Mexico’s trade practices to be noncompliant with the terms of the USMCA or unfairly advantageous, Mexican goods may be subject to new tariffs. Further, with President Trump elsewhere promising new 25 percent duties on Canada and Mexico as retaliation for a perceived lack of urgency regarding immigration and fentanyl exports to the United States, there is a strong possibility that changes could upend trade within the USMCA region on a far quicker timeframe.
The memorandum directs an investigation of exchange rate policies of trading partners. Here, Trump is seeking an assessment of any potential currency manipulation or misalignment that prevents effective balance of payment adjustments or that provides trading partners with an unfair competitive advantage in international trade. Trump also calls for the identification of any countries that should be designated as currency manipulators, which almost certainly is directed at countries that maintain large trade deficits with the United States, particularly China. This could mark the end of the longstanding “strong dollar” informal trade policy of the United States, which dates back to the Clinton administration and could mark a return to Reagan-era intervention in currency markets on a multi-country basis to lower the value of the dollar.
The memorandum directs a review of all current free trade agreements, as well as countries “with which the United States can negotiate agreements on a bilateral or sector-specific basis to obtain export market access.” In other words, Trump is calling for a review, and potential revision, of all of America’s free trade agreements, with a view toward obtaining reciprocal and mutually advantageous concessions.
The memorandum directs a review of policies and regulations regarding the application of antidumping and countervailing duty laws, including with regard to transnational subsidies, cost adjustments, affiliations, and zeroing. The United States already maintains a record inventory of antidumping and countervailing duty orders, which could effectuate any changes to calculation methodologies in annual administrative reviews. Changes designed to increase calculated margins also could encourage more industries to file new antidumping and countervailing duty petitions, particularly against China (the most frequent target of such actions by far).
The memorandum directs an assessment of the “loss of tariff revenues and the risks from importing counterfeit products and contraband drugs” that result from the current implementation of the de minimis exemption, as well as any necessary modifications to that exemption. This provision, among others, signals the Trump administration’s attention toward the flow of fentanyl and counterfeit goods across U.S. borders, including those originating from or passing through Mexico. Depending on the outcome, this could cause significant economic challenges for Mexico’s largely export-driven economy and severely impact U.S.-Mexico trade relations, particularly because it is impossible to divorce this issue from the upcoming trilateral review of the USMCA.
The memorandum directs an investigation into whether any foreign country subjects U.S. citizens or corporations to discriminatory or extraterritorial taxes. Given the expansive use of Section 301 in the first administration, such reports could serve as a basis for expansive action in return, much as the Section 301 investigation into Chinese intellectual property practices morphed into a decision to raise tariffs on more than half of all imported Chinese goods.
The memorandum directs a review of all trade agreements on “the volume of Federal procurement” related to the Buy American and Hire American executive orders. By calling for recommendations to ensure such agreements are being implemented in a manner that favors domestic workers and manufacturers, Trump indicates potential restrictions on the use of foreign firms that supply the U.S. government.
“Economic and Trade Relations with the People’s Republic of China”
The memorandum directs a review of the Economic and Trade Agreement Between the U.S. and the Government of the People’s Republic of China (PRC) to determine whether the PRC is acting in accordance with this agreement. By seeking recommendations on appropriate actions to be taken based on the findings of this review, “up to and including the imposition of tariffs or other measures as needed,” Trump is signaling that new tariffs may be imposed on Chinese goods if the U.S. finds the PRC is not acting in compliance with the agreement.
The memorandum directs an examination of potential additional modifications to the Section 301 tariffs on China, particularly with respect to industrial supply chains and circumvention through third countries. It is widely viewed that China failed to act in accordance with the earlier, partial settlement of certain Section 301 tariffs, which were suspended in the first Trump administration. It is likely this review will be used as a basis for further increasing the Section 301 tariffs on many Chinese products.
The memorandum directs an investigation into other acts, policies, and practices by the PRC that may be unreasonable or discriminatory and that may burden or restrict U.S. commerce, and recommendations regarding appropriate responsive actions. Again, Trump here is signaling that changes to the U.S.-PRC trading landscape are imminent if the U.S. finds the PRC is engaging in discriminatory acts that restrict U.S. commerce. The likely endpoint is an expansion of earlier Section 301 tariffs based on a far wider-ranging set of grievances with Chinese trading practices.
The memorandum directs a study of legislative proposals, and any needed changes to them, regarding permanent normal trade relations status for imports from China. There is bipartisan agreement in Congress regarding taking a skeptical approach to China, in matters of trade and otherwise. In addition to telegraphing a desire to permanently enshrine restrictions on trade with China into U.S. law (which would be much more difficult for a future administration to reverse), these efforts could reach related trade issues such as further restrictions on trade with China based on the treatment of the Uyghur people and their role in producing products intended for sale in the United States.
The memorandum directs an assessment of the status of U.S. intellectual property rights such as patents, copyrights, and trademarks conferred upon PRC persons. In other words, changes may be implemented to “ensure reciprocal and balanced treatment of intellectual property rights with the PRC.”
“Additional Economic Security Matters”
The memorandum directs a full economic and security review of the U.S. industrial and manufacturing base to assess whether to initiate investigations to adjust imports that threaten national security. This review of U.S. manufacturing and industrial vulnerabilities will inform new policies aimed at insulating domestic industries from reliance on imports. There is a high likelihood that this could lead to further revisions to CFIUS (Committee on Foreign Investment in the United States) reviews, which were considerably tightened in recent years.
The memorandum directs an assessment of the effectiveness of the exclusions, exemptions, and other import adjustment measures on steel and aluminum in responding to threats to the national security of the United States. This provision, like the above, illustrates Trump’s goal of safeguarding domestic industrial and manufacturing industries from relying on imports.
The memorandum directs a review of the U.S. export control system and advice regarding necessary modifications in light of developments involving strategic adversaries or geopolitical rivals, as well as all other relevant national security and global considerations. With an eye toward “identifying and eliminating loopholes in existing export controls, especially those that enable the transfer of strategic goods, software, services, and technology to strategic rivals and their proxies,” this provision implicates potential changes to the U.S. export control landscape, with the technology sector being most vulnerable to such changes. Trump’s call for recommendations of “enforcement mechanisms to incentivize compliance by foreign countries, including appropriate trade and national security measures,” illustrates the administration’s inclination to use trade measures as negotiation tools.
The memorandum directs a review of the rulemaking by the Office of Information and Communication Technology and Services (ICTS) on connected vehicles, and consideration of expanding the controls. In other words, this provision marks the potential expansion of controls on ICTS transactions to connected products other than vehicles.
The memorandum directs a review of the legal landscape regarding U.S. investments in certain national security technologies and products in countries of concern. If the U.S. finds this legal landscape does not contain sufficient controls to address national security threats, changes may be implemented, including potential modifications to the Outbound Investment Security Program.
The memorandum directs an assessment of any distorting impact of foreign government financial contributions or subsidies on U.S. federal procurement programs. In other words, Trump is seeking guidance, regulations, or legislation to combat any such distortion to protect federal procurement programs from unfavorable impacts of foreign governments.
The memorandum directs an assessment of the “unlawful migration and fentanyl flows from Canada, Mexico, the PRC, and any other relevant jurisdictions” and seeks recommendations of appropriate trade and national security measures “to resolve that emergency.” This provision raises the prospect that new tariffs or other measures may be imposed to pursue Trump’s broader policy goals of combating unauthorized migration and fentanyl flows from other countries, with the focus being on Canada, Mexico, and the PRC. Elsewhere, Trump has promised 25 percent tariffs to incentivize solving these concerns, beginning potentially as soon as February 1, 2025.
Implications
While the memorandum outlines a vast series of reviews of U.S. trade policy and investigations of trade imbalances and unfair practices, it is not yet clear how this very broad laundry list of international trade objectives will play out. Potential outcomes range from using the threat of tariffs to accomplish other goals (e.g., immigration, fentanyl) to setting up renegotiations of Free Trade Agreements on more favorable terms (particularly for the USMCA), to the establishment of permanently higher tariffs. Notably, the memorandum raises questions as to the future of U.S.-Mexico trade relations, a focus that takes on increased urgency given the impending trilateral review when combined with President Trump’s focus on immigration and fentanyl from Mexico and Canada. The focus on revisiting the USMCA threatens increased restrictions or provisions that may disadvantage Mexico’s export-driven economy and impact Mexico’s role as a key U.S. trading partner, with particularly strong implications for the U.S. automotive sector.
Given these concerns, Part III of this series will focus on concrete steps that multinational companies can take to risk plan for potential major changes in the international trade environment, particularly with regard to the topics of potential changes to tariff rates, potential changes to the USMCA, and potentially greater scrutiny of supply chain integrity requirements, particularly as they relate to China and imports using Chinese parts and components.
This Week in 340B: January 14 – 20, 2025
Find this week’s updates on 340B litigation to help you stay in the know on how 340B cases are developing across the country. Each week we comb through the dockets of more than 50 340B cases to provide you with a quick summary of relevant updates from the prior week in this industry-shaping body of litigation.
Issues at Stake: HRSA Audit Process; Contract Pharmacy; Rebate Model; Other
In one Health Resources and Services Administration (HRSA) audit process case, the government filed a motion to dismiss.
In two HRSA audit process cases, the government filed reply briefs in further support of the government’s motion to dismiss.
A drug manufacturer filed suit against HRSA to challenge HRSA’s disapproval of its proposed rebate model.
A 340B covered entity filed suit against HRSA, alleging that HRSA prevented it from accessing the 340B Program.
A 340B covered entity filed suit against HRSA to challenge HRSA’s determination that certain clinics were not eligible for the 340B program, and, in the same case, the court issued an administrative stay.
In three cases challenging proposed state laws governing contract pharmacy arrangements in Missouri and West Virginia:
MO: Defendants and intervenors separately filed reply suggestions in support of the motion to dismiss.
WV: Plaintiffs in two separate cases filed oppositions to defendants’ motions to consolidate
Matt David, associate in McDermott’s Los Angeles office, also contributed to this blog post.
When Life Gives you Lemons….Thatchers Successful as Court of Appeal Finds Aldi Copycat Products Amount to Trade Mark Infringement in the UK
On 20 January 2025, the English Court of Appeal handed down its judgment in a highly anticipated appeal by Thatchers Cider Company, concluding that Aldi had infringed Thatchers’ registered trade mark under section 10(3) of the Trade Marks Act 1994, by taking unfair advantage of Thatchers’ packaging trade mark (see comparison below).
In February 2024 we reported on the High Court judgment in the case of Thatchers v Aldi, where Thatchers took action for trade mark infringement and passing off in relation to its ‘Cloudy Lemon Cider’ product (see our original post here). The Intellectual Property Enterprise Court (IPEC) held that there was no trade mark infringement or passing off by Aldi in respect of its ‘Taurus Cloudy Cider Lemon’ product.
The decision surprised many commentators and brands and left the future of trade mark law in the UK with respect to ‘copycat’, ‘dupe’ or ‘look-a-like’ products in a state of uncertainty. Thatchers appealed the decision on a number of grounds and brand owners and innovators will be pleased that the Court of Appeal unanimously allowed the appeal with respect to trade mark infringement for “unfair advantage”.
The Appeal
The Court of Appeal considered each aspect of Thatchers’ appeal in turn and noted in addition that Aldi had invited the Court to depart from the leading European case on unfair advantage, L’Oreal v Bellure, a point which Arnold LJ considered in detail in the conclusion of his judgment.
The key aspects of the Court of Appeal judgment were as follows:
The IPEC judge had incorrectly assessed the similarity of the signs.
In the first instance proceeding, counsel for Thatchers argued that Aldi had tried to ‘sail as close to the wind as they could’ when engaging designers for the Taurus product. In the appeal, the Court held that the overall ‘Sign’ of the Thatchers product included both the cardboard packaging used on a multipack of ciders, and the image on an individual can, agreeing with Thatchers that the first instance judge was wrong to hold the two-dimensional versus three-dimensional nature of both products as a ‘point of difference’.
Thatchers argued that the judge was correct to consider the distinctive and dominant elements of the marks for the purposes of assessing likelihood of confusion, but extending that conclusion to the analysis of the section 10(3) argument was incorrect. Although the Court of Appeal held that it can be commonplace for tribunals to make a single assessment on similarity, when looking at additional factors LJ Arnold concludes at [86] that the judge should have “assessed the similarity as being somewhat greater than she did”.
The similarity of the signs was intended to create a link with the Aldi product and convey to consumers that the product was “like the Thatchers product, only cheaper”.
The Court of Appeal held that the sign used by Aldi for the Taurus Cloudy Cider Lemon represented a ‘manifest departure’ from the house style used by Aldi in its Taurus range of products. The Taurus range was usually presented with white text on a black background with coloured ‘swooshes’. However, the Taurus Cloudy Cider Lemon product used black text on a pale yellow background, including prominent images of lemons and leaves.
This in conjunction with evidence presented of the Aldi design process using the Thatchers product as the only ‘benchmark’, led the Court to the ‘inescapable conclusion’ that the Aldi product was intended to remind consumers of the Thatchers product and that “this can only have been in order to convey the message that the Aldi Product was like theThatchers Product, only cheaper” [99].
The Aldi product achieved significant sales without any promotion; Aldi unfairly benefitted from Thatchers design and development of its own product.
The Court deemed this to be significant, as Aldi made no attempt to prove that the impressive sales of its Taurus Cloudy Cider Lemon product would have occurred with branding closer to its Taurus ‘house style’ or as a result of Aldi’s own marketing efforts.
The Court concluded that it was clear that Aldi intended for its product to remind consumers of the Thatchers product, taking advantage of the trade mark in order to increase sales. The matter at hand was deemed to fall within the issues considered in the leading case of L’Oréal v Bellure, namely the issue of “riding on the coat-tails” of a registered mark by transferring the image of the mark to the infringing product packaging.
Comparing instances of real consumer comparisons and the volume of sales, the Court concluded that there was an unfair advantage, as Aldi was able to profit and benefit from the investment that Thatchers had made in developing, designing and promoting its product, rather than simply competing with Thatchers on the basis of the quality, price and promotional efforts of Aldi’s own product.
It was clear to the Court that Aldi intended its product to remind consumers of the Thatchers trade mark and obtained an advantage from doing so. In a swift blow to ‘copycat’ brands, the Court concluded that “Aldi’s use of the Sign was not in accordance with honest practices in industrial and commercial matters because it was unfair competition”[141].
Although not a key factor in this conclusion, LJ Arnold also mentioned the lower quality of the Aldi product as it did not contain real lemon juice, a point which Thatchers submitted was misleading in the presentation of Aldi’s product.
Key Takeaways
The decision marks the end of a line of recent cases in the UK where brand owners have struggled to enforce their rights against similar packaging and logos. It will serve as a helpful precedent for future cases against ‘copycat’, ‘dupe’ and ‘look-a-like’ products across a number of industries, and bring the UK in line with European and other jurisdictions where claims against these products for unfair advantage, dilution and unfair competition have historically faced stronger prospects of success. Whether the case represents a “watershed” or “landmark” moment in trade mark law remains to be seen, and it will be important for brand owners to recognise that claims against ‘copycat’, ‘dupe’ and ‘look-a-like’ products in the UK will continue to present challenges.
It is noteworthy that there was evidence in the case that the Thatchers packaging and trade mark was fairly unique in the market for cider products, and that the products had only been launched in 2020. Thatchers had registered packaging trade marks shortly after the launch, a decision which served them well considering that registered trade mark infringement was the basis of the only successful claim against Aldi. Based on the evidence, the Court was prepared to find that the Thatchers packaging trade mark was “well known” even though it had only been in the market for a few years. The challenge for brand owners seeking to rely on this decision will be to show that they too have unique and well-known trade marks, and we expect that trade mark claims relating to more generic packaging and marketing assets, or products that are part of a market flooded with similar designs, will continue to face difficulty in the absence of strong evidence of benchmarking or copying.
Nevertheless, we expect there to be a renewed focus on challenging look-a-like products in the United Kingdom as a result of the decision, as well as an evolution of the approach taken by sophisticated copycats and retailers producing such products, and increased enforcement and litigation involving trade mark registrations for packaging and marketing assets in the coming years. Brand owners are likely to re-assess their pan-European and international enforcement efforts with a greater focus on the United Kingdom, and not only the more brand-owner friendly jurisdictions such as Germany, the Netherlands and France.
This case should be considered by brands in both offensive and defensive contexts going forward, and highlights the need for registered trade mark protection for packaging, logos and marketing assets. Passing off, unfair competition and trade mark infringement claims based on confusion remain difficult in this space, but the Court of Appeal has given a (measured) green light to claims of trade mark infringement for unfair advantage or detriment where a ‘copycat’, ‘dupe’ or ‘look-a-like’ product is clearly intended to remind consumers of the brand owner’s original product by transferring their image and reputation to the accused product, and the evidence points to an intention to do so.
Mexico 2025: Foreign Trade Outlook | What to Expect in Terms of Foreign Trade?
Mexico 2025: Foreign Trade Outlook | What to Expect in Terms of Foreign Trade?
Panorama Mexicano 2025, ¿Qué podemos esperar en materia de comercio exterior?
Collection forecast and tax collection plan In view of the “success” in terms of foreign trade taxes collection during 2024, the Federal Government approved for the 2025 fiscal package an increase in absolute terms of more than 40% with respect to the goal set for the previous fiscal year, amounting to MX$151,789.7 million for fiscal year 2025 (approximately US$7,404.4 million considering an exchange rate of MX$20.50 per US dollar). The above, without considering other contributions that could also be collected by the tax and customs authorities as a result of their verification powers. In connection with this collection goal, it is important to point out that the Federal Government also released its Master Plan for fiscal year 2025, which summarizes the points that will make up the central axes for collection by the Federal Tax Authorities. As expected, some foreign trade issues are once again on the collection agenda of the tax and customs authorities, including the following: – Verifying the return of temporarily imported goods;– Combat apparent abuses in foreign trade authorizations, particularly VAT and Excise Tax Certification, and as a result, initiate cancellation procedures;– Verify the correct customs valuation that could lead to omissions in the payment of taxes; and– Correct interpretation and application of free trade agreements Constitutional reform related to Ex-officio preventive detention Despite criticism from various human rights organizations and even from the Office of the United Nations High Commissioner for Human Rights in Mexico, on January 1, 2025, the constitutional reform that provides for Ex-officio preventive detention went into effect. Through this reform, the Mexican State is legitimized so that judges may order Ex-officio preventive detentions. Of particular relevance is the addition of contraband to the list of crimes that may give rise to this type of precautionary measure. It is important to point out that the crime of contraband includes diverse activities that go beyond the simple illegal introduction of goods into the country and that may be committed as a result of omissions of compliance in the foreign trade operations of companies. This reform further obliges companies to implement appropriate controls to mitigate, in addition to administrative infractions, a possible criminal process that could follow against the representatives and boards of directors of companies leading to deprivation of their liberty. Online inventory control system for temporary imports At the end of 2024, the Tax Administration Service published a series of measures applicable to companies that have an IMMEX Program and also have a VAT and Excise Tax Certification. Particularly, the obligation of the companies in question was established to allow the Tax Authorities the remote and practically simultaneous consultation of their temporary importation operations registered in their inventory control systems, commonly known as Annex 24. On this issue, some modifications to this obligation were recently published, aimed at providing clarity. Although the modifications may have dispelled some doubts for companies, many foreign trade players are still concerned with the correct handling of the sensitive data and information involved in complying with this obligation. In this sense, it is likely that, during this year, the measure in question will evolve in terms of its surveillance and, therefore, the Tax Administration Service will initiate more inspection procedures, as well as more inspections to review the level of compliance in terms of VAT and Excise Tax Certification. It is important to remember that failure to comply with an inspection visit in a timely manner may result in the initiation of the cancellation of the VAT and Excise Tax Certification, which not only represents a future impact(benefit of importing without paying value added tax), but could also trigger the obligation to pay value added tax on the credit that has been applied by the companies. Mexico Plan: IMMEX 4.0 As a result of recent official statements, the Federal Government is expected to implement a series of investment and infrastructure measures. As part of these measures, the Federal Government is planning a series of industrial policy and development measures for the different areas of the country. A series of modifications to authorizations within IMMEX Programs were announced, apparently with a view to simplifying and reducing the time required to obtain them by 50%. It will be important to monitor whether this could trigger new obligations or modifications that affect companies in any way. Trade War Mexico has been the subject of multiple accusations and criticisms by its North American trading partners, among others, that Mexico: (1) has been lax in counteracting the exponential growth of China, even allowing product triangulation; (2) has failed to contain the advance of illegal migration; and (3) is not effectively combating its drug trafficking problems. This has given rise to positions on the establishment of tariffs on the importation of goods from Mexico. In the face of such pressures, Mexico has raised its tariffs considerably, with the textile sector (155 tariff items) being one of the sectors most affected by these recent measures, even to the extent prohibiting temporary importation by IMMEX companies (for which an exception mechanism has already been implemented so that they can continue importing these types of goods on a temporary basis under the IMMEX Program). Likewise, the Federal Government has increased security measures to counteract drug trafficking, as well as the illegal entry of people into the country. It will be important to closely monitor the measures established by the new administration in the United States regarding foreign trade, as there is a possibility that Mexico will increase tariff and even non-tariff regulations, in order to align its trade policy with the agenda of the countries that make up the North American region. GMO Corn At the end of 2024, an arbitration panel constituted under the USMCA resolved the dispute brought by the U.S. Government against the Mexican Government in connection with the publication of the Decrees aimed at prohibiting the use and consumption of genetically modified corn. Although the Mexican Government defended its position under the banner of cultural protection position, the Arbitral Panel ruled that the measures implemented by Mexico were inconsistent with the USMCA. Consequently, the Panel issued a recommendation to the Mexican Government to eliminate the prohibition in question. As of this date, the Mexican Government has not eliminated the Decrees in question. It should be noted that Mexico and the United States have a period of 45 days, which is currently elapsing, to agree on a solution. Otherwise, the U.S. Government would have the authority under the USMCA to suspend the application of benefits (retaliation). Judicial Reform In 2024, the Mexican Government approved a package of constitutional reforms aimed at structurally modifying the organic composition of the Judiciary branch. Undoubtedly, this reform is the most significant change in decades, mainly highlighting the mechanism for the election of judges and magistrates. According to the reform in question, on June 1, 2025, elections will be held to elect the above public officials, who must be assigned to the corresponding judicial bodies no later than September 15, 2025. In this sense, the second half of 2025 will mark the beginning of a new era in the administration of justice in Mexico, whose main question is whether this new model of popular election will in any way affect impartiality in the administration of justice. USMCA Renegotiation Under the USMCA, the governments of the United States, Canada, and Mexico agreed that the Treaty would remain in effect for 16 years after its entry into force. However, prior to that date, it was agreed that on the sixth anniversary of its entry into force (June 1, 2026), the parties would carry out a joint review of (i) the operation of the Treaty; (ii) the recommendations for action submitted by the parties; and (iii) decide on any other measures deemed appropriate. The purpose of this is to define whether it is the desire of the Parties to extend the validity of the Treaty for an additional16 years. During this year, it is very likely that the contracting parties will lay the groundwork for the negotiations that will officially take place during the second half of 2026. Conclusion of the Mexico-European Community Treaty negotiations On January 16, 2025, the European Community issued a press release informing that negotiations between the Ministry of Economy of Mexico and the Commissioner for Trade and Economic Security of the European Community were concluded. The official release of the texts of this Treaty are still pending, as well as the conclusion of the approval and ratification processes by the contracting parties. In any case, it will be important for companies that maintain or intend to trade products between the European Community and Mexico, keep the corresponding texts in perspective. Among other issues that will arise as a result of the above, we can highlight that companies will have to reevaluate whether the products exchanged still qualify as originating products under the Treaty in question. Likewise, the modernization of the Treaty represents a new opportunity to verify whether products that previously did not qualify as originating products may now be eligible for tariff preferences.
Pronóstico de recaudación y plan de fiscalización En vista del “éxito” en materia de recaudación en materia de impuestos al comercio exterior durante 2024, el Gobierno Federal aprobó para el paquete fiscal de 2025 un incremento en términos absolutos de más del 40% con respecto a la meta fijada para el ejercicio anterior, quedando en 151,789.7 millones de pesos para el ejercicio 2025 (aproximadamente 7,404.4 millones de dólares considerando un tipo de cambio de 20.50 pesos por dólar de los Estados Unidos de América).[1] Lo anterior, sin considerar otras contribuciones que igualmente pudieran recaudarse por parte de las autoridades fiscales y aduaneras como resultado del ejercicio de sus facultades de comprobación. En relación con dicha meta recaudatoria, es importante señalar que el Gobierno Federal también dio a conocer su Plan Maestro para el ejercicio fiscal 2025 que resume los puntos que constituirán los ejes centrales en la recaudación por parte de las Autoridades Fiscales Federales. Como era de esperarse, algunos temas de comercio exterior nuevamente se mantienen en la agenda recaudatoria de las autoridades fiscales y aduaneras destacando las siguientes: – Verificar el retorno de mercancías de importación temporal– Combatir aparentes abusos en las autorizaciones de comercio exterior, particularmente de la Certificación en materia de IVA e IEPS y como consecuencia de ello, iniciar procedimientos de cancelación.– Verificar la correcta valoración aduanera que pudieran dar lugar a omisiones en el pago de impuestos,– Correcta interpretación y aplicación de tratados de libre comercio Reforma Constitucional en materia de prisión preventiva oficiosa Pese a las críticas de diversas organizaciones en materia de derechos humanos e inclusive de la propia Oficina en México del Alto Comisionado de las Naciones Unidas para los Derechos Humanos, el 1 de enero de 2025 entró en vigor la reforma constitucional que prevé la prisión preventiva oficiosa. Así, a través de la Reforma en cuestión se legitima al Estado Mexicano para que los jueces puedan ordenar la prisión preventiva de manera oficiosa. Cobra especial relevancia, la incorporación del delito de contrabando dentro del catálogo de delitos que puede dar lugar a este tipo de medida cautelar. Resulta importante precisar que el delito de contrabando comprende actividades diversas que van más allá de la simple introducción ilegal de mercancías al país y que puede actualizarse con motivo de omisiones de cumplimiento en las operaciones de comercio exterior de las empresas. Así las cosas, la presente reforma obliga aún más a las empresas a que implementen controles apropiados para mitigar, además de infracciones administrativas, un eventual proceso penal que pudiera seguirse para los representantes y consejos de administración de las empresas con privación de su libertad. Sistema de control de inventarios de importaciones temporales en línea A finales de 2024, el Servicio de Administración Tributaria publicó una serie de medidas aplicables a las empresas que cuentan con un Programa IMMEX y que además contaran con la Certificación en materia de IVA e IEPS. Particularmente, se estableció la obligación de las empresas en cuestión de permitirle a las Autoridades Fiscales la consulta remota y prácticamente de manera simultánea, de sus operaciones de importación temporal registradas en sus sistemas de control de inventarios comúnmente conocido como Anexo 24. Sobre el presente tema, en fechas recientes se publicaron algunas modificaciones a dicha obligación, tendientes a dar claridad. Si bien con las modificaciones podrían haberse disipado algunas dudas por parte de las empresas, aún sigue la inquietud de muchos actores del comercio exterior en cuanto al correcto manejo de los datos e información sensible que representa el cumplimiento de esta obligación. En ese sentido, es probable que, durante el presente año, la medida en comento madure en cuanto a su vigilancia y, por ende, el Servicio de Administración Tributaria, detone el ejercicio de mayores procedimientos de fiscalización, así como visitas de inspección para revisar su nivel de cumplimiento en materia de la certificación en materia de IVA e IEPS. Es importante recordar que, el no atender oportunamente una visita de inspección, puede dar lugar al inicio de la cancelación de la Certificación en materia de IVA e IEPS, lo cual no solo representa una afectación hacia futuro (beneficio de importar sin el pago del impuesto al valor agregado), sino también pudiera detonar la obligación de pago del impuesto al valor agregado, respecto del crédito que se haya aplicado por las empresas. Plan México: IMMEX 4.0 Derivado de los recientes comunicados oficiales, se proyecta que el Gobierno Federal implemente una serie de medidas en materia de inversión e infraestructura. Como parte de dichas medidas, el Gobierno Federal proyecta una serie de medidas de política industrial y desarrollo de las distintas zonas del país. Particularmente, se anunciaron una serie de modificaciones en materia de autorizaciones a los Programas IMMEX, aparentemente con miras a simplificar y reducir los tiempos en su obtención en un 50%. Será importante vigilar si esto pudiera detonar nuevas obligaciones o modificaciones que afecten de alguna manera a las empresas. Guerra comercial México ha sido objeto de múltiples señalamientos y críticas por parte sus socios comerciales de Norteamérica, entre otras, con respecto a que México: (1) ha sido laxo para contrarrestar el crecimiento exponencial de China, permitiendo inclusive la triangulación de producto, (2) ha fallado en contener el avance en la migración ilegal; (3) no está combatiendo eficazmente sus problemas de narcotráfico. Lo anterior ha dado lugar a posicionamientos sobre el establecimiento de aranceles a la importación de mercancías provenientes de México. Ante dichas presiones, México ha elevado considerablemente sus aranceles, siendo el sector textil (155 fracciones arancelarias) uno de los sectores que más afectados se han visto con estas recientes medidas, inclusive al grado de prohibirse su importación temporal por las empresas IMMEX (respecto de las cuales ya se implementó un mecanismo de excepción de tal forma que puedan seguir importando este tipo de mercancías de manera temporal al amparo del Programa IMMEX). De igual manera, el Gobierno Federal ha incrementado las medidas de seguridad tendientes a contrarrestar el tráfico de drogas, así como, la entrada ilegal de personas al país. Será importante vigilar muy de cerca las medidas que establezca la nueva administración en los Estados Unidos de América en materia de comercio exterior, pues existe la posibilidad de que México, incremente las regulaciones arancelarias e inclusive, las no arancelarias, a fin de alinear la política comercial con la agenda de los países que integran la región de Norteamérica. Maíz OGM A finales de 2024, un panel constituido con arreglo al TMEC resolvió la disputa promovida por el Gobierno estadounidense en contra del Gobierno Mexicano con motivo de la publicación de los Decretos tendientes a prohibir el uso y consumo de maíz genéticamente modificado. Si bien el Gobierno Mexicano defendía su postura bajo un estandarte de protección cultural; el Panel arbitral resolvió que las medidas implementadas por México resultaban ser incompatibles con el TMEC. Por consiguiente, el Panel emitió la recomendación al Gobierno Mexicano para que eliminara la prohibición en cuestión. A la fecha del presente, el Gobierno Mexicano no ha eliminado los Decretos en cuestión. Conviene señalar que México y los Estados Unidos cuentan con un plazo de 45 días que actualmente se encuentra transcurriendo para acordar una solución. De lo contrario, el Gobierno de los Estados Unidos estaría facultado conforme al TMEC para suspender la aplicación de beneficios (retaliación). Reforma Judicial En el año 2024, el Gobierno Mexicano aprobó un paquete de reformas constitucionales tendientes a modificar de manera estructural la composición orgánica del Poder Judicial. Sin duda, esta reforma resulta ser el cambio más significativo en décadas, destacando principalmente el mecanismo de elección de los juzgadores y magistrados. Conforme a la reforma en cuestión, el próximo 1 de junio de 2025, se llevará a cabo la jornada electoral en donde se elijan a los citados funcionarios públicos, quienes deberán quedar adscritos a los órganos judiciales correspondientes a más tardar el 15 de septiembre de 2025. En ese sentido, el segundo semestre de 2025 iniciará una nueva era en la impartición de justicia en el país cuya principal interrogante radica en si a través de este nuevo modelo de elección popular, se afecta de alguna forma la imparcialidad en la procuración de justicia. Renegociación TMEC Conforme al TMEC, los Gobiernos de Estados Unidos, Canadá y México acordaron que la vigencia del Tratado sería de 16 años a partir de su entrada en vigor. Sin embargo, previo a dicha fecha, se acordó que al sexto aniversario de la entrada en vigor (1 de junio de 2026), las partes llevarían a cabo una revisión conjunta en torno a (i) el funcionamiento del Tratado, (ii) las recomendaciones en torno a las medidas presentadas por las partes y (iii) decidir sobre cualquier otra medida que se estime apropiada. Ello con la finalidad de definir si será el deseo de las Partes el prorrogar la vigencia del Tratado por otros 16 años adicionales. En ese sentido, dentro del presente año muy seguramente veremos que las partes contratantes “preparen el terreno” para las negociaciones que se llevarán a cabo oficialmente durante el segundo semestre del año 2026. Conclusión en las negociaciones del Tratado México – Comunidad Europea El pasado 16 de enero de 2025, se dio a conocer un comunicado de prensa por parte de la Comunidad Europea en el que informan que se concluyeron las negociaciones entre la Secretaría de Economía y el Comisario de Comercio y Seguridad Económica de la Comunidad Europea. Aún está pendiente de que los textos de dicho Tratado sean oficialmente liberados, así como que las partes contratantes concluyan sus procesos para su aprobación y ratificación. De cualquier forma, será importante que las empresas que mantengan o tengan intenciones de intercambiar productos entre las regiones Comunidad Europea – México, tengan en perspectiva los textos correspondientes. Entre otros temas que surgirán con motivo de lo anterior, podemos destacar que las empresas deberán reevaluar si los productos intercambiados, siguen calificando como originarios al amparo del Tratado en cuestión. De igual manera, la modernización del Tratado representa una nueva oportunidad para verificar si productos que anteriormente no calificaban como originarios, puedan ahora sí ser elegibles para acceder a preferencias arancelarias.
[1] Aunque es importante considerar que algunas calificadoras pronostican que el peso podría alcanzar los 21 pesos por dólar de los Estados Unidos de América.
New TTB Standard of Fill No Place for Kegged Cocktails
Big changes are coming to the alcohol industry this new year. On Jan. 10, 2025, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) implemented a final rule that expands the “standards of fill” for wine and distilled spirits. This long-awaited update adds significant flexibility for producers, with the introduction of 28 new container sizes: 13 for wine and 15 for distilled spirits. This move is designed to address the evolving needs of the alcohol industry and provide consumers with a wider variety of purchasing options.
Standards of fill are relatively obscure laws which limits the size a manufacturer can “fill.” Even before these new standards were approved, kegged cocktails were illegal and remain illegal under the new regulations. Unfortunately, even a small sixtel keg, which is almost 20 liters, does not come close to the largest “standard of fill” for spirits or wine.
For wine, new approved standards include sizes such as 180, 300, and 473 milliliters (the popular 16-ounce size), as well as larger formats like 1.8 and 2.25 liters. Distilled spirits now have additional standards like 187, 355, and 570 milliliters (19.2 ounces), and even larger options like 3.75 liters. The rule removes distinctions between standards of fill for distilled spirits in cans versus other types of containers, simplifying regulations for ready-to-drink (“RTD”) products. These changes are a direct response to industry feedback and aims to help both domestic and international producers thrive by offering products in sizes that appeal to a broader market.
While these rule changes provide greater flexibility, it is crucial to remember that standards of fill refer to the quantity of liquid in a container, not the overall size or format. This distinction is at the heart of why certain packaging options remain off-limits for some products, most notably, kegged cocktails.
Kegged cocktails have grown in popularity at bars and events, but they remain illegal under TTB regulations. Why? Because kegs are not an approved standard of fill for distilled spirits. Since the largest standard of fill is 3.75 liters for spirits, kegs that hold multiple gallons do not fit within the approved categories. Thus, keg cocktails are illegal under federal law at present.
There is also significant confusion about alcohol infusions which many bars display and use to survive. In Pennsylvania for example, a vodka infused with fresh orange slices that sits in a large glass container on the bar top for more than 24 hours technically means the bar is acting as a distillery and would need a distillery license. These infusion containers are typically 3 gallons and utilizing them without a distillery license means the bar is violating state law and potentially federal law including standards of fill regulations.
The new rule does little to change this reality for kegged cocktails. While the addition of sizes like 475 and 570 milliliters offers exciting opportunities for RTD cocktails in cans, larger formats for dispensing like kegs remain non-compliant. Producers and retailers interested in exploring new packaging options should stick to approved standards of fill to avoid potential TTB violations especially with increased enforcement. As always, understanding the nuances of TTB regulations and staying compliant with reporting change of owners, registering COLAs, and submitting formulas will keep your operations on the right side of the law and your products in the hands of consumers.
At Long Last, DEA’s Remote Prescribing Rules 2.0 Are (Really) Here! (Pending Further Consideration by the Incoming Administration . . .)
Remote prescribing via telemedicine continues to be a huge area of interest among prescribers and other health care providers.
After publishing a Notice of Proposed Rulemaking (“NPRM”) in March 2023 on the prescribing of controlled substances via telemedicine that was widely criticized for being far more restrictive than temporary waivers then in place under the COVID-19 public health emergency, the Drug Enforcement Administration (“DEA”) went back to the drawing board.
Additional time and a new year has brought renewed focus. Published January 17 in the Federal Register as one NPRM and two final rules (collectively referred to herein as the “DEA’s 2025 Rules”), the DEA’s 2025 Rules seek, as DEA indicates in its press release, to “focus[] on the patient to ensure telemedicine is accessible for medical care.”
Background
The Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (“Ryan Haight Act”) amended the federal Controlled Substances Act (“CSA”) to generally mandate that dispensing controlled substances via the Internet requires a valid prescription, which includes at least one (1) in-person medical evaluation. In conjunction with establishing this general rule, however, the Ryan Haight Act created seven telemedicine exceptions that allow a practitioner to prescribe controlled substances to a patient without an in-person evaluation as long as the practice complies with applicable federal and state laws and meets other specific requirements. These exceptions apply when:
a patient is physically located at a DEA-registered hospital or clinics, and the remote prescribing practitioner is DEA-registered in the state in which the patient is located;
a patient is being treated by a prescribing practitioner, and in the physical presence of a DEA-registered practitioner in the state in which the patient is located;
the prescribing practitioner is an employee or contractor of the Indian Health Service, acting within the scope of the practitioner’s employment, who has been designated an Internet Eligible Controlled Substances Provider by the U.S. Department of Health and Human Services (“HHS”);
the prescribing activity takes place during a public health emergency (“PHE”) declared by HHS under Section 247d of Title 42;
the practitioner has obtained a Special Registration with DEA;
there is a medical emergency that prevents the patient from being in the physical presence of an employee or contractor of the Veterans Health Administration and one of its hospitals or clinics, and immediate intervention by the practitioner using controlled substances is required to prevent injury or death; or
any other circumstances that DEA and HHS have jointly determined to be consistent with effective controls against diversion and otherwise consistent with the public health and safety.
In Epstein Becker Green’s podcast, “The DEA Is Knocking at Your Door…Are You Prepared,” we explained that before the COVID-19 PHE, telemedicine prescribers were required to have at least one in-person visit with a patient before prescribing a controlled substance, with limited exceptions. In response to the PHE, the DEA granted temporary flexibilities to the Ryan Haight Act in an effort to prevent lapses in patient care and which permitted, in certain instances, the prescribing of controlled substances via telemedicine even when there had not been any prior in-person medical evaluation.
The March 2023 NPRM, “Telemedicine Prescribing of Controlled Substances When the Practitioner and the Patient Have Not Had a Prior In-Person Visit” (“2023 Proposed Rule”), received a record number of comments—more than 38,000—causing the agency to reconsider its positions (see our previous post on the 2023 Proposed Rule).
In May 2023, DEA temporarily extended the telemedicine flexibilities issued during the COVID-19 pandemic while sifting through the comments, and in September 2023 hosted public listening sessions to hear publicly from stakeholders. In October 2023, DEA and HHS jointly issued a second temporary extension of these flexibilities through the end of 2024.
More recently, in November 2024, DEA and HHS once again jointly issued a third temporary extension of these flexibilities through the end of 2025. DEA stated in the November 2024 temporary rule that “[t]his additional time will allow DEA (and also HHS, for rules that must be issued jointly) to promulgate proposed and final regulations that are consistent with public health and safety, and that also effectively mitigate the risk of possible diversion.”
In the latest rulemaking, DEA and HHS released the following guidance:
Proposed Rule Regarding Special Registration for Telemedicine Providers and Companies
Final Rule Regarding Access to Buprenorphine Treatment Via Telemedicine
Final Rule Regarding Veterans’ Access to Controlled Substances Via Telemedicine
DEA’s 2025 Rules
In DEA’s 2025 Rules, the agency is proposing the following:
DEA Proposed Rule Regarding Special Registration for Telemedicine Providers and Companies
DEA is proposing, in a Notice of Proposed Rulemaking, to establish a Special Registration process that will permit patients to receive prescribed controlled substance medications via telemedicine encounters without requiring the prescribing provider to conduct an in-person medical evaluation (the “Special Registration Proposed Rule”). The Special Registration Proposed Rule aims to expand patient access to controlled substances through telemedicine, while balancing the need to prevent misuse and diversion. Through the Special Registration Proposed Rule, the DEA seeks to modernize regulations, provide continuity for telemedicine-based care following the COVID-19 PHE, and align regulations with statutory requirements under federal law. The Special Registration Proposed Rule would implement requirements for registration, heightened prescription standards, recordkeeping, and state-level compliance, aiming to create a robust structure that supports the safe expansion of telemedicine. However, the Special Registration requirements would not apply to the practice of telemedicine authorized under the Ryan Haight Act, including buprenorphine treatment via telemedicine encounter and continuity of care via telemedicine for Veterans Affairs patient, as addressed by the new final rules discussed in further detail below.
In the Special Registration Proposed Rule, DEA has outlined not one, but three separate types of registrations that would be available:
A Telemedicine Prescribing Registration, which would be available to health care providers who, as part of their treatment plans for patients, need the ability to prescribe Schedule III through V controlled substances;
An Advanced Telemedicine Prescribing Registration, available for certain health care providers who are board certified in specific specialties, including psychiatry, and who need the ability to prescribe Schedule II controlled substances;
A Telemedicine Platform Registration, which would establish a new requirement applicable to telemedicine companies—specifically, the online platforms that facilitate connections between patients and health care providers that may result in the prescribing of these medications.
The different types of Special Registrations would make it possible for health care providers with prescribing authority—both physicians and non-physician practitioners—and the telemedicine companies that support the industry’s infrastructure to apply for one or more of these registrations in order to prescribe controlled substances via telemedicine without the need for an in-person evaluation of the patient.
As part of the Special Registration Proposed Rule, the DEA also would require the creation of a national prescription drug management program (“PDMP”) to provide greater visibility into a patient’s prescribed medication history for both prescribing providers and pharmacists. Regardless of the type of registration a provider or telemedicine company holds, the DEA would be establishing the added requirement of the provider or company needing to verify “the identity of the patient and [completing] a nationwide [PDMP] check of all 50 states and any U.S. district or territory that maintains its own PDMP.”[1]
Other highlights in the Special Registration Proposed Rule include:
Requiring, for prescriptions of Schedule II controlled substances: (a) that special registrants be physically located in the same state as the patient when prescribing the Schedule II medication via telemedicine; and (b) that telemedicine prescriptions of Schedule II controlled substances must, on average, make up “less than 50 percent of the total number of Schedule II prescriptions issued by the clinician special registrant in their telemedicine and non-telemedicine practice in a calendar month.”[2]
Requiring, with certain but limited exceptions, that special registrants use audio and video capabilities when prescribing controlled substances via telemedicine, regardless of whether the provider-patient encounter is an initial or follow-up visit.[3]
Requiring, during any initial visits between a special registrant and a patient, that a photo of the patient presenting federal or state identification is captured, as a means for confirming the patient’s identity.[4]
Requiring special registrants to maintain a State Telemedicine Registration for every state in which a patient is treated by the special registrant, subject to limited exceptions (g., the special registrant is an officer of the U.S. Armed Forces, the Public Health Service, or the Bureau of Prisons authorized to prescribe, or an employee or contractor of the U.S. Department of Veterans Affairs). The State Telemedicine Registration would be issued by the DEA, not the states, and function as an ancillary credential, contingent on the type of special registration held by the special registrant, and the special registrant’s authorization under state laws and rules to prescribe controlled substances within that state.[5]
The DEA has requested public comments on the Special Registration Proposed Rule, due no later than March 16, 2025.
Final Rule Regarding Access to Buprenorphine Treatment Via Telemedicine
Under this DEA and HHS final rule, effective February 18, 2025, the Departments are expanding access to buprenorphine treatment via telemedicine encounters (the “Buprenorphine Telemedicine Prescribing Final Rule”).
As background, during the COVID-19 PHE, when the DEA issued a waiver to temporarily loosen many of the restrictions on telemedicine prescribing controlled substances, the use of telemedicine prescribing for buprenorphine expanded dramatically as a means of treatment for patients with opioid use disorder (“OUD”).
The Buprenorphine Telemedicine Prescribing Final Rule diverges significantly from the 2023 Proposed Rule and codifies and extends many of the telemedicine flexibilities allowed during the pandemic with respect to treatment of patients with OUD. This will not only ensure continuity of care for patients who initiated buprenorphine treatment via telemedicine during the PHE, but also will allow new patients to access the same treatment without requiring an initial in-person visit.
Under the Buprenorphine Telemedicine Prescribing Final Rule, health care providers may prescribe buprenorphine for the treatment of OUD via a telemedicine encounter, including an audio-only telemedicine encounter, for up to six (6) months. To continue a patient’s treatment beyond six (6) months, the patient either can obtain an in-person medical evaluation or pursue other forms of telemedicine that are authorized under the Controlled Substances Act. Thus, this final rule permits patients to continue to receive telemedicine prescriptions for buprenorphine without ever receiving an in-person visit, as long as the patient visits conform to existing requirements for telemedicine modalities including audio-visual telemedicine, asynchronous telemedicine (store-and-forward), or remote patient monitoring.
Key requirements for providers to prescribe under the Buprenorphine Telemedicine Prescribing Final Rule include that the provider must be registered by the DEA to prescribe controlled substances, and the provider must review the patient’s prescription drug monitoring program data for the state in which the patient is located during the telemedicine visit. The Buprenorphine Telemedicine Prescribing Final Rule also adds a new requirement not included in the proposed rule that the dispensing pharmacist must verify the patient’s identity prior to filling the prescription.
In response to public comments DEA and HHS received regarding the 2023 Proposed Rule, the Buprenorphine Telemedicine Prescribing Final Rule significantly reduces or eliminates several of the barriers under the proposed rule that were most heavily criticized. In particular:
30-Day Supply: The 2023 Proposed Rule would have allowed only a thirty (30) day supply of buprenorphine to be prescribed via telemedicine before an in-person encounter would need to take place. Public comments to the 2023 DEA Proposed Rule argued that this short window vitiated the purpose of the statutory exception and was insufficient to meaningfully increase access to OUD treatment.
In-Person Assessment to Continue Treatment: The 2023 Proposed Rule would have required patients to obtain an in-person assessment at the end of the initial prescribing period in order to continue treatment. This requirement meant that access would not have materially improved for the large number of people in rural and underserved areas or who otherwise face barriers to accessing in-person treatment.
Recordkeeping: The 2023 Proposed Rule would have required providers to comply with a variety of record-keeping requirements, including maintaining a record of whether the encounter was conducted via audio-visual or audio-only means, why the patient chose an audio-only telemedicine encounter, and maintaining copies of all qualifying telemedicine referrals. These requirements would have increased the administrative burden of offering telemedicine services.
The Buprenorphine Telemedicine Prescribing Final Rule dramatically expands access to those who are seeking OUD treatment, allowing these patients to participate in a sustained program of treatment with buprenorphine by extending the prescribing period to six (6) months, allowing patients who initiate treatment via audio-only telemedicine to continue treatment via other forms of telemedicine without an in-person assessment, and eliminating some of the burdensome recordkeeping requirements.
DEA Final Rule Regarding Veterans’ Access to Controlled Substances Via Telemedicine
Under this DEA and HHS final rule, entitled “Continuity of Care via Telemedicine for Veterans Affairs Patients,” the Departments finalized parts of the 2023 Proposed Rule that specifically pertain to U.S. Department of Veterans Affairs (“VA”) practitioners and the VA patients they serve (the “VA Telemedicine Prescribing Final Rule”). This rule becomes effective February 18, 2025.
The VA Telemedicine Prescribing Final Rule will allow VA practitioners acting within the scope of their VA employment and professional practice to prescribe controlled substances via telemedicine to VA patients with whom they have not conducted an in-person medical evaluation, provided that another VA practitioner has previously conducted an in-person medical evaluation with the same patient. Practically speaking, this means that once a VA patient has received an in-person medical examination from a VA practitioner, the ongoing practitioner-patient relationship—including the ability to prescribe controlled substances—can be extended to all VA practitioners who engage with that patient via telemedicine.
The VA Telemedicine Prescribing Final Rule includes certain conditions that are similar to some being proposed in the Special Registration Proposed Rule. For example, VA practitioners will be required under the VA Telemedicine Prescribing Final Rule, prior to issuing a prescription via telemedicine for any Schedule II through V controlled substances, to review both the patient’s electronic medical record with the VA and the PDMP data for the state in which the VA patient is located at the time of the telemedicine encounter—provided the state has such data—to confirm the history of prescriptions for controlled substances that have been issued to the patient.
DEA states in the VA Telemedicine Prescribing Final Rule that the agency’s basis for creating a separate, VA-specific rule has been done in response to “the evolving landscape of the healthcare needs of VA patients, advancements in telemedicine, and DEA’s capacity to implement safeguards that protect against potential misuse.”[6] DEA describes its intended approach as being responsive to and possible because of the specialized health care needs of veterans and the unique structure of the VA health care system. The VA Telemedicine Prescribing Final Rule will ensure that veterans have more consistent and flexible access to care, regardless of their geographic location, while still maintaining oversight and continuity of care through the VA system.
Regulatory Freeze Pending Review
As anticipated, in connection with the transition between Administrations, President Donald Trump implemented a “regulatory freeze” by memorandum issued on January 20, 2025. The freeze applies differently depending on whether or not a rule (including a NPRM) has been published in the Federal Register – contrasted with rules not yet submitted, or rules submitted to the Office of the Federal Register, but not yet published. For rules that have been published to the Federal Register, such as the DEA’s 2025 Rules, the White House requires executive departments and agencies to “consider postponing” the rule’s effective date until at least March 21, 2025 (sixty (60) days from the issuance of the memorandum), to allow review of any questions of fact, law, and/or policy raised by the rule, and to “consider opening” a comment period for stakeholders to comment on those questions. Executive agencies are also directed to “consider reevaluating” pending petitions involving such rules, which may result in effective dates being further delayed beyond the 60-day period.
As directly applicable here, the two final rules, as published in the Federal Register, are set to be effective February 18, 2025. The comment period for the NPRM ends March 16, 2025. What exactly happens next, and on what timeline, depends on how the DEA administrator exercises the agency’s discretion to “consider postponing” the DEA’s 2025 Rules. In the meantime, DEA registered prescribers can continue operating under the telemedicine prescribing flexibilities issued during COVID-19 (though December 31, 2025).
Takeaways
The DEA’s 2025 Rules offer, on the one hand, clarity that many practitioners and telemedicine companies have been eagerly awaiting in the wake of the PHE. However, the DEA’s 2025 Rules also suggest that the industry has its work cut out for it.
Telemedicine providers and companies should begin preparing for the potential regulatory changes that would be imposed by the Special Registration Proposed Rule. Although the rulemaking process may be delayed because of the recent regulatory freeze issued by the Trump Administration, it is never too early to begin thinking about the related operational changes and administrative oversight that may be required to obtain the applicable registration(s).
In the case of the final rules regarding buprenorphine prescribing and veterans, telemedicine providers must begin making plans for how to achieve operational compliance, though the effective date of such regulations may also be delayed.
Epstein Becker Green Attorneys Ann W. Parks and Erin Sutton contributed to the preparation of this post.
ENDNOTES
[1] 90 Fed. Reg. 6541, 6543 (Jan. 17, 2025).
[2] Id. at 6556.
[3] Id. at 6554. Note that the Expansion of Buprenorphine Treatment via Telemedicine Encounter final rule allows an exception for buprenorphine and other controlled substances used to treat opioid use disorder, discussed in more detail below.
[4] Id. at 6557.
[5] Id. at 6551.
[6] 90 Fed. Reg. 6523, 6527 (Jan. 17, 2025).
DEA Unveils Long-Overdue Special Registration for Telemedicine in Proposed Rule
In the final days of the Biden administration, the Drug Enforcement Administration (DEA) released a proposed rule that would allow practitioners with a Special Registration to prescribe Schedule III-V, and in limited circumstances Schedule II, controlled substances via telemedicine.
Practitioners with a Special Registration would still need to obtain a DEA registration in each state where they prescribe or dispense controlled substances. However, the proposed rule establishes a limited, less expensive State Telemedicine Registration as an alternative to the traditional DEA registration. The proposed rule imposes several obligations on practitioners with Special Registrations when they prescribe controlled substances via telemedicine. Of note, practitioners would need to be located in the same state as the patient at the time of the encounter when issuing a Schedule II controlled substance prescription, and the average monthly number of Schedule II controlled substances prescribed via telemedicine would need to be limited to less than 50% of the practitioner’s total Schedule II prescriptions (including both telemedicine prescriptions and non-telemedicine prescriptions).
If finalized, the Special Registration process would provide an alternative pathway for practitioners to prescribe controlled substances via telemedicine if the DEA telemedicine prescribing flexibilities currently in place through December 31, 2025, expire. We provide a summary of some of the key provisions of the proposed rule below.
Definitions
The proposed rule introduces several new definitions, some of which include:
Clinician practitioner — an individual practitioner who provides direct patient care or assesses, diagnoses, or treats medical conditions.
Platform practitioner — a covered online telemedicine platform that dispenses controlled substances by virtue of its central involvement as an intermediary in the remote prescribing of controlled substances by an individual practitioner. Platform practitioners are subject to the requirements imposed upon non-pharmacist practitioners under the Controlled Substances Act, 21 U.S.C. Sections 801-904, and its regulations.
Covered online telemedicine platform — an entity that facilitates connections between patients and clinician practitioners, via an audio-video telecommunications system, for the diagnosis and treatment of patients that may result in the prescription of controlled substances, but is not a hospital, clinic, local in-person medical practice, or insurance provider, and meets one or more of the following criteria:
The entity explicitly promotes or advertises the prescribing of controlled substances through the platform;
The entity has financial interests, whether direct incentives or otherwise, tied to the volume or types of controlled substance prescriptions issued through the platform, including but not limited to, ownership interest in pharmacies used to fill patients’ prescriptions, or rebates from those pharmacies;
The entity exerts control or influence on clinical decision-making processes or prescribing related to controlled substances, including, but not limited to: prescribing guidelines or protocols for clinician practitioners employed or contracted by the platform; consideration of clinician practitioner prescribing rates in the entity’s hiring, retention, or compensation decisions; imposing explicit or de facto prescribing quotas; directing patients to preferred pharmacies; and/or
The entity has control or custody of the prescriptions or medical records of patients who are prescribed controlled substances through the platform.
Special Registrations
Categories and Eligibility
The proposed rule establishes the following categories of Special Registrations and eligibility requirements:
Telemedicine Prescribing Registration: This registration would allow clinician practitioners to prescribe Schedule III-V controlled substances.
Clinician practitioners would need to demonstrate a legitimate need for the registration.
Physicians, nurse practitioners, physicians, and other mid-level practitioners defined under 21 C.F.R. § 1300.01 (“mid-level practitioners”) would have a legitimate need to prescribe Schedule III-V controlled substances if they expect to treat patients for whom in-person exams would be burdensome.
Examples include patients who experience severe weather conditions, live in remote or distant areas, or have communicable diseases.
Advanced Telemedicine Prescribing Registration: This registration would allow certain specialized clinician practitioners to prescribe Schedule II-V controlled substances.
Specialized clinician practitioners would need to demonstrate a legitimate need for the registration and justify the additional authorization to prescribe Schedule II medications. These practitioners would need to provide information demonstrating their specialized training on their Special Registration application.
Specialized physicians and board-certified mid-level practitioners would have a legitimate need to prescribe Schedule II-V controlled substances when treating vulnerable patient populations. This includes individuals who face significant barriers to accessing care and who suffer from debilitating or terminal illnesses.
Only specialized physicians and board-certified mid-level practitioners in the following limited circumstances or practice specialties are eligible:
Psychiatrists;
Hospice care physicians;
Palliative care physicians;
Practitioners rendering treatment at long-term care facilities;
Pediatricians;
Neurologists; and
Mid-level practitioners and physicians from other specialties who are board certified in the treatment of psychiatric or psychological disorders, hospice care, palliative care, pediatric care, or neurological disorders unrelated to the treatment and management of pain.
Telemedicine Platform Registration: This registration would allow covered online telemedicine platforms to dispense Schedule II-V controlled substances through a clinician practitioner who holds a Telemedicine Prescribing Registration or Advanced Telemedicine Prescribing Registration (i.e., a platform practitioner).
Covered online telemedicine platforms would need to demonstrate a legitimate need for the registration.
Covered online telemedicine platforms, in their capacity as platform practitioners, would have a legitimate need to dispense Schedule II-V controlled substances when they:
Expect to provide necessary services that connect patients with clinician practitioners via telemedicine for the diagnosis, treatment, and prescription of controlled substances;
Comply with federal and state regulations;
Oversee the clinician practitioner’s prescribing practices; and
Implement safeguards to prioritize patient safety and prevent diversion, abuse, or misuse of controlled substances.
Platform practitioners would need to attest to their legitimate need on their Special Registration application.
Special Registration numbers would be formatted distinctly, allowing pharmacists to easily differentiate between practitioners with a Special Registration and those with a traditional DEA registration.
Application Requirements
In the proposed rule, the DEA outlines several Special Registration application requirements. Notably, applicants would need to provide a physical address as their registered location, and platform practitioners would need to disclose all employment relationships, contractual relationships, and professional affiliations with any clinician practitioner with a Special Registration and online pharmacy.
State Telemedicine Registration
In addition to a Special Registration, clinician practitioners and platform practitioners, unless exempt, would still need to obtain a DEA registration in each state in which they intend to prescribe or dispense controlled substances to patients via telemedicine. However, in lieu of the traditional DEA registration, the proposed rule establishes a limited State Telemedicine Registration, which would be less expensive for clinician practitioners. The proposed fee is $50 for clinician practitioners, reflecting a significant reduction from the cost of a traditional DEA registration, and $888 for platform practitioners, which matches the cost of a traditional DEA registration. Similar to Special Registrations, State Telemedicine Registration numbers would be formatted distinctly, allowing pharmacists to easily differentiate between practitioners with a State Telemedicine Registration and those with a traditional DEA registration.
Requirements of the Proposed Rule
Telehealth Modality
Similar to the final rule regarding telemedicine prescribing of buprenorphine, practitioners would be permitted to prescribe Schedule III-V controlled substances approved by the U.S. Food & Drug Administration to treat opioid use disorder via telemedicine (currently limited to buprenorphine) through an audio-only visit. (See our discussion on the DEA’s final buprenorphine rule here.) Audio-only visits would only be permitted if the practitioner has the capability to use audio-video, but the patient is either unable to use video or does not consent to it. However, unlike the final buprenorphine rule, treatment would need to be initiated through an audio-video visit, and the practitioner would need to have conducted at least one medical exam of the patient via audio-video. Prescriptions not meeting the criteria described above would only be able to be issued through an audio-video visit.
Schedule II Controlled Substances
Practitioners would only be permitted to prescribe Schedule II controlled substances via telemedicine if they are physically located in the same state as the patient at the time of the encounter when the prescription is issued. Additionally, the number of Schedule II controlled substances prescribed via telemedicine, averaged monthly, would be limited to less than 50% of the practitioner’s total Schedule II prescriptions (including both telemedicine prescriptions and non-telemedicine prescriptions).
PDMP Check
Effective immediately, if the proposed rule is finalized, practitioners with a Special Registration would need to check the patient’s controlled substance prescription data in Prescription Drug Monitoring Programs (PDMPs) of certain jurisdictions before issuing a prescription for controlled substances via telemedicine. The practitioner would need to review the PDMPs for any controlled substance prescriptions issued to the patient within the last year, or, if less than a year is available, for the entire available period. The relevant jurisdictions include:
The state where the patient is located;
The state where the practitioner is located; and
Any U.S. jurisdiction with PDMP reciprocity agreements with either of the states above.
Three years after the effective date, before issuing a prescription for controlled substances via telemedicine, practitioners with a Special Registration would need to check the PDMPs of all U.S. jurisdictions for controlled substance prescriptions issued to the patient within the last year, or, if less than a year is available, for the entire available period. If there is no means to perform this nationwide PDMP check, the practitioner would continue performing the PDMP checks as described above. We note that there is currently no nationwide PDMP database in operation.
Additional Requirements and Commentary
The proposed rule also:
Sets forth certain recordkeeping, patient identification verification, reporting, prescription, and e-prescribing requirements for those with Special Registrations;
Notes that practitioners with Special Registrations would need to be located within the U.S. when issuing a prescription via telemedicine and would need to still comply with any applicable state requirements and restrictions regarding prescribing controlled substances;
Emphasizes that once an in-person medical exam has been conducted, the practitioner and patient would no longer be considered to be engaged in the practice of telemedicine, and the requirements of the proposed rule would not apply; and
Establishes reporting requirements for pharmacies filling Special Registration prescriptions.
A Brief History
The rule stems from the Ryan Haight Act, which amended the Controlled Substances Act to restrict practitioners from prescribing controlled substances unless the practitioner conducts an in-person examination of the patient. The Controlled Substances Act also requires practitioners obtain a separate DEA registration in each state where their patients are located. The Ryan Haight Act (at 21 U.S.C. § 802(54)) outlines seven exceptions under which practitioners may prescribe controlled substances via telemedicine without an in-person exam, one of which involves practitioners who have obtained a special registration. Congress expected the DEA to issue the special registration rule shortly after the Ryan Haight Act was signed into law in 2008. After years of DEA failing to do so, Congress and the White House signed the SUPPORT Act of 2018, a federal law that mandated DEA promulgate the special registration rule by October 2019.
During the COVID-19 Public Health Emergency (PHE), the DEA issued letters on March 25, 2020, and March 31, 2020, granting temporary exceptions to the Ryan Haight Act and its implementing rules that enabled DEA-registered practitioners to prescribe controlled substances without an in-person exam and with a DEA registration in only one state. In March 2023, two months before the end of the PHE, the DEA proposed a rule on telemedicine prescribing of controlled substances, but the rule did not include a special registration framework and was not favorably-viewed. In response, the DEA quickly rescinded the proposed rule and extended the COVID-era flexibilities in May 2023 and again in October 2023. In June 2024, the DEA submitted a special registration rule for Office of Management and Budget clearance that was so unworkable for stakeholders that it was not published. Instead, the flexibilities were further extended in November 2024, and are now set to expire on December 31, 2025. (For more details, see our previous discussions on the DEA’s proposed rules for telemedicine prescribing of controlled substances and the first, second, and third temporary rules extending COVID-era flexibilities.)
Make Your Voice Heard
The DEA is soliciting comments until 11:59 p.m. ET March 18, 2025. Stakeholders may submit comments electronically here or via regular or express mail to the following address:
Drug Enforcement AdministrationAttn: DEA Federal Register Representative/DPW8701 Morrissette Drive, Springfield, VA 22152
All correspondence, including attachments, must include a reference to “Docket No. DEA-407”.
Additionally, those with concerns about the proposed rule can share their feedback by contacting their local Congressperson or the White House.
What Comes Next
With the widespread frustration that met the March 2023 and June 2024 versions of this rule, there is little chance that the proposed rule will be finalized close to its current form. A key point of contention for stakeholders in the proposed rule is the nationwide PDMP check requirement, which is seen as overly burdensome given the absence of a nationwide PDMP database — a burden the DEA continues to underestimate. However, the future of the Special Registration is unclear due to the change in administration and potentially changing priorities and approaches.
President Trump’s first round of executive orders included a regulatory freeze. However, the Regulatory Freeze Pending Review Executive Order does not affect the proposed rule. To influence the direction of the proposed rule, ATA Action has urged President Trump to prioritize the immediate withdrawal of it. If the proposed rule undergoes another set of revisions and round of notice-and-comment rulemaking, it is unlikely that practitioners will have access to a special registration in 2025. Without a special registration process this year, another extension of the DEA telemedicine flexibilities will be crucial. We will continue to closely monitor any developments regarding the special registration process.
Supreme Court Update: Royal Canin U.S.A., Inc. v. Wullschleger (No. 23-677)
In Royal Canin U.S.A., Inc. v. Wullschleger (No. 23-677), the Supreme Court resolved a jurisdictional dog fight over dog food. If a plaintiff files a complaint containing state- and federal-law claims, the complaint can ordinarily be removed to federal court, and that court will have jurisdiction to resolve all the claims. But what happens if, after removal, the plaintiff eliminates the federal causes of action, leaving only the state-law ones? A unanimous Court concluded that in that situation, the federal court no longer has jurisdiction over the now state-law-only case so it must be remanded to state court.
Royal Canin manufactures a brand of dog food that can be purchased only with a veterinarian’s prescription. This mark of exclusivity allows it to charge a premium price. Anastasia Wullschleger purchased some of Royal Canin’s food, believing that the prescription meant the food contained some mediation not found in ordinary dog food. But when she learned that wasn’t so, she sued Royal Canin in Missouri state court, alleging claims under the Missouri Merchandising Practices Act, state antitrust law, and the federal Food, Drug, and Cosmetic Act (“FDCA”).
Royal Canin promptly removed the case to federal court based on Wullschleger’s federal-law FDCA claim. Wullschleger countered that move by amending her complaint to excise all the federal claims and asking the District Court to remand the case. It declined, and ultimately dismissed her complaint for failure to state a claim. Wullschleger then appealed, arguing (among other things) that the District Court never should have reached the merits because it was required to remand the case to state court. The Eighth Circuit agreed with her, reasoning that the District Court’s supplemental jurisdiction over the state-law claims vanished with the federal-law claims. But because other Courts of Appeal has reached the opposite result—allowing cases to persist in federal court notwithstanding the elimination of federal claims—the Supreme Court granted cert.
A unanimous Court agreed with the Eighth Circuit. Writing for the Court, Justice Kagan began by discussing the supplemental jurisdiction statute, 28 U.S.C. § 1367. In cases where a district court had “original jurisdiction” over a case, Section 1367 also gives the court “supplemental” jurisdiction over any non-federal law claims that are closely related to the federal ones. That means that if a plaintiff files a case in federal court asserting closely related state- and federal-law claims, the district court will ordinarily have supplemental jurisdiction over the state-law claims by virtue of its federal-question jurisdiction over the federal ones. But what if the plaintiff them amends the complaint to remove the federal claims? In a prior case, Rockwell International Corp. v. United States (2007), the Court answered that question: Federal courts must look to the amended complaint, not the original one, in deciding whether they have jurisdiction. So if a plaintiff amends the complaint to eliminate the federal causes of action, supplemental jurisdiction over the state-law claims evaporates too.
Given Rockwell International, the only debate was whether the rule should be different for removed cases than it was for cases filed in federal court in the first place. Justice Kagan saw no reason why it should be: Section 1367’s plain text draws no distinction between cases originally filed in federal court and cases that are moved there after being filed in state court. So if federal jurisdiction looks to the amended complaint in one context, it should do the same in the other. Kagan also concluded that this approach better fit with how amended pleadings affect jurisdiction in a variety of other contexts, where courts similarly look to amended pleadings alone to resolve jurisdictional questions.
So far so good. But complicating the analysis quite a bit was the inconvenient fact that a footnote in Rockwell International asserted that its rule shouldn’t apply to removed cases given the “forum-manipulation concerns” of such cases. While that footnote did “set[] out exactly the rule Royal Canin wants,” the Court dismissed it as non-binding dictum. After all, Rockwell International was a case that was filed in federal court in the first instance, so its speculative commentary about what should happen in a case that was removed to federal court was “beside the point.” The Court’s recent practice of refusing to give precedential effect to “drive-by jurisdictional rulings” (that is, decisions that blithely characterize some requirement as a “jurisdictional” one) applies with equal force to drive-by jurisdictional footnotes. So while every dog may have its day, this one’s day is in Missouri court.
FDA Proposes Front-of-Package Labeling Requirements
On 14 January 2024, the US Food and Drug Administration (FDA) issued a proposed rule to be published on 16 January, which, if finalized, will require a front-of-package (FOP) nutrition label on most packaged foods. This FOP nutrition label consists of a “Nutrition Info box,” detailing the relative Percent Daily Values (% DV) of saturated fat, sodium, and added sugars (undesirable nutrients) in a serving of the packaged food. The Nutrition Info box for most foods will: (1) include a description of the serving size; (2) include the % DV of the undesirable nutrients; (3) include a characterization of such values as “Low,” “Med,” and “High;” and (4) appear in at least eight-point font or be no smaller than the size of the required net quantity of contents declaration specified in 21 C.F.R. §§ 101.7(h) and (i). The Nutrition Info box will have to be prominently displayed in the upper-right corner of the Principal Display Panel.
The proposed rule would require that most packaged foods for children aged four and older and the general population bear a Nutrition Info box, a sample image of which is shown below:
Image Source: US Food and Drug Administration Website
Levels 5% or less of the % DV of saturated fat, sodium, and added sugars would be considered “Low,” while levels 6% to 19% of the % DV are “Med.” Levels of 20% or more of the % DV are considered “High.”
FDA noted that these numbers are generally consistent with the levels in the “low” (21 C.F.R. § 101.62(b)(2)) and “high” (21 C.F.R. § 101.54(b)) nutrient content claims. However, it is relevant to note that these terms have historically been associated with marketing claims of favorable nutrients (e.g., high in dietary fiber and low in sodium). This proposed rule marks the first time FDA is regulating the mandatory use of the “high” term for undesirable nutrients.
FDA tested with consumers Nutrition Info boxes that used red for High, yellow for Med, and green for Low to designate which nutrients to limit and consume enough of. However, FDA ultimately declined to include colors as study participants found the scheme confusing.
FDA has invited comments on several facets of this proposed rule. Notably, FDA has invited comments on how these requirements are impacted by the nutritional needs of subpopulations, such as children aged one to three years, and the need for or value of interpretive nutrition information for these subpopulations. FDA also invited comment on the inclusion of a mandatory or voluntary quantitative statement of calories in the Nutrition Info box and ways to interpret quantitative calorie information. Additionally, FDA is seeking feedback on use of the “Low” categorization for products that declare a 0% DV for any of these three nutrients, and whether a fourth categorization, such as “Zero” or “Free,” would better indicate that the product is not simply “Low” for that nutrient but contributes 0% to the % DV for that nutrient.
In addition to creating a Nutrition Info box regulation under 21 C.F.R. § 101.6, the proposed rule would revise the requirements for “low sodium” under 21 C.F.R. § 101.61 and “low saturated fat” nutrient content claims under 21 C.F.R. § 101.62. Notably, the permissible limit for “low sodium” claims would be 115 mg, as compared to the current 140 mg level.
FDA will accept comments on the proposed rule until 16 May 2025, at regulations.gov under docket number FDA-2024-N-2910. If and when the proposed rule is finalized, most businesses will have three years after the effective date to comply; small businesses with less than US$10 million in annual food sales will have four years after the effective date to comply.