What to Watch: Potential Increase in Enforcement of “RUO” Diagnostics
Last spring, we wrote about a warning letter the United States Food & Drug Administration (“FDA” or the “Agency”) issued to Agena Bioscience Inc. (the “Agena Warning Letter”)[1] for allegedly promoting its diagnostic product (which was labeled for research use only “RUO” and therefore, not cleared or approved by FDA) for clinical purposes in violation of the U.S. Food, Drug, and Cosmetics Act (the “FDCA”).[2] The Agena Warning Letter – the first issued to an RUO product manufacturer in over five years – left the industry wondering whether FDA intended to ramp up enforcement against manufacturers who improperly utilize the regulatory carve-out for RUO diagnostic devices.[3] However, after the issuance of that Agena Warning Letter last April, all had been quiet on the enforcement front in the RUO space and, given the priorities of the new administration, we expected it to remain that way. But surprisingly, last month, FDA posted yet another warning letter to DRG Instruments GmbH (“DRG”) alleging failure to qualify for the RUO carve-out (the “Warning Letter”), potentially signaling the Agency’s intention to increase, or at least maintain, oversight for RUO-labeled products.[4]
In the Warning Letter, FDA concluded that DRG’s product was inappropriately labeled “ROU” – and, therefore, was not exempt from FDA’s in vitro diagnostic (“IVD”) regulations, including premarket clearance and/or approval – based on evidence that, in FDA’s view, showed the product was intended for clinical use. According to FDA, such evidence included (a) distribution records showing that DRG sold the product to “companies in the business of performing clinical analysis” with “no indication that these companies also conduct research,” and (b) claims made on DRG’s website suggesting that the product may be appropriate for clinical use (e.g., “can be performed also by patients”). Interestingly, FDA reached this conclusion despite the existence of certification letters from the purchasing companies acknowledging that the product was to be used for research purposes only.
The Warning Letter does not add any new parameters to the current regulatory framework for marketing RUOs, which consists of only a single regulation, two relatively dated guidance documents, and the Agena Warning Letter.[5] For instance, we already knew that making “device” claims (i.e., claims suggesting that a product could be intended to diagnose, cure, mitigate, treat, or prevent a disease or condition) and selling RUO products to clinical entities with no research operations are two factors that tend to prove that a product is intended for clinical – as opposed to research – use.[6] Likewise, we already knew that certification letters are not enough to offset evidence otherwise suggesting that a product is intended for clinical use.[7]
However, the issuance of the letter itself is significant. Although it may have been surprising at first glance – given the new administration’s publicized preference for deregulation of drugs and devices generally – it may be part of a larger scheme for FDA to retain at least some patient safety assurances for a smaller subset of exempt diagnostics (i.e., RUO products) in light of its recent decision not to oversee a larger subset of exempt diagnostics (i.e., laboratory developed tests (“LDTs”)) directly.[8] Given the regulatory context, it remains to be seen whether the Warning Letter indicates an intention by the new administration to keep a closer eye on the regulatory carve-out for RUO products and/or components – despite its decision not to regulate one of its most significant policy carve-outs (LDTs) – or whether this Warning Letter will ultimately be an outlier like the Agena Warning Letter. We’ll keep an eye out for further enforcement in the space.
FOOTNOTES
[1] Letter to Agena Bioscience, Inc., MARCS-CMS 665159 (2024).
[2] See FDA Warning Letter Tightens Reins On ‘Research Only’ Labels, Law360 (Apr. 22, 2024).
[3] We remind readers that diagnostic products properly labeled “RUO” are exempt from most FDA regulations, including premarket clearance and/or approval. See 21 CFR 812.2(c)(3); Guidance For Industry, Distribution of In Vitro Diagnostic Products Labeled ‘RUO’ or “IUO’, FDA (2018).
[4] See Letter to DRG Instruments GmbH, MARCS-CMS 700918 (Mar. 31, 2025).
[5] See 21 CFR 812.2(c)(3); FDA Guidance, supra FN 3; Draft Guidance for Industry, Commercially Distributed In Vitro Diagnostic Products Labeled for Research Use Only or Investigational Use Only: Frequently Asked Questions, FDA (2011).
[6] See Agena Warning Letter, supra FN 1.
[7] See FDA Guidance, supra FN 3, at p. 11.
[8] On May 30, FDA’s deadline to appeal the Eastern District of Texas decision vacating the controversial “LDT Rule” issued under the Biden administration lapsed, meaning that the LDT Rule is permanently vacated in its entirety. The LDT Rule (which we wrote about here, here, here, and here) would have required LDTs to comply with the full scope of FDA’s IVD regulations, including premarket clearance and/or approval, ending FDA’s long-standing policy of enforcement discretion for LDTs.
EPA Releases Draft Charge Questions for SACC Meeting on Phthalates and Memorandum on Proposed Refinement for Estimating DBP Skin Exposures
On June 16, 2025, the U.S. Environmental Protection Agency (EPA) announced the release of the draft charge questions for discussion at the upcoming Science Advisory Committee on Chemicals (SACC) meeting to review all documents released thus far on the risk evaluations of five phthalates. SACC will review the draft risk evaluations for dibutyl phthalate (DBP), di(2-ethylhexyl) phthalate (DEHP), and dicyclohexyl phthalate (DCHP), as well as cross-cutting documents related to DBP, DEHP, DCHP, butyl benzyl phthalate (BBP), and diisobutyl phthalate (DIBP). In addition, EPA also released a memorandum describing a proposed refinement of the approach for estimating skin exposures for DBP.
EPA will hold the virtual public meeting of SACC on August 4-8, 2025, where the charge questions will guide the discussion. EPA will also hold a preparatory virtual public meeting on July 21, 2025, for SACC and the public to consider and ask questions regarding the scope and clarity of the draft charge questions. EPA states that it will publish registration links for the August SACC meeting and July preparatory meeting on the SACC website approximately one month prior to each meeting. If the public would like their comments on the documents related to the phthalates to be considered by the SACC during the peer review meeting, they must be submitted by July 21, 2025.
CRISPR Clarity: Enablement Is Analyzed Differently Under §§ 102 and 112
In a decision underscoring the distinct standards governing enablement under §§ 102 and 112, the US Court of Appeals for the Federal Circuit affirmed the Patent Trial & Appeal Board’s finding that a prior art reference was enabling for purposes of anticipation, even in the absence of working examples. Agilent Technologies, Inc. v. Synthego Corp., Case Nos. 23-2186; -2187 (Fed. Cir. June 11, 2025) (Prost, Linn, Reyna, JJ.)
The case centers on CRISPR, the gene-editing technology that has reshaped the frontiers of biology and biotechnology. Agilent owns patents that claim chemically modified guide RNAs (gRNAs) designed to improve stability and performance in CRISPR-Cas systems. Synthego filed an inter partes review (IPR) petition asserting that the patents were unpatentable. The Board found all claims unpatentable, relying on a 2014 publication by Pioneer Hi-Bred that disclosed similar modified gRNAs. Agilent appealed.
Agilent challenged the Board’s finding that the prior art was enabling, arguing that Pioneer Hi-Bred merely proposed a research plan without demonstrating which specific modifications would yield functional gRNAs. Agilent emphasized that the reference lacked working examples and disclosed numerous nonfunctional sequences, contending that a skilled artisan would not have been able to identify a successful embodiment without undue experimentation. It also argued that the nascent state of CRISPR technology in 2014 compounded the unpredictability, making the reference non-enabling. In support, Agilent relied heavily on the Supreme Court’s 2023 decision in Amgen v. Sanofi, where the Supreme Court invalidated a broad genus claim for failing to enable its full scope.
The Federal Circuit was not persuaded. The Court drew a clear distinction between enablement under § 112 (which governs patent validity) and enablement under § 102 (which governs anticipation). The Court explained that the bar is lower for the latter, and that a prior art reference need only enable a single embodiment within the scope of the claim. While Amgen involved § 112, the Court emphasized that this case turned on § 102, where the standard is less demanding.
The Federal Circuit grounded this distinction in both the statutory text and the underlying purpose of the respective provisions. Statutorily, § 112 requires that a patent specification enable a person of ordinary skill in the art to “make and use” the invention. Section 102, by contrast, contains no such requirement. This divergence reflects a difference in purpose: § 112 ensures that the patentee does not claim more than they have taught, thereby preventing overbroad monopolies. As the Supreme Court explained in Amgen, “[t]he more a party claims, the broader the monopoly it demands, the more it must enable.” But the Federal Circuit emphasized that the Supreme Court’s reasoning in Amgen was rooted in the patentee’s burden to support the full scope of a genus claim under § 112. That concern, the Court explained, does not apply in the § 102 context, where the question is not how much the prior art claims, but whether it teaches enough for a skilled artisan to practice at least one embodiment without undue experimentation.
Applying that standard, the Federal Circuit credited the Board’s application of the Wands factors governing the “undue experimentation” analysis, noting that the chemical modifications in question were well known, the synthesis techniques (such as click chemistry) were established, and the field had matured significantly by the 2014 priority date. The fact that Pioneer Hi-Bred disclosed many inoperable examples didn’t doom it. Instead, what mattered was that a skilled artisan could, without undue experimentation, make and use at least one embodiment that fell within the claims. Accordingly, the Court affirmed that the prior art enabled at least one embodiment and therefore anticipated the claims.
Practice Note: This decision, when read alongside the Federal Circuit’s recent ruling in Regents of the Univ. of Cal. v. Broad Inst., reflects a consistent theme: enablement and conception are judged by what a skilled artisan can do without undue experimentation. In Regents, the Court clarified that inventors need not appreciate the success of their invention at the time of conception. In Agilent, it confirmed that prior art need not demonstrate success to be enabling. Together, these decisions reaffirm that the touchstone for disclosure – whether in conception or anticipation – is not certainty or completeness, but the capacity of a skilled artisan to fill in the gaps using routine techniques and reasonable effort.
McDermott+ Check-Up – June 18, 2025
THIS WEEK’S DOSE
Senate Finance Committee Releases Reconciliation Text. The language is subject to change as negotiations continue and the Byrd rule process plays out.
CMS Releases MA Risk Adjustment Audit Methodology for Payment Year 2019. The risk adjustment process aims to recover overpayments made to Medicare Advantage (MA) plans.
Federal Court Rules Against NIH in Grant Termination Cases. The decision comes as lawmakers and stakeholders express concerns over pauses or terminations in fiscal year 2025 National Institutes of Health (NIH) grant funding.
SCOTUS Upholds Tennessee Law Prohibiting Gender-Affirming Care for Minors. The Supreme Court of the United States (SCOTUS) ruling comes as the Trump Administration and Congress are seeking to limit certain federal funding of gender-affirming care.
CONGRESS
Senate Finance Committee Releases Reconciliation Text. On June 16, 2025, the Senate Finance Committee released its portion of the budget reconciliation bill. The section-by-section summary is available here. The text includes the majority of healthcare provisions being considered as part of the reconciliation process, because the Finance Committee has jurisdiction over Medicaid, Medicare, and the Affordable Care Act (ACA). The text includes some of the same provisions as the House-passed bill, while removing or making significant changes to other key provisions. The Senate text goes further than the House-passed bill on Medicaid provider taxes and state directed payments (SDPs). Some Senate Republicans have expressed concern about these provisions, including Sens. Hawley (R-MO) and Murkowski (R-AK), who have both raised concerns about Medicaid cuts this year.
Major changes compared to the House-passed bill include:
Medicaid Provider Taxes. Provider taxes would be frozen at current rates, but starting in 2027, Medicaid expansion states would see their hold harmless threshold incrementally decrease from 6% to 3.5% by 2031. The text includes exceptions for provider taxes on nursing homes and intermediate care facilities in expansion states.
SDPs. The House-passed bill grandfathered in existing Medicaid SDPs, but the Senate bill would reduce existing SDP payment limits in all states by 10% annually until they reach their specified payment limit. The payment limit for all SDPs in non-expansion states would be 110% of the Medicare rate, and for expansion states it would be 100% of the Medicare payment rate.
Medicare. The only Medicare provision in the Finance Committee text is the provision limiting Medicare coverage for certain non-citizens. The Finance Committee removed other House-passed Medicare provisions, including the provision to reform Medicare physician payment.
Other Missing Provisions. The Senate bill does not include the delay of disproportionate share hospital payment reductions, any of the health savings account provisions, or the codification of the proposed ACA program integrity rule (although rumors persist that it may reappear).
It remains to be seen if this package, which has significant differences from the House-passed version, would get 51 votes in the Senate as written, given concerns about the Medicaid provisions and non-health-related tax policies. However, the package is subject to change as negotiations continue. The “Byrd bath” process is also happening, and provisions may be struck or modified to comply with the Byrd rule.
Majority Leader Thune (R-SD) has reiterated his plan to bring the reconciliation package to the Senate floor next Wednesday or Thursday. That could be delayed as senators react to the package and negotiations continue. And, after Senate passage, the bill will need to pass the House again before it can go to the president for his signature. President Trump and Senate leaders continue to push to have the Senate complete consideration of the bill before the July 4 recess. However, this is a self-imposed deadline and if it slips past that date, Congress will continue their work in July. In fact, Vice President Vance acknowledged at a Senate meeting this week that the August recess is the real deadline.
ADMINISTRATION
CMS Releases MA Risk Adjustment Audit Methodology for Payment Year 2019. The Centers for Medicare & Medicaid Services (CMS) released the methodology for payment year (PY) 2019 risk adjustment data validation (RADV) audits. CMS selected 45 MA contracts for those audits. The methodology provides additional information about the criteria used to select enrollees for audit, instructions for submission of medical records, and details on how CMS will calculate extrapolated overpayment amounts. This follows a May 2025 announcement that CMS will accelerate RADV audits for PYs 2018 to 2024 to recoup overpayments made to MA plans. In related news, the US Department of Health and Human Services (HHS) Office of Inspector General updated its work plan that notes forthcoming reports, including one on MA health risk assessments by dual-eligible special needs plans.
COURTS
Federal Court Rules Against NIH in Grant Termination Cases. A federal judge in Massachusetts who was appointed by former President Reagan ruled in two cases that hundreds of grants terminated by NIH were illegal. The judge noted that the process of terminating the grants was arbitrary and capricious and ordered some of the grants to be restored. The cases were filed by the American Public Health Association and 16 states and mostly focused on terminations of grants related to gender identity and diversity, equity, and inclusion.
SCOTUS Upholds Tennessee Law Prohibiting Gender-Affirming Care for Minors. At the center of the case is a 2023 Tennessee law that prohibits healthcare providers from providing certain gender-affirming care services to minors. Transgender minors, their parents, and a doctor challenged the law under the Equal Protection Clause of the Fourteenth Amendment. In the case, US v. Skrmetti, SCOTUS ruled 6 – 3 that the law does not violate the Equal Protection Clause but satisfies rational basis review, allowing the Tenneessee law to take effect.
QUICK HITS
CMS Approves Medicaid Expansion of Tribal Healthcare in Six States. The approvals in Minnesota, New Mexico, Oregon, South Dakota, Washington, and Wyoming allow Indian Health Service and Tribal clinics to provide Medicaid clinic services outside of the “four walls” of a physical clinic site, including in schools and homes. This policy was mandated in the calendar year 2025 Medicare Hospital Outpatient Prospective Payment System final rule.
FDA Announces National Priority Voucher Program. The US Food and Drug Administration (FDA) program aims to expedite drug application reviews for companies developing drugs that are in line with specific priorities, including increasing domestic drug manufacturing and addressing unmet public health needs.
House Energy and Commerce Democrats Question Kennedy on MAHA Report. In a letter, leading Energy and Commerce Democrats posed questions to HHS Secretary Kennedy on the validity of information in the recently released Make America Healthy Again (MAHA) report. Read the press release here.
House Energy and Commerce Republicans Express Concerns about Data Privacy in California Marketplace. In a letter to the executive director of California’s Health Insurance Marketplace, Covered California, the committee’s Republican leaders seek information about data management practices of the exchange. Read the press release here.
Gary Andres Confirmed as HHS Assistant Secretary for Legislation. The Senate confirmed Andres by a 57 – 40 vote, with Sens. Hassan (D-NH), Shaheen (D-NH), Warnock (D-GA), Welch (D-VT), and Whitehouse (D-RI) joining Republicans in voting yes. Andres formerly worked at the House Budget Committee.
NEXT WEEK’S DIAGNOSIS
Both chambers will be in session next week. Lawmakers will continue to hash out the details of the reconciliation bill before an anticipated vote on the Senate floor, which could occur as early as next week. The House Energy and Commerce Committee will hold a hearing with HHS Secretary Kennedy, and the House Ways and Means Committee will discuss digital health data. The Senate Health, Education, Labor, and Pensions Committee will hold the nomination hearing for Susan Monarez, nominated for Centers for Disease Control and Prevention director.
DOJ Civil Division Publishes Memo Outlining Trump Administration Civil Enforcement Priority Related to Health Care
In May 2025 the Department of Justice (DOJ) Criminal Division published its enforcement priorities, and the Civil Division has now followed suit with a memorandum of its own (the “Civil Division Memo”). It outlines five policy objectives that President Trump and Attorney General Bondi have directed the Civil Division to prioritize in their investigative and enforcement work:
(1) combatting discriminatory practices and policies;
(2) ending antisemitism;
(3) protecting women and children;
(4) ending sanctuary jurisdictions; and
(5) prioritizing denaturalization.
Each section identifies the Executive Order(s) and DOJ Memoranda that set forth the Trump Administration’s policy objective(s) in each priority area and describes the types of conduct that will be subject to enforcement, as well as some of the tools that DOJ might use in those efforts. This article focuses on the Administration’s stated objective of “protecting women and children,” which relates to several Executive Orders regarding gender identity and gender-affirming care and a related directive from Attorney General Bondi to the Civil Division describing DOJ’s intent to investigate certain manufacturers and distributors of puberty blockers, sex hormones, and other drugs.
The Civil Division intends to use the Federal Food, Drug & Cosmetic Act (FD&C Act), among other authorities, to undertake civil enforcement action against:
manufacturers and distributors “engaged in misbranding by making false claims about on- or off-label use of puberty blockers, sex hormones, or any other drug used to facilitate a child’s so-called ‘gender transition’”; and
“dealers,” such as online pharmacies, “suspected of illegally selling [ ] drugs” used in connection with gender-affirming care.
Because many of the hormones and other drugs used in gender-affirming care can be used to treat other clinical conditions, this enforcement directive could have wide-ranging impacts beyond the enforcement priorities explicitly identified by DOJ. For example, testosterone is a hormone commonly used in gender-affirming care, but it is also prescribed to treat patients with other, unrelated conditions, such as men with low testosterone. Manufacturers that produce this and other hormones will now be forced to consider the risk of civil investigation or enforcement when deciding which hormones (or other drugs) to manufacture and to which entities it will sell those products. Under the government’s current interpretation of the FD&C Act’s misbranding provisions, a wide array of factual circumstances can be used as evidence of a manufacturers or distributor’s intent to have a drug be used in an off-label manner by health care providers, even when direct off-label promotional activity is not at issue.
As directed by Attorney General Bondi, the Civil Division also will investigate false claims submitted to federal health care programs for any “non-covered services related to radical gender experimentation.” According to the Civil Division Memo, the Civil Division intends to use the False Claims Act (FCA) and other authorities to “aggressively pursue” health care providers that bill the federal government for “impermissible services,” by, for example, attempting “to evade state bans on gender dysphoria treatments by knowingly submitting claims to Medicaid with false diagnosis codes.” The Civil Division Memo does not explain why it believes that health care providers are actually submitting such claims.
Doctors, hospitals, pharmaceutical companies, pharmacies, and other entities that care for patients seeking gender-affirming care will be under heightened scrutiny from DOJ and other enforcement agencies seeking to ensure that federal health care program funds are not used in contravention of the Civil Division Memo and the various Executive Orders and memoranda on which it is based. It remains to be seen whether whistleblowers will see the Civil Division Memo as describing a new area of opportunity for qui tam lawsuits under the FCA, which is important because relators drive the vast majority of FCA-related enforcement activity. Given that the number of patients seeking such services is relatively small, and the number covered by federal health care programs (e.g., Medicaid or TRICARE) is even smaller, relators and relators’ counsel may not view cases based on the theories described in the Civil Division Memo as being as lucrative as other enforcement areas. State laws protecting the clinical judgment of doctors and other health care professionals also may pose an obstacle to this enforcement goal.
While the Civil Division Memo is notable for the specific areas of investigative and civil enforcement it identifies, it is likewise notable for what it does not describe. Many of the priority areas on which DOJ has focused its FCA enforcement efforts over the last many years (e.g., cybersecurity fraud, COVID-19-related fraud, other types of health care fraud) are not mentioned at all. Only time will tell whether the Civil Division Memo reflects an entire reorientation of DOJ civil enforcement or simply a prioritization of new enforcement areas on top of traditional areas of focus.
This Week in 340B: June 10 – 16, 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: Contract Pharmacy; Rebate Model; HRSA Audit Process; Anti-Trust
A drug manufacturer filed a complaint challenging a Colorado state law governing contract pharmacy arrangements.
In two cases against the government related to rebate models, the plaintiffs filed a notice of appeal and in one of those cases intervenors filed a notice of cross appeal.
In two cases against the government related to rebate models, the court granted the plaintiffs’ motion to consolidate.
In a case by a covered entity challenging the government’s decision to allow a manufacturer’s audit, the covered entity filed a memorandum in opposition to the government’s motion to dismiss.
In a case challenging a South Dakota state bill, defendants filed a reply brief in support of their motion to dismiss.
In an antitrust class action case, the plaintiff filed a memorandum in opposition to the defendant’s motion to dismiss the plaintiff’s amended complaint.
Additional Author: Nadine Tejadilla
Uneven Pour: FTC’s Robinson-Patman Enforcement Sees Mixed Results as Pepsi Case Goes Flat and Southern Glazer’s Orders Another Round
Since the publication of “Rum and Coke: The FTC Targets Soft Drinks and Alcohol in the Revival of Robinson-Patman Act Enforcement – What’s Next?”, new developments have continued to shape the enforcement landscape of the Robinson-Patman Act (the Act).1
In effect, the Federal Trade Commission (FTC) is sending mixed messages about how aggressively it intends to enforce the Act. Since our last update, the agency has brought two notable cases—one against Southern Glazer’s Wine and Spirits, LLC (Southern) and another against PepsiCo, Inc. (PepsiCo)—but handled them very differently. While FTC Chairman Andrew Ferguson initially opposed filing both cases, the agency has decided to proceed with the Southern lawsuit while voluntarily dismissing the PepsiCo action. These developments suggest a more selective and uncertain approach to the Act’s enforcement under the current leadership.
FTC Initiates Enforcement Action Against Southern
On 12 December 2024, following an investigation, the FTC filed suit against Southern in the US District Court for the Central District of California (the Court), alleging violations of both (1) the Act, 15 U.S.C. § 13(a), and (2) Section 5 of the FTC Act, 15 U.S.C. § 45.2 In its complaint, the FTC alleges that Southern unlawfully favored large national retailers by offering them significantly lower prices and promotional benefits on wine and spirits than those made available to smaller, independent, “mom and pop” retailers.3 According to the complaint, these advantages included volume-based and cumulative discounts, as well as scan rebates.4 The FTC asserts that these practices were not justified by cost differences and had the effect of harming competition and disadvantaging small businesses.5
Court Denies Southern’s Motion to Dismiss
In a recent development, the Court denied Southern’s motion to dismiss the FTC’s complaint.6 The Court held that the FTC had sufficiently stated a claim under the Act by adequately alleging each element of a secondary-line price discrimination claim. Specifically, the Court reasoned that the FTC plausibly alleged that: (1) the sales occurred in interstate commerce, (2) the products sold to different buyers were of like grade and quality, (3) Southern charged different prices to favored and disfavored purchasers, and (4) the price discrimination had a likely harmful effect on competition.7 Under the first element, Southern argued that state laws requiring alcohol to “come to rest” in in-state warehouses before retail sale breaks the flow of interstate commerce, but the Court rejected this argument, holding that temporary storage does not eliminate the interstate character of the sales.8 Under the second element, while Southern argued that the FTC failed to plausibly allege the products were of “like grade and quality” because the complaint lacked details beyond price, the Court disagreed, finding that the FTC adequately alleged the same products were sold to different buyers under materially similar terms except for price.9 Under the third element, the Court reasoned that the FTC sufficiently alleged price discrimination by claiming Southern charged significantly higher prices to disfavored purchasers than to favored chains, supporting the claim with aggregated data from thousands of transactions.10 Last, under the fourth element, the Court reasoned that the FTC adequately alleged competitive harm by pleading that favored retailers received substantial, long-term price discounts enabling them to undercut disfavored retailers, and these retailers operated in close geographic proximity, bought similar products at the same time, and competed at the same functional level.11
FTC Dismisses PepsiCo Case
In contrast to the above, the FTC recently dismissed its lawsuit against PepsiCo, which alleged that PepsiCo provided preferential pricing to Walmart in violation of the Act.12 The case, filed on 23 January 2025, was voluntarily dismissed by the FTC on 22 May 2025.13 FTC Chairman Ferguson criticized the lawsuit as a “politically motivated travesty,” stating his opinion that it lacked sufficient evidence and was an inappropriate use of agency resources.14
Implications for Businesses
Although these developments send a mixed message, they indicate that the FTC remains at least partially focused on enforcing the Act—particularly in cases where there is compelling evidence of price discrimination that harms competition. Moreover, even if the FTC ultimately retreats from active enforcement, the Act provides for a private right of action. Therefore, businesses across all industries should take this opportunity to review their pricing and promotional practices to ensure compliance with the Act.
For further information or assistance in evaluating your company’s compliance with the Act, please contact the firm’s Policy and Regulatory practice lawyers.
Footnotes
1 See Christopher S. Finnerty & Michael R. Murphy, Rum and Coke: The FTC Targets Soft Drinks and Alcohol in the Revival of Robinson-Patman Act Enforcement—What’s Next?, K&L GATES HUB (June 16, 2023), https://www.klgates.com/Rum-and-Coke-The-FTC-Targets-Soft-Drinks-and-Alcohol-in-the-Revival-of-Robinson-Patman-Act-Enforcement-Whats-Next-6-16-2023.
2 See Fed. Trade Comm’n v. S. Glazer’s Wine & Spirits, LLC, No. 8:24-cv-02684-FWS-ADS (C.D. Cal. Dec. 12, 2024).
3 Id. at 1–3, 9–10.
4 Id. at 10–20.
5 Id. at 20–21.
6 Order Denying Motion to Dismiss, Fed. Trade Comm’n v. S. Glazer’s Wine & Spirits, LLC, No. 8:24-cv-02684-FWS-ADS (C.D. Cal. Apr. 17, 2025).
7 Id. at 5–12.
8 Id. at 5–8.
9 Id. at 8–9.
10 Id. at 9–10.
11 Id. at 10–12.
12 See Fed. Trade Comm’n v. PepsiCo, Inc., No. 1:25-cv-00664-JMF (S.D.N.Y. Jan. 17, 2025).
13 See Notice of Voluntary Dismissal, Fed. Trade Comm’n v. PepsiCo, Inc., No. 1:25-cv-00664-JMF (S.D.N.Y. May 22, 2025).
14 Andrew N. Ferguson, Dissenting Statement of Commissioner Andrew N. Ferguson, In the Matter of Non-Alcoholic Beverages Price Discrimination Investigation, FTC Matter No. 2210158 (Jan. 17, 2025), https://www.ftc.gov/system/files/ftc_gov/pdf/dissenting-statement-commissioner-ferguson-regarding-non-alcoholic-beverages-price-discrimination-investigation.pdf.
OIG Favorable Advisory Opinion on Physician Practice’s Arrangement with Telehealth Platform and Recent Corporate Practice of Medicine Developments
On June 11, 2025, the Department of Health and Human Services Office of Inspector General (OIG) issued a favorable advisory opinion on a proposed arrangement where a physician practice managed by a management services organization (MSO) would engage telehealth-based practices and platforms (collectively, Telehealth Companies) to provide telehealth services, including leasing health care professionals and maintaining the telehealth platform. The physician practice would submit claims for the telehealth services under its own private and government payor contracts. This advisory opinion addresses an increasingly common telehealth delivery model aimed at increasing the availability of health plan coverage for telehealth services, particularly in recent years with the rise in popularity of GLP-1 drugs for managing obesity.
The Proposed Arrangement
The advisory opinion was requested by an MSO and a physician practice wholly owned by a physician shareholder whose underlying arrangement was presumably designed to comply with state prohibitions on the corporate practice of medicine (CPOM). State CPOM provisions generally bar a business corporation from practicing medicine or employing physicians to provide medical services. Under the proposed arrangement, the physician practice would engage the Telehealth Companies, which would (i) lease health care professionals to the physician practice for the provision of professional telehealth services; (ii) provide accounting services (e.g., collecting patients’ copays); (iii) provide online marketing services; and (iv) maintain the telehealth platform. The physician practice would pay hourly rates to lease the health care professionals and an administrative fee for the non-clinical services provided by the Telehealth Companies. The requesters certified that the fees were consistent with fair market value as established by a third-party valuator and that the physician practice would pay the fees regardless of whether the practice was ultimately reimbursed by payors for the telehealth services.
The requestors noted that the Telehealth Companies often have limited in-network contracts with health plans, which can result in reduced access to covered telehealth services and higher out-of-pocket costs for patients—especially those in rural and underserved communities. To address this, the arrangement allows for referrals between the Telehealth Companies and the physician practice when both maintain contracts with the same payor. For example, a Telehealth Company may serve patients in one state, while referring patients from another state to the physician practice, thereby expanding access to in-network care.
OIG’s Analysis
The OIG determined that the arrangement would implicate the federal Anti-Kickback Statute (AKS) since the physician practice would pay remuneration in the form of service fees and the physician practice would receive patient referrals from the Telehealth Companies. But ultimately, the OIG reached a favorable determination based on the requesters’ certification that the proposed arrangement would fully satisfy the AKS’s personal services and management contracts safe harbor including outcomes-based payment arrangements. This safe harbor protects service arrangements meeting certain requirements, including that the methodology for determining the compensation related to the services is set in advance, the compensation is consistent with fair market value in arms-length transactions, and the compensation does not take into account the volume or value of any referrals or other business generated between the parties for which payment may be made by federal health care programs.
GLP-1 Manufacturers’ Lawsuits Against Telehealth Companies
The types of medical services contemplated under the proposed arrangement include obesity management care and the arrangement is reminiscent of the models adopted by a number of telehealth companies focused on managing obesity using drugs commonly known as GLP-1s. In recent years, there has been a rise in telehealth companies partnering with compounding pharmacies, physician practices and/or med spas to compound, prescribe, and distribute compounded versions of GLP-1s. The Food and Drug Administration (FDA) temporarily permitted the compounding of GLP-1s during a nationwide shortage that lasted for about two years and ended by mid-March 2025.
Subsequently, manufacturers of FDA-approved GLP-1s have filed lawsuits against multiple Telehealth Companies alleging that the Telehealth Companies are making compounded versions of their drugs illegally and without approval from FDA. Moreover, in two lawsuits filed by Eli Lilly in April 2025, the manufacturer introduced a novel argument that the Telehealth Companies are violating California’s CPOM law by unduly controlling or influencing prescribing decisions. Both Telehealth Companies are structured as MSOs managing physician-owned physician practices. To comply with state CPOM laws, physician practices must maintain autonomy over clinical decision-making and MSOs must refrain from exercising control over clinical decision-making. However, in both lawsuits, Eli Lilly alleges that the Telehealth Companies (and not the physician practices) provide insufficiently “personalized” medical advice to patients and switch patients’ dosages in violation of California’s CPOM statute.
The advisory opinion in support of, and the lawsuits challenging, these common MSO arrangements have emerged against a backdrop of increased interest in CPOM enforcement by the states. As discussed in another recent post, Oregon and Massachusetts are the latest examples of states aiming to impose additional restrictions on the MSO model.
Maybe So, Maybe Not: Mississippi AG’s Office Opines That Mississippi Law Prohibits Most Consumable Hemp Products While Recognizing Opinion’s Limitations
All participants of Mississippi’s cannabis industry should take notice of an opinion the Mississippi Attorney General’s Office published on June 11, 2025. The opinion answered three questions Mississippi Rep. Lee Yancey presented: (1) Is the sale of non-FDA approved hemp-derived products designed for human ingestion and/or consumption prohibited in Mississippi; (2) is the possession of non-FDA approved hemp-derived products designed for human ingestion and/or consumption prohibited in Mississippi; and (3) if the answer to the first two questions is yes, are municipalities authorized to enact rules and regulations that prohibit or penalize the sale and/or possession of the same?
The attorney general, relying on Mississippi’s Uniform Controlled Substances Law (MSCSL), answered the first two questions in the affirmative, concluding that the terms of the MSCSL prohibited the sale and possession of such products unless they were being sold or possessed pursuant to the provisions of Mississippi’s medical cannabis laws and regulations. The opinion, however, notes its limitations by acknowledging that components of the analysis are controlled by federal law: “[A] complete response to [Yancey’s] request is outside the scope of an official opinion.”
The opinion focuses on two exemptions to the MSCSL’s prohibition of THC but recognizes a third. THC, the psychoactive ingredient in cannabis, is illegal under the terms of the MSCSL, however, several exemptions to this prohibition exist. Two of these exemptions, forming the basis of the AG’s opinion, make an allowance for hemp products that have been approved for human ingestion and/or consumption by the FDA or products possessed or sold under Mississippi’s medical cannabis laws. The third exemption (mentioned briefly in the opinion) exempts “hemp,” as defined and regulated under the Mississippi Hemp Cultivation Act (MHCA), from the MSCSL. The MHCA defines hemp in a manner similar to the 2018 Farm Bill, stating that hemp includes all derivatives, extracts and isomers. While many have interpreted the third exemption as allowing the sale and possession of hemp as long as it meets the MHCA’s definition (an interpretation adopted across the country under the Farm Bill’s same definition of hemp), the Attorney General’s Office appears to take a different stance.
In a footnote, the attorney general seems to suggest that since the MHCA has not been fully implemented, the exemption referencing the act may not apply. This positioning points towards the attorney general’s stance being that unless a hemp product is approved for human consumption by the FDA or handled pursuant to Mississippi’s medical cannabis laws, its sale and possession are prohibited by the MSCSL – regardless of what the hemp cultivation act says. That said, the opinion reiterates that because the cultivation of hemp in Mississippi “is legalized, licensed, and controlled by federal law [and] this office cannot opine on questions of federal law [,]… to the extent federal law controls the issues presented in your request, a complete response is outside the scope of an official opinion.”
The opinion, while briefly referencing the MHCA, does not explain additional exemptions to the definitions of both THC and marijuana under the MSCSL for hemp. Again, the opinion generally acknowledges that hemp, as defined in the MHCA and 2018 Farm Bill, is not controlled under MSCSL. But because such analysis is, at least in part, controlled by federal law, the opinion ends its discussion with just these acknowledgments.
While the AG’s opinions are not considered binding precedent, this opinion undoubtedly garnered the attention of Mississippi’s consumable hemp industry and medical cannabis industry alike and rightly so. There’s also little doubt that the opinion will be used as support next legislative session when yet another hemp bill is introduced.
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Workplace Socializing May Change as Gen Z Employees Drink Less
Research shows that Gen Z employees, ages twenty-one to twenty-eight, are less likely to drink alcohol than previous generations, which may impact how they feel about work-related events that include drinking.
Quick Hits
Alcohol often plays a part in work-related socializing and networking.
Gen Z workers are less likely to drink alcohol than previous generations.
There are a number of possible strategies for employers to help nondrinkers feel included in social events.
Socializing with colleagues continues to be factor that boosts employee engagement, retention, and a sense of belonging. In many companies and industries, the work-related conferences, team bonding events, holiday celebrations, golf outings, and other meetings are often centered around alcohol. But for employees who don’t drink at all, or drink very rarely, it may feel awkward to attend sober when everyone else seems to be a little tipsy.
In a quick survey during a recent Ogletree Deakins webinar, 63 percent of participants said there can be drinking at social events for their employees, while 29 percent said alcohol can be there, but it is not provided by the employer.
Gen Z workers seem to be much less interested than previous generations in happy hour get-togethers with colleagues and other events with alcohol. Their reasons for not drinking may include the cost, wanting to prioritize health and wellness, concerns over driving, or aligning with what others in their age cohort are doing.
A Gallup poll showed that the proportion of young adults (ages eighteen to thirty-four) who said they drink alcohol fell from 72 percent in 2003 to 62 percent in 2023. Likewise, for young adults, the average number of alcoholic drinks consumed per week dropped from 5.2 in 2003 to 3.6 in 2023. With these generational changes in the workforce, employers may find that traditional happy hours for team bonding are not as well-attended or well-received as they used to be.
Next Steps
Employers can consider taking these steps to foster a welcoming and inclusive workplace for Gen Z workers who don’t drink:
When planning a work-related event or team-building activity, asking employees what they want to partake in.
If a work-related event has alcohol, providing nonalcoholic drink options.
Incorporating social activities, such as trivia contests or scavenger hunts, alongside events that have alcohol.
Your Simple Guide to Depo-Provera Lawsuits and Settlements
What is a meningioma and what types of injuries qualify?
Depo-Provera has many known side effects. However, the current Depo-Provera litigation mainly involves a “signature injury” that was not properly warned against by the Depo-Provera drugmaker, Pfizer. That signature injury is cranial meningioma.
Meningiomas are tumors that have been shown by scientific studies to be caused by Depo-Provera. While meningiomas can form in the tissues surrounding the spinal cord, the signature injury for the purposes of the current litigation are meningiomas that formed in the tissues surrounding the brain – cranial meningiomas. Depending on the size and aggressiveness of the cranial meningioma, symptoms can include pain, altered vision, hearing loss, cognitive impairment, and seizures.
Cranial meningiomas must be diagnosed through computed tomography (CT) scan or magnetic resonance imaging (MRI). Once diagnosed, cranial meningioma sufferers frequently undergo chemotherapy, radiation treatment and surgery.
Bottom Line: You should have been diagnosed with a cranial (not just spinal) meningioma to qualify for the current Depo-Provera litigation.
How do I prove I used Depo-Provera?
The current Depo-Provera litigation involves a minimum level of usage, which is typically one year. Depo-Provera is injected every three months, so the minimum level of usage would equal four injections.
The United States Food and Drug Administration (FDA) approved Depo-Provera for sale back in 1992, and a related drug, Depo-SubQ Provera, was approved shortly afterward. This means that some treatment records could be decades old and may be difficult to obtain.
In those situations, claimants (mostly through their attorneys) will have to search for and try to obtain archived medical records. These searches will not just consist of the usual pharmacy records, but include physician’s records (as injections were many times administered in a doctor’s office) and insurance records (which can tend to be preserved for longer periods of time). Even if these searches eventually prove fruitless, a claimant wants to be in a position to affirm that all avenues were exhausted and ask the Court to rely upon a claimant’s affidavit or similar form of proof.
Bottom Line: You should be able to prove that you used Depo-Provera for one year (received four shots) to qualify for the current Depo-Provera litigation.
What is the current Depo-Provera litigation?
All of the federal Depo-Provera lawsuits have been consolidated into a multidistrict litigation (MDL) before Judge M. Casey Rogers in the Northern District of Florida. It is expected that the MDL will eventually consist of five to ten thousand claims.
Each of the claims in the MDL will retain their individual identities (this is not a class action), but are being consolidated for uniform pretrial proceedings and a what should be a handful of “bellwether cases.” Bellwether cases are basically test cases that are worked up for trial and primarily used to set the value of any future settlements.
Bottom Line: Most cases are being consolidated in the MDL in Florida.
How do I find a Depo-Provera attorney?
You have been diagnosed with a cranial meningioma after using Depo-Provera for at least one year and your claim will likely be filed in the MDL. You now need to talk to legal counsel with experience in MDL litigations and Depo-Provera claims.
Do your homework and research the firm you will be working with — there is a really good chance it will not be the same lawyer that handled your last speeding ticket, or the people answering the phone at the other end of one of the 800 numbers that flash across your television screen late at night.
Also, as with any claims, Pfizer will assert many defenses in the MDL. Some of these defenses can include applicable filing deadlines like statutes of limitations and repose. This basically means that the longer a claimant waits to file a lawsuit, the more likely these types of defenses could be used against that claimant.
Is the One Big Beautiful Bill Act an Employee Benefits Crystal Ball?
Takeaways
Republicans in the U.S. House of Representatives attempt to deliver on President Trump’s campaign promises in the One Big Beautiful Bill Act (BBB or the Act), which passed the House by a razor-thin margin of 215 in favor and 214 opposed on May 22, 2025.
BBB shows favoritism of Health Savings Accounts and Health Reimbursement Account benefits, making changes to broaden their scope, increase utilization, and bolster savings.
The Act also provides a glimpse into legislative or regulatory changes that may be on the horizon for ERISA-governed plans, including standards for Pharmacy Benefit Manager compensation, contractual requirements, and disclosures applicable to government-subsidized plans.
The goal of the U.S. Senate is to pass One Big Beautiful Bill in a form on which Senators can agree, send it back to the U.S. House of Representatives, who then would have it on President Trump’s desk for signature by July 4, 2025. Time will tell whether this accelerated schedule is practical and what ultimately makes its way into federal law.
Without getting too far ahead of the legislative process and certainly staying out of the weeds of the 1,038 pages of legislative proposals, the BBB reveals fringe benefit, health and welfare benefit, and executive compensation priorities. The legislation also tips the hand of the Trump Administration, shining a light on areas in which we may see additional activity.
HSA, HRA Improvements
It is clear that House Republicans like Health Savings Accounts (HSA) and Health Reimbursement Accounts (HRA). There are pages of text aimed at expanding eligibility (including permitting Medicare-eligible enrollees to contribute to HSAs), increasing savings opportunities, allowing rollovers from other healthcare accounts, and permitting the reimbursement of qualified sports and fitness expenses. If the Act becomes law, employers offering HSA or HRA benefits will have some new bells and whistles to add to their programs.
Fringe Benefits That Make Education and Childcare More Affordable
With a focus on families and paying down student loan debt, BBB makes permanent an employer’s ability to make student loan debt repayments on a tax-favored basis under Section 127 of the tax code. BBB also enhances the employer-provided childcare tax credit, further incentivizing employers to provide childcare services to their employees. Whether the employer operates a childcare facility or pays amounts under a contract with a qualified childcare facility, BBB entices employers to add this much-needed employee benefit.
Executive Compensation Changes
The executive compensation changes baked into BBB are designed to help pay for some of the other changes. BBB expands the application of the excise tax on certain tax-exempt organizations paying compensation over $1 million (or excess parachute payments) to include former employees (think: severance). BBB also requires public companies to allocate the Internal Revenue Code Section 162(m) $1 million deduction limit among controlled group members relative to compensation when specified covered employees receive pay from those related employers.
Tax Cuts and Jobs Act Extension
A priority of President Trump, who touted extending his tax cuts during the campaign trail, BBB extends and makes permanent the Tax Cuts and Jobs Act changes. For example, BBB permanently makes qualified moving expense reimbursements taxable.
Pharmacy Benefit Manager Regulation
BBB also includes a few surprise new twists related to Pharmacy Benefit Managers (PBM). Although the legislative reforms currently focus on Medicaid and prescription drug programs subsidized by the federal government (e.g., Medicare Part D plans, including Employer Group Waiver Plans for retirees absent a waiver), it is clear that the Trump Administration and Republicans in Congress seek transparent and fair pricing of prescription drugs. These initiatives eventually may spill over to apply to ERISA-governed plans, in furtherance of President Trump’s Executive Orders advancing Most-Favored Nation prescription drug pricing and directing increased transparency over PBM direct and indirect compensation. So, the changes are worthy of note by all employers that use PBMs.
For Medicaid, BBB prohibits the “spread pricing” model in favor of “transparent prescription drug pass-through pricing model,” which essentially is cost-plus pricing. No more than fair market value can be paid for PBM administrative services.
In the case of Medicare Part D plans, BBB imposes contractual requirements limiting PBM compensation to bona fide service fees. Rebates, incentives, and other price concessions all would need to be passed on to the plan sponsor. Further, the PBM would be required to define and apply in a fully transparent and consistent manner against pricing guarantees and performance measures terms such as “generic drug,” “brand name drug,” and “specialty drug.”
Transparency also is paramount. BBB requires PBMs not only to disclose their compensation, but also their costs and any contractual arrangements with drug manufacturers for rebates, among other details.
It certainly is possible these PBM reforms are coming to an ERISA plan near you. BBB provides a roadmap for the Department of Labor’s Employee Benefits Security Administration to issue ERISA fiduciary standards, best practices, or disclosure requirements.