ECHA Adds Five Chemicals to the Candidate List and Updates One Entry
The European Chemicals Agency (ECHA) announced on January 21, 2025, that it added five chemicals to the Candidate List of substances of very high concern (SVHC) and updated one entry:
Substance Name
Reason for Inclusion
Examples of Uses
6-[(C10-C13)-alkyl-(branched, unsaturated)-2,5-dioxopyrrolidin-1-yl]hexanoic acid
Toxic for reproduction (Article 57(c))
Lubricants, greases, release products, and metal working fluids
O,O,O-triphenyl phosphorothioate
Persistent, bioaccumulative, and toxic (PBT) (Article 57(d))
Lubricants and greases
Octamethyltrisiloxane
Very persistent, very bioaccumulative (vPvB) (Article 57(e))
Manufacture and/or formulation of: cosmetics, personal/health care products, pharmaceuticals, washing and cleaning products, coating and non-metal surface treatment, and in sealants and adhesives
Perfluamine
vPvB (Article 57(e))
Manufacture of electrical, electronic, and optical equipment and machinery and vehicles
Reaction mass of: triphenylthiophosphate and tertiary butylated phenyl derivatives
PBT (Article 57(d))
No active registrations
Updated entry
Tris(4-nonylphenyl, branched and linear) phosphite
Endocrine disrupting properties (Article 57(f) — environment)
Polymers, adhesives, sealants, and coatings
ECHA states that its Member State Committee confirmed the addition of these chemicals to the Candidate List, which now has 247 entries. ECHA notes that some entries are groups of chemicals, so the overall number of impacted chemicals is higher. Candidate List chemicals may be placed on the Authorization List in the future. If a substance is on that list, its use will be prohibited unless companies apply for authorization and the European Commission (EC) authorizes them to continue its use.
Under the Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation (REACH), companies have legal obligations when their substance is included — either on its own, in mixtures, or in articles — on the Candidate List. Suppliers of articles containing a Candidate List substance above a concentration of 0.1 percent (weight by weight) must provide their customers and consumers information on how to use the article safely. ECHA notes that consumers have the right to ask suppliers whether the products they buy contain SVHCs. Importers and producers of articles must notify ECHA if their article contains a Candidate List substance within six months from the date it has been included on the list (January 21, 2025). European Union (EU) and European Economic Area (EEA) suppliers of substances on the Candidate List, supplied either on their own or in mixtures, must update the safety data sheet (SDS) provided to customers.
Under the Waste Framework Directive, companies also have to notify ECHA if the articles they produce contain SVHCs in a concentration above 0.1 percent (weight by weight). ECHA will publish this notification in its database of substances of concern in products (SCIP). Under the EU Ecolabel Regulation, products containing SVHCs cannot have the ecolabel award.
The DOL Issues New Guidance On The Relationship Between The FMLA and State Paid Family Medical Leave Programs
Employers face a complicated patchwork of state, local and federal laws governing time off for family and medical reasons. The intersection of these often-overlapping laws creates numerous issues including how to handle time off that qualifies under both state paid family medical leave (PFML) laws and the federal Family and Medical Leave Act (FMLA). On January 14, 2025, the Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) issued an opinion letter stating that employers cannot require employees to use their employer-provided paid time off such as vacation time while the employee is taking leave under the FMLA and receiving pay under a state or local PFML program. The WHD explained that the DOL’s FMLA regulations on substitution of paid leave apply to leave taken under a PFML program in the same way they apply when an employee is on FMLA leave and receiving benefits under a paid disability plan.
Background
Thirteen states and the District of Columbia have adopted mandatory PFML programs, and more states are considering similar legislation. Each state program is unique, but generally PFML programs provide income replacement for a certain number of weeks from a state fund for employees who are absent from work for specified family reasons, such as the birth of a child, and/or medical reasons, such as the employee’s own serious health condition. State and local PFML laws vary widely in their payment and eligibility structures but often employees who are eligible for leave and benefits under a state program are also eligible for unpaid leave under the FMLA.
Substitution of Paid Leave
When an employee takes job-protected leave under the FMLA, the regulations state that an employee may elect, or an employer may require an employee, to “substitute” accrued employer-provided paid leave (i.e., paid vacation, paid sick leave) for any part of the unpaid FMLA entitlement period. However, if an employee taking FMLA receives payments under a disability plan or worker’s compensation program, the employer cannot unilaterally require the employee to use accrued employer-provided paid time off.
DOL’s Guidance
Against this backdrop, the DOL opined that while state and local PFML programs are not directly addressed in the FMLA regulations, the same principles apply to such programs as those that apply to employees that receive payments on FMLA from workers’ compensation insurance programs or disability plans. These principles include:
Where an employee takes leave under a state or local PFML program, if the leave is covered by the FMLA, it must be designated as FMLA leave and the employee must be given notice of the designation, including the amount of leave to be counted against the employee’s FMLA leave entitlement.
Where an employee, during leave covered by the FMLA, receives compensation from a state or local PFML program, the FMLA substitution provision does not apply to the portion of leave that is compensated. This means that an employee or employer cannot unilaterally require the concurrent use of employer-provided paid leave for leave that is already compensated by the PFML program.
Where an employee is receiving compensation through the state or local PFML program that does not fully compensate the employee for their FMLA covered leave, the employer and employee may agree, if state law permits, to use the employee’s accrued employer-provided paid leave to supplement the payments under the state or local leave program, but the employer cannot require it.
If an employee is eligible for a state or local PFML program under circumstances that do not qualify as FMLA leave, the employer cannot apply the leave against the employee’s FMLA entitlement.
If an employee’s leave under a state or local PFML program ends before the employee has exhausted the full FMLA entitlement, the employee is still entitled to the protections of the FMLA and the employee could elect, or the employer could require the employee, to substitute the employer-provided paid leave consistent with the FMLA rules and regulations.
The DOL provides a useful example to illustrate these principles:
Yvette takes eight weeks of continuous FMLA leave to care for her mother following her mother’s inpatient surgery. Yvette’s employer notifies her that the eight weeks are designated as FMLA leave. Caring for a parent with a serious health condition is also a qualifying reason under her state’s family leave program, and she applies for and receives benefits that replace two-thirds of her normal income each week that she is on leave, for up to six weeks.
During the six weeks that Yvette is receiving paid leave benefits under the state program, under the FMLA, her employer cannot require, and she cannot unilaterally elect, to substitute her accrued vacation under her employer’s leave plan and thereby receive full pay from her employer in addition to the state-paid benefit. However, if Yvette’s state permits an employee to use accrued paid leave concurrently with the state’s paid leave, the FMLA permits Yvette and her employer to agree that Yvette will use one-third of a week of her vacation time each week to supplement the portion of her full pay that is not provided by the state’s paid leave benefit.
During the final two weeks of Yvette’s FMLA leave, she will have exhausted her state program’s paid leave. At that point, her leave becomes unpaid leave, and the FMLA substitution provision applies. Yvette elects to use her employer-provided accrued paid vacation time to receive pay during the final two weeks of her FMLA leave.
FDA Dumps Trio of Device-Related Guidances Prior to Administration Change
Among the wave of guidance documents issued by the U.S. Food and Drug Administration (“FDA” or the “Agency”) in the first week of 2025 were three notable draft guidance documents pertaining to medical devices (together, the “Draft Guidances”). The Draft Guidances hit on the topics of in vitro diagnostic (“IVD”) devices, artificial intelligence (“AI”) enabled device software functions, and pulse oximeters. This uncharacteristic deluge of guidance all within the span of a week illustrates the Agency’s desire to disseminate policy ahead of the incoming administration – especially as it relates to medical devices, which for a variety of reasons that any follower of this blog could intuit, have become a hot-button issue across the various corners of the healthcare and life sciences industries.
I. In Vitro Diagnostic Devices
On January 6, FDA released a draft guidance titled “Validation of Certain In Vitro Diagnostic Devices for Emerging Pathogens During a Section 564 Declared Emergency” (the “IVD Draft Guidance”).[1] This guidance aims to provide a framework for manufacturers to efficiently validate IVDs for emerging pathogens – part of FDA’s continuing effort to lay the groundwork for a timely and effective response to future public health emergencies. FDA is inviting comments to the Draft Guidance with a deadline set for March 7, 2025.
A. Background
The Food, Drug, and Cosmetic Act (“FD&C Act”) grants FDA authority to facilitate the availability and use of medical countermeasures (“MCMs”) to address chemical, biological, radiological, and nuclear threats to the nation’s public health.[2] This power is referred to as Emergency Use Authorization (“EUA”) and allows FDA to authorize the use of certain unapproved medical products if the Secretary of Health and Human Services (the “Secretary”) declares that justifying circumstances exist. FDA has used EUA to authorize emergency use of IVDs for eight infectious diseases over the years – most recently and notably, for COVID-19.
During COVID-19, FDA had to play catch-up by issuing enforcement discretion policies, through guidance, for certain unauthorized tests to help rapidly increase testing capacity on a nationwide scale – meaning certain tests were made available without EUA. Whether or not tests are authorized through EUA or described in enforcement discretion policies, the key concern for FDA is that these tests are properly validated. To this end, FDA can, and has, taken appropriate action against tests lacking the proper validation. In the IVD Draft Guidance, FDA provides recommendations for test validation so that IVD manufacturers can have a framework to efficiently secure authorization under EUA, and get much-needed treatments to the public, in the event of a new infectious disease outbreak.
B. Takeaways
The IVD Draft Guidance is clearly underscored by a desire to be better prepared to efficient, safe, and effective testing in the event of another disease outbreak like COVID-19 – in fact, FDA says as much in the guidance itself. What FDA does not explicitly say, but would could also underscore the Agency’s timing in issuing the guidance when it did, is a concern about how the incoming administration might handle such an outbreak in terms of testing and therapeutics, given some of the discourse we’ve heard to date.
Aside from emergency preparation, the IVD Draft Guidance also underscores FDA’s concerns about the efficacy of IVDs, generally, especially those that are subject to abbreviated validation standards. For example, last year, the Agency issued a lengthy (and controversial) final rule outlining a plan to end its previous policy of enforcement discretion for laboratory-developed tests (“LDTs”) – a subset of IVD – based on over a decade of concerns over the efficacy of these tests that have historically not been subject to any oversight, including validation standards, from FDA at all. The framework outlined in this IVD Draft Guide similarly addressed concerns over the efficacy of testing during emergency scenarios when manufacturers are subject to urgent time constraints and abbreviated EUA standards.
II. AI-Enabled Device Software
On January 7, FDA released a draft guidance titled “Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations” (the “AI Draft Guidance”).[3] This is only the third guidance FDA has released related to Artificial Intelligence (“AI”), and the second relating specifically to AI-enabled device software functions.[4] The AI Draft Guidance was expected, as it appeared on FDA’s Center for Devices and Radiological Health’s (“CDRH”) “A-list” of guidances to publish in Fiscal Year 2025.[5] The AI Draft Guidance signifies an acknowledgement by FDA of the need to keep pace – as best it can – with technological advancements in the medical device space, particularly in light of the attention and concern swirling around AI use. FDA is inviting comments to the Draft Guidance with a deadline set for April 7, 2025.
A. Background
The rapid advance of AI technology in recent years has significantly influenced the development and implementation of medical device software functions. Device manufacturers are increasingly integrating these AI-enabled device software functions (“AI-DSFs”) to enhance diagnostic, monitoring, and treatment capabilities. In recent years, FDA has focused on promoting a Total Product Life Cycle (“TPLC”) approach to the oversight of AI-DSF, which emphasizes ongoing management and continuous improvement of AI-enabled devices both pre- and post-market according to guiding principles for Good Machine Learning Practice (“GMLP”), to ensure that AI-DSF remain safe and effective from design through decommissioning. In the AI Draft Guidance, FDA continues its effort by establishing lifecycle management and marketing submission recommendations for AI-DSF and, as always, encouraging early interaction with FDA to ensure the development of a safe and effective product for patients.
B. Takeaways
In its AI Draft Guidance, FDA makes clear that the integration of AI modeling into medical device software is being scrutinized in a way that at least parallels, or even exceeds, the oversight given to general device software functions. The AI Draft Guidance sets forth many FDA recommendations for lifecycle management, suggesting that a large overhaul is needed to come up-to-speed with rapidly evolving AI development. Significantly, the scope of the AI Draft Guidance includes the device itself and any device constituent parts of a combination product, which may include AI-DSFs.
Much of the AI Draft Guidance focuses on premarket notification (e.g., 510(k)) submissions for devices that include AI-DSFs, notably requiring a thorough explanation of how AI is integrated into the device. In light of all the uncertainties surrounding AI use and its seemingly unlimited application, FDA seems to be looking for some level of assurance that AI-DSF developers will properly leverage parameters and safeguards so that this “unlimited” use potential does not transform a device beyond its cleared and/or approved intended use.
Another key focus of the AI Draft Guidance is transparency and bias reduction. This is a typical, and growing, area of concern for FDA when it comes to devices that collect and store information; however, incorporating AI complicates the issue because of unknown risk of bias. Specifically, FDA notes that AI models may rely on data correlations and other machine learning-derived processes that do not connect to biologically plausible mechanisms of action. Therefore, while AI’s strength is its adaptability, risk lies in the fact that its decision-making processes are not fully predictable. To mitigate this risk, FDA provides a recommended design approach to transparency throughout the product lifecycle, especially with respect to involving data collection and monitoring.
Another key focus of the AI Draft Guidance – and another growing area concern for FDA and stakeholders alike – is cybersecurity. Here, FDA builds off of its 2023 guidance (“2023 Guidance”) which addressed, more generally, cybersecurity in medical devices,[6] to contextualize it within the AI-sphere. The application of AI to medical device software adds a new layer of security concern because, if AI systems are hacked/accessed, the consequences can be much more widespread. To mitigate this risk, FDA provides comprehensive, AI-specific recommendations for handling cybersecurity threats, while also deferring to the 2023 Guidance for the complete framework that should be implemented prior to marketing submission.
The emergence of AI necessitates that FDA alter its long-standing framework for ensuring the safety and efficacy of medical devices in light of the unique way that AI-enabled device functions operate – and the AI Draft Guidance illustrates FDA’s continued recognition of, and response to this need.
III. Pulse Oximeters for Medical Purposes
On January 7, FDA released a draft guidance titled “Pulse Oximeters for Medical Purposes – Non-Clinical and Clinical Performance Testing, Labeling, and Premarket Submission Recommendations.” (the “PO Draft Guidance”),[7] which provides recommendations for performance testing, labeling, and premarket submissions of pulse oximeters. Once finalized, the PO Draft Guidance FDA’s existing pulse oximeter guidance, which was issued on March 4, 2013 (“2013 Guidance”).[8] FDA is inviting comments to the PO Draft Guidance with a deadline set for March 10, 2025.
A. Background
In recent years, there has been growing concern over the accuracy of readings from pulse oximeters, which are devices that measure the amount of oxygen in arterial blood and pulse rate.[9] In addressing this concern, FDA found that a host of factors affects the accuracy of pulse oximeter readings, especially person’s skin pigmentation. In light of this particular concern, FDA engaged interested parties, and partnered with the University of California San Francisco, as part of the Centers of Excellence in Regulatory Science and Innovation (“CERSI”) program, to conduct a study comparing pulse oximeter errors in clinical patients with varying skin tones. Based on results from this study, as well as input from interested stakeholders, FDA has created enhanced recommendations for marketing submissions to ensure that pulse oximeters used as standalone medical devices, or as part of a multi-parameter medical device, accurately fulfill their intended use. This comprehensive list of marketing submission recommendations is laid out in the new PO Draft Guidance and includes enhanced clinical performance testing procedures that specifically account for disparities in performance across different populations, such as diverse skin tones and pediatric populations.
FDA is showing that it is concerned not only with whether the device performs its intended function accurately, but whether that performance is consistent across all patient populations. Significantly, FDA is exhibiting concern regarding the diversity of patient populations across this country, urging manufacturers to ensure accuracy for all.
B. Takeaways
This new PO Draft Guidance underscores FDA’s continuing commitment to ensuring that regulated products are safe and effective for all individuals – not only those majority populations who have typically been the subject of clinical testing and validation. It is incumbent on manufacturers, FDA, and providers to ensure that medical devices perform properly for each and every person, irrespective of differences in identifying characteristics. And where a certain product has not been tested on and/or cannot be confirmed safe and effective for a certain population, FDA is clear that this limitation needs to be made known to prescribers and end users by limiting the product’s intended use and associated labeling. Bottom line – we can’t have patients relying on products that do not operate safely and/or specifically for them and others like them.
Conclusion
The common thread among these device-specific Draft Guidances is an emphasis on early collaboration with FDA to get ahead of certain identified issues that pose public health threats—an infectious disease emergency, an unmanageable and/or unsecure AI algorithm, or a test result that was not clinically verified for a certain patient’s skin tone. Now, we have heard this refrain before, especially on the drug side of the house—we often roll our eyes when we see it, given that the Agency holds the ultimate power in just about any facet of inquiry, decision-making, and enforcement. But given the blistering speed with which these technologies have been and will continue to develop, FDA’s entreaties here might mean something more.
Indeed, despite the myriad of other critical issues that FDA needs to address, it is clear that CDRH policymakers did not intend for devices to fall by the wayside as this administrations changed guard. Whatever happens over the coming months, all eyes in our industry will be on FDA policy—in guidance, enforcement, or otherwise.
FOOTNOTES
[1] IVD Draft Guidance available here: Validation of Certain In Vitro Diagnostic Devices for Emerging Pathogens During a Section 564 Declared Emergency | FDA
[2] FD&C Act Section 564 available here: 21 U.S.C. 360bbb-3.
[3] AI Draft Guidance available here: Artificial Intelligence-Enabled Device Software Functions: Lifecycle Management and Marketing Submission Recommendations | FDA
[4] See December 2024 guidance available here: Marketing Submission Recommendations for a Predetermined Change Control Plan for Artificial Intelligence-Enabled Device Software Functions | FDA; January 2025 draft guidance available here: Considerations for the Use of Artificial Intelligence To Support Regulatory Decision-Making for Drug and Biological Products | FDA
[5] 2025 A-List available here: CDRH Proposed Guidances for Fiscal Year 2025 (FY2025) | FDA
[6] 2023 Guidance available here: Cybersecurity in Medical Devices: Quality System Considerations and Content of Premarket Submissions | FDA
[7] PO Draft Guidance available here: Pulse Oximeters for Medical Purposes – Non-Clinical and Clinical Performance Testing, Labeling, and Premarket Submission Recommendations | FDA
[8] 2013 Guidance available here: Pulse Oximeters – Premarket Notification Submissions [510(k)s]: Guidance for Industry and Food and Drug Administration Staff | FDA
[9] See, e.g., Pulse Oximeter Accuracy and Limitations: FDA Safety Communication, FDA (Feb. 19, 2021).; Multistate Letter Urging FDA to Address Concerns about Dangerous Pulse Oximeter Inaccuracies Impacting Communities of Color, Cal. Atty. Gen. (Nov. 1, 2023).
Healthcare Preview for the Week of: January 27, 2025 [Podcast]
RFK Nomination Hearing Week
Robert F. Kennedy Jr. (RFK), nominated for Secretary of Health and Human Services (HHS), has a busy week with two Senate nomination hearings. He will testify in front of the Senate Finance Committee on Wednesday and the Senate Health, Education, Labor, and Pensions (HELP) Committee on Thursday. Both hearings are likely to be highly charged. Some Republican senators, including Senate HELP Chair Cassidy (R-LA), have raised questions about RFK’s previous positions and may raise those questions to him directly during the hearings. With back-to-back hearings, members who sit on both committees (Sens. Cassidy (R-LA), Crapo (R-ID), Scott (R-SC), Blackburn (R-TN), Marshall (R-KS), Hassan (D-NH), and Sanders (I-VT)) have an opportunity to ask follow-up questions the next day.
Only the Senate Finance Committee will vote on RFK’s nomination, before it heads to the full Senate floor. RFK can only lose three Republicans and still be confirmed. On Friday, Secretary of Defense Pete Hegseth was confirmed by a vote of 51 – 50, with Vice President JD Vance breaking the tie. Sen. McConnell (R-KY) surprised some by joining moderate Sens. Collins (R-ME) and Murkowski (R-AK) to vote against Hegseth’s nomination.
While the House is out of session, eyes are on House Republicans who are convening in Miami, Florida, to discuss their plans on reconciliation. They aim to refine which policies to include in their budget reconciliation. Healthcare policies, such as 340B reform, Medicaid per capita caps, and a Medicare site neutral policy, are eyed as savers to fund Republican priorities of tax cuts and immigration policies. Read our latest +Insight for more on this topic.
On the administrative front, late Friday evening, President Trump took much-anticipated actions on abortion, including:
Issuing an executive order (EO) that revoked two Biden-era reproductive health executive orders. The EO directs the Office of Management and Budget to issue guidance ensuring agencies comply with the Hyde Amendment, which is passed by Congress annually and prohibits federal funding for abortion.
Issuing a memorandum to HHS and the US Department of State that reinstates the Mexico City Policy. This policy prohibits foreign organizations that receive US federal funding from providing or promoting abortions. The policy has consistently been revoked by democratic presidents and reinstated by republican presidents.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the nomination hearing process and what could be in store for Robert F. Kennedy Jr.’s HHS Secretary hearings this week.
In Confirmation Hearings, AG Nominee Pledges to Defend the Constitutionality of the False Claims Act
What may have seemed like an out-of-the-blue question to the casual observer was no surprise to those who represent individuals and entities in the health care and life sciences industries: U.S. Attorney General (AG) nominee Pam Bondi was asked to share her thoughts on the constitutionality of the False Claims Act (FCA) and its qui tam provisions during her January 15, 2025, confirmation hearings.
Senator Chuck Grassley (R-IA) prefaced his questioning by noting that the FCA is “central to fighting government waste and fraud.” And since 1986—when Grassley authored amendments that modernized and strengthened the Civil War-era statute—he has been a fierce defender. Since the 1986 amendments, the FCA has brought in $78 billion for the federal government, with more than $2.9 billion recovered in fiscal year (FY) 2024.
“Most of that is due to patriotic whistleblowers who found the fraud and brought the cases forward at their own risk,” Grassley said.
The U.S. Supreme Court, the senator said, “has long upheld the law’s constitutionality.” Yet Justice Clarence Thomas, in a 2023 dissent,[1] wrote that “[t]he FCA’s qui tam provisions have long inhabited something of a ‘constitutional twilight zone,’” and posited that Article II of the Constitution does not permit Congress to “authorize a private relator to wield executive authority to represent the United States’ interests in civil litigation.” Subsequently, on September 30, 2024, a Middle District of Florida District Judge followed suit and declared the provisions unconstitutional.[2] Former AG William Barr, Grassley noted, once objected to the FCA’s whistleblower provisions—and then retracted that objection in confirmation hearings held six years earlier, to the day.
So, what is Bondi’s position on the constitutionality of the FCA’s qui tam provisions?
“I would defend the constitutionality, of course, of the False Claims Act,” the nominee said.
“If confirmed, would you commit to continuing [the Department of Justice’s (DOJ’s)] defense of the constitutionality of it—and will you ensure the entire staff and funding levels, to properly support and prosecute False Claims cases?” Grassley asked.
“Senator, the False Claims Act is so important and especially by what you said, with whistleblowers, as well, and the protection, and the money it brings back to our country. Yes, sir,” Bondi answered.
As we noted in our blog post analyzing the DOJ’s FY 2024 FCA statistics, also released on January 15, last year whistleblowers filed the highest number of qui tam actions in history—979—with the government and whistleblowers, combined, being parties to 588 settlements and judgments. FCA settlements and judgments topped $2.9 billion in FY 2024, with relator share awards totaling nearly $404 million.
The Middle District of Florida’s Dismissal with Prejudice
The U.S. Court of Appeals for the Eleventh Circuit has yet to weigh in on the matter after U.S. District Court Judge Kathryn Kimball Mizelle dismissed an FCA case brought by a qui tam relator based on her ruling that the qui tam provisions are unconstitutional.
Judge Mizelle, who was appointed to the federal bench by President Trump in his first term, dismissed the suit brought by Clarissa Zafirov, a physician who sued her former employer and others in an otherwise ordinary FCA case for allegedly misrepresenting patients’ medical claims to Medicare using false diagnosis codes to obtain inflated reimbursements.
“Zafirov has determined which defendants to sue, which theories to raise, which motions to file, and which evidence to obtain….Yet no one—not the President, not a department head, and not a court of law—appointed Zafirov to the office of relator,” Judge Mizelle wrote on September 30, 2024. “Instead, relying on an idiosyncratic provision of the False Claims Act, Zafirov appointed herself. This she may not do.”
The plaintiffs appealed to the Eleventh Circuit. Senator Grassley’s office filed an amicus brief on January 15, 2025, “strongly urging the Eleventh Circuit to reverse the lower court’s flawed decision and uphold the constitutionally sound qui tam provision.”
Specifically, Grassley’s 33-page brief rests on three tenets:
Qui tam statutes are deeply rooted in history: Indeed, qui tam provisions were enacted during the First Congress by the framers of the Constitution and are deeply embedded in the United States’ constitutional history.
Courts consistently find the FCA constitutional: Courts that have addressed this issue have uniformly concluded that the qui tam provision is constitutional.
The FCA is an effective (and cost-effective) leveraging of private knowledge and resources: The FCA, strengthened by the qui tam provision, is an effective tool to fight fraud, deter would-be fraudsters, and protect the public from harm.
“And the FCA is a resounding success, as Congress and the Executive Branch have both acknowledged,” Grassley wrote, noting that in health care—the largest area of FCA enforcement—qui tam whistleblowers have prevented harm and have uncovered fraud of which the government might not have been aware. “Additionally, an incalculable but astronomical amount of taxpayer money is saved via the deterrent effect of the whistleblower provisions.”
The United States filed a 77-page opening brief on January 6, 2025, and requested oral argument in the case, noting the importance of the issue. The district court’s decision, the government argued, conflicts with the prior opinions of four U.S. Courts of Appeals, as well as every other court to have considered the question. While the issue applies to cases where the government has not intervened, the government intervened in Zafirov for the limited purpose of defending the qui tam provisions. Specifically, the United States argued that:
Supreme Court precedent is clear that the qui tam provisions comport with Article II (e., relators do not exercise executive power);
the district court erred in applying the Appointments Clause to private citizens (e., relators do not exercise significant government authority and do not occupy a continuing position established by law); and
the district court erred in assessing and dismissing historical evidence bolstering the constitutionality of the FCA’s qui tam provisions, including early qui tam statutes comparable to the FCA.
What This Means for Health Care Enforcement
What might this mean for health care fraud enforcement, as we enter President Trump’s second term? As we noted in our recent blog post on the DOJ’s FCA recovery statistics, the fact that the first Trump administration saw nearly 370 more health care cases brought by relators than during the Biden administration, and the highest number of health care-related FCA cases brought by the DOJ in a single year—combined with Bondi’s support of the constitutionality of the statute—indicates the DOJ’s continued interest in pursuing FCA cases. Focusing on the health care sector continues to generate more FCA enforcement and recovery than any other industry, a trend likely to continue even if we may not yet know if Bondi’s leadership will ultimately prove more favorable to business interests. Stay tuned for more to come once the Eleventh Circuit issues its highly anticipated decision on the constitutionality of the FCA’s qui tam provisions.
Epstein Becker Green Attorney Ann W. Parks contributed to the preparation of this post.
ENDNOTES
[1] See U.S. ex rel. Polansky v. Executive Health Resources, 599 U.S. 419 (2023). In addition to Justice Thomas’ dissent, Justices Kavanaugh and Barrett in a concurrence acknowledged that “[t]here are substantial arguments that the qui tam device is inconsistent with Article II” and suggested that the Court consider those arguments in an “appropriate case.”
[2] See U.S. ex rel. Zafirov v. Florida Medical Associates LLC, 2024 WL 434942 (D. Fla. Sept. 30, 2024).
DOJ Announces Modest Increase in FCA Recoveries, Fueled Largely by Whistleblower Lawsuits
The Department of Justice (“DOJ”) recently announced a modest increase in monetary recoveries for 2024 from investigations and lawsuits under the False Claims Act (“FCA”), which is the Government’s primary tool for combating fraud, waste, and abuse. In fiscal year 2024, the DOJ recovered over $2.9 billion from FCA settlements and judgments, marking a 5% increase over 2023’s total and the highest amount in three years. Recoveries were fueled largely by qui tam lawsuits previously filed by whistleblowers, which contributed to $2.4 billion of the $2.9 billion recovered. The number of qui tams filed last year was also the highest ever in a single year at 979 cases. While health care fraud continues to be the primary source of enforcement activity, the rise in lawsuits stemmed from non-health care related cases. This underscores the Government’s and private citizens’ intensified enforcement efforts through FCA investigations and litigation in both the health care sector and beyond.
FCA Recoveries by the Numbers
While the nearly $3 billion recovered last year resulted from a record-breaking number of 566 settlements and judgments, last year’s haul remains well below peak year recoveries, such as 2014’s $6.2 billion and 2021’s $5.7 billion. The following chart illustrates the FCA recoveries by fiscal year, showcasing monetary trends over the past decade.
Key Enforcement Areas
In announcing 2024’s recoveries, the Government highlighted several key enforcement areas, such as:
The opioid epidemic. The Government continues to pursue health care industry participants that allegedly contributed to the opioid crisis, focusing primarily on schemes to market opioids and schemes to prescribe or dispense medically unnecessary or illegitimate opioid prescriptions.
Medicare Advantage Program (Medicare Part C). As the Medicare Advantage Program is the largest component of Medicare in terms of reimbursement and beneficiaries impacted, the Government stressed this remains a critical area of importance for FCA enforcement.
COVID-19 related fraud. Given the historic levels of government funding provided as a result of the COVID-19 pandemic, the Government also continues to pursue cases involving improper payment under the Paycheck Protection Program as well as false claims for COVID-19 testing and treatment. Close to half of 2024’s settlements and judgments resolved allegations related to COVID-19.
Anti-Kickback Statute and Stark Law violations. Cases premised on alleged violations of the AKS and Stark Law remain a driving force in FCA litigation for health care providers. In the last several years, there seems to be renewed interest in Stark Law enforcement, in particular.
Medically unnecessary services. The provision of medically unnecessary health care services also remains a widely-used theory of FCA liability, despite this being a historically challenging enforcement area often involving disputes over subjective clinical decisions.
EPA and OSHA Renew Cooperation With Memorandum of Understanding on Toxic Substances Control Act
The Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) have long cooperated with each other and have renewed their commitment to cooperation in a December 2024 memorandum of understanding (MOU) focused on the Toxic Substances Control Act (TSCA).
The EPA routinely recommends new chemicals be subject to TSCA review to determine whether a chemical or significant new use presents unreasonable risk of injury to health or the environment, without consideration of cost or other non-risk factors. The MOU was one of the last acts of the Biden administration’s assistant secretary of labor for workplace safety and health, Douglas Parker.
Quick Hits
A December 2024 memorandum of understanding (MOU) between OSHA and the EPA emphasizes sharing information on inspections, complaints, and potential violations related to Section 6 of the Toxic Substances Control Act (TSCA)
OSHA will encourage states with OSHA-approved state plans to participate in information-sharing activities under the MOU.
In decades’ old agreements, EPA and OSHA have outlined various alliances and agreements to work with each other in their respective inspection and enforcement activities. When personnel associated with the EPA observe workplace health and safety concerns, they are authorized under those agreements to make referrals to OSHA. When OSHA personnel identify potential environmental issues, they are authorized to make referrals to the EPA. OSHA’s process safety management (PSM) rules are the workplace health and safety corollary to EPA’s risk management program rules, both of which relate to processes involving “highly hazardous substances.”
In an MOU from 2021, the EPA and OSHA entered into an agreement related to TSCA, that resulted in:
establishing designated staff and management points of contact from each agency to discuss and resolve workplace exposure issues related to EPA’s review of new chemicals;
providing OSHA with regular updates on EPA’s new chemical determinations, including any necessary worker protection identified during EPA’s review; and
documenting EPA’s role in identifying and notifying OSHA of the need for formal consultation on EPA’s review of new chemicals.
It bears noting that the term “new chemicals” does not mean newly developed chemicals, but instead chemicals that are not on the TSCA inventory. In 2024, EPA issued draft and final risk assessments related to formaldehyde, 1,1 dichloroethane, and 1,3 butadiene. Five commonly used chemicals, acetaldehyde, acrylonitrile, benzenamine, vinyl chloride, and 4,4’-methylene bis(2-chloroaniline) (MBOCA), were designated as high-priority substances, which prioritizes the risk assessment of those chemicals. A change to the TSCA rules also resulted in all new per and polyfluoroalkyl substances (PFAS) being subject to a full safety review process under TSCA.
The 2024 MOU built on the 2021 MOU, but focused on the sharing of information and data concerning each agency’s focus areas for inspections, complaints, potential violations, and EPA’s planned enforcement pertaining to TSCA’s section 6 rulemaking and enforcement. While the MOU portends potential changes in substances that might fall under OSHA’s control, such as the list of highly hazardous chemicals related to PSM, it is not clear that OSHA will act to make any changes related to TSCA determinations.
The two agencies agreed to share information on complaints, inspections, potential violations, and EPA’s planned enforcement, as appropriate, related to TSCA section 6 activities in workplaces where areas of mutual interest exist. Each organization will exercise its independent jurisdiction to enforce applicable regulations and laws. EPA and OSHA agreed to mutually refer potential violations under TSCA section 6 and OSHA standards in workplaces within their respective jurisdictions, and, for cases of joint interest, take other cooperative steps to share information on such potential violations.
Regarding coordination with states with OSHA-approved state plans:
OSHA intends to share this MOU with state plans and encourage state plans to refer applicable potential violations to EPA.
OSHA intends to encourage states with OSHA-approved state plans to participate in all information-sharing activities established under this MOU.
Wearable Technologies in the Workplace May Implicate Nondiscrimination Laws
The U.S. Equal Employment Opportunity Commission (EEOC) recently released a fact sheet that explains why employers need to be careful in using wearable technologies so they do not violate federal nondiscrimination laws.
Companies in the warehousing, package delivery, construction, manufacturing, and healthcare industries are most likely to rely on wearable technologies and be impacted by federal enforcement of nondiscrimination laws.
Quick Hits
An increasing number of employers are requiring workers to use wearables to track their movements and location for safety and productivity purposes.
A new fact sheet from the EEOC describes how the use of wearables in the workplace could violate federal nondiscrimination laws.
When relying on wearables, employers may need to make reasonable accommodations for workers with disabilities.
On December 19, 2024, the EEOC published “Wearables in the Workplace: Using Wearable Technologies Under Federal Employment Discrimination Laws” to help employers prevent legal challenges related to using wearables.
The EEOC fact sheet defines wearables as “digital devices embedded with sensors and worn on the body that may keep track of bodily movements, collect biometric information, and/or track location.” Wearables include GPS trackers, smart watches, smart rings, smart glasses, smart helmets, and proximity sensors. They may monitor eye movements, blood pressure, heart rate, body temperature, or physical location.
Collecting Medical Information
The fact sheet advises that using wearables to collect information about an employee’s physical or mental condition, or to conduct diagnostic testing, could constitute “medical examinations” under the Americans with Disabilities Act (ADA).
The fact sheet also advises that requiring workers to provide medical information in connection with using wearables could constitute “disability-related inquiries” under the ADA. The EEOC reminds employers that the ADA bars disability-related inquiries unless they are job-related and consistent with business necessity.
If an employer collects medical or disability-related data from wearable devices, the ADA requires the employer to store that data in separate medical files and treat it as confidential medical information.
The EEOC confirmed that an employer may violate federal nondiscrimination laws if it uses information collected from wearables to make decisions that have an adverse impact on protected classes. The EEOC’s examples include using wearables’ information to determine that an employee is pregnant and treat her differently because of the pregnancy, or to fire an employee with an elevated heartbeat that a heart condition causes.
Reasonable Accommodation Issues
The EEOC advised that employers may have to provide employees with the reasonable accommodation of excusing them from utilizing wearable devices. The EEOC posited that an employer might have to excuse workers whose religion prevented them from wearing the device, or make a reasonable accommodation based on pregnancy and/or disability.
Next Steps
Employers that rely on, or are considering using, wearable technologies may wish to review their policies and practices to ensure they comply with federal nondiscrimination laws, particularly the ADA’s requirement that collecting medical information and making disability-related inquiries must be job-related and consistent with business necessity.
Employers that use data from wearables in their employment-related decision-making may wish to examine whether their use adversely impacts individuals in protected groups.
Update: California State Assembly Passes AB 3129 Requiring State Approval of Private Equity Healthcare Deals
California’s AB 3129, which would require private equity firms and hedge funds to obtain prior approval to consummate certain healthcare-related transactions, is now one step closer to becoming law following the State Assembly’s May 22, 2024 passage of the pending legislation. The legislation is now being considered by the California State Senate, where approval must be obtained prior to the end of the legislative session in August if it is to be enacted into law this year.
As previewed in our prior blog post, if enacted, AB 3129 would require private equity firms and hedge funds to file an application with the state Attorney General at least 90 days in advance of a transaction involving the acquisition or change of control of healthcare facilities and provider groups and in most cases, await approval to close the transaction. Furthermore, the bill would place significant restrictions on the ability of private equity and other investors to implement “friendly PC-MSO” and similar arrangements, which are widely used today by stakeholders as an investment structure to avoid violating California’s prohibition on the corporate practice of medicine.
While the bill has not yet been enacted into law, the State Assembly’s passage of the bill does represent positive momentum for proponents of the legislation, and stakeholders should be aware of the legislation’s broad implications on the structuring and consummation of healthcare-related transactions in the state.
Massachusetts Aligns with National Trends and Enacts Sweeping Legislation to Regulate Pharmaceutical Benefit Managers
On the heels of a nationwide push to regulate pharmacy benefit managers (PBMs), Massachusetts enacted a landmark piece of legislation to increase transparency and oversight within the pharmaceutical supply chain, specifically targeting PBMs. Signed into law by Governor Healey on January 9, 2025, the comprehensive bill, titled “An Act Relative to Pharmaceutical Access, Costs and Transparency” (the Act), introduces a multifaceted approach that aims to reduce prescription drug costs, enhance data transparency, and impose stronger oversight of PBMs and pharmaceutical manufacturers.
Key Provisions of the Act
Patient Cost Sharing Limitations: The Act mandates that certain health plans, including those offered by MassHealth, offer limited or no cost-sharing for specific generic and brand-name drugs for chronic illnesses, such as diabetes or asthma. Specifically, health insurers must: (i) cover one generic medication for diabetes, asthma, and certain heart conditions with no cost-sharing requirements by patients (eliminating copays and deductibles), and (ii) cap copays for one brand-name medication per condition at $25 per 30-day supply. The Commissioner of Insurance may change the selection of drugs subject to this law, not more than annually. This requirement will go into effect on July 1, 2025.
PBM Licensing and Regulation: The Act established a licensing regime for PBMs and requires all PBMs to obtain a license from the Division of Insurance. The Division of Insurance is tasked with establishing the PBM licensing program by October 1, 2025, and PBMS are required to be licensed as of January 1, 2026. This oversight will enable the state to monitor PBM activities, ensure financial stability, and regulate the growing PBM market.
In addition, the Act takes aim at conflicts of interest within the PBM industry. The Act requires PBMs to disclose to its health plan clients any activity, policy, practice contract, or arrangement that directly or indirectly presents any conflict of interest in regard to the PBM’s relationship with, or obligations to, its client. The Act also specifically prohibits certain payments from PBMs to consultants and brokers whose services were obtained by a health benefit sponsor to work on the pharmacy benefit bidding or contracting process if the payment constitutes a conflict of interest. Interestingly, the Act does not explicitly define what constitutes a conflict of interest. Instead, it states that the determination of whether a payment constitutes a conflict of interest will be determined by the Commissioner of Insurance and instructs the Division of Insurance to adopt written policies and procedures or promulgate regulations to implement this requirement.
Transparency and Data Reporting: The Act requires PBMs and pharmaceutical manufacturers to submit detailed cost and pricing data to the Center for Health Information and Analysis (CHIA), including information on rebates, administrative fees, patient cost-share, and formulary decisions. This data will inform CHIA’s annual health care cost trends reports, which analyze key drivers of healthcare costs in the state. The Act also requires both PBMs and pharmaceutical manufacturers to participate in the Health Policy Commission (HPC)’s Cost Trends Hearings, by providing testimony on pricing practices, rebates, and access issues. The Act further establishes a new Office for Pharmaceutical Policy and Analysis within the HPC to monitor pharmaceutical trends using the information gathered through the hearings and reports to evaluate spending trends and recommend strategies to improve affordability.
Funding and Broader Oversight: To fund CHIA’s and HPC’s expanded oversight and monitoring activities, starting in Fiscal Year 2026, the Act introduces financial assessments for PBMs and pharmaceutical manufacturers. The assessment amount will be between 5% and 10% of HPC and CHIA’s operating budgets, based on the entities’ market share within Massachusetts, ensuring the contribution is commensurate with their business in the state. Additional provisions adjust assessments for hospitals and non-hospital providers, requiring their contributions to fund health policy initiatives. For more details on the financial assessments imposed on PBMs and other entities, such as hospitals and non-hospital providers, see our analysis of the recently enacted “An Act Enhancing the Health Care Market Review Process.”
Key Takeaways
This comprehensive legislation positions Massachusetts alongside other states that have taken steps to regulate PBMs. However, the full scope and impact of this legislation will not be fully understood until the Division of Insurance promulgates the necessary regulations and establishes specific requirements for PBM licensing and operations. In addition, the efficacy of any regulations is unknown at this point, given that the successful implementation of the law will depend heavily on effective collaboration between the state agencies, PBMs, and health insurers. The Act’s aims require ongoing monitoring, evaluation, and potential adjustments based on the data collected and the observed impact on drug costs, patient access and the overall healthcare system. What is clear though, is that PBMs will face heightened scrutiny from regulators, requiring them to adapt to the new regulatory regime in the Commonwealth of Massachusetts.
Swing and a Miss: The Government Strikes Out in Pharmacy Executive Kickback Trial
Last week, the government submitted its decision to the federal court not to retry partially-acquitted pharmacy executive, Chad Beene, for conspiracy and illegal kickback allegations. At the end of last year, a New Jersey jury partially acquitted Mr. Beene on charges related to an alleged $34 million illegal kickback scheme. At trial, federal prosecutors alleged that Mr. Beene and his colleagues crafted an illegal scheme through which they paid several marketing companies illegal kickbacks for securing prescriptions of “medically unnecessary” and “exorbitantly priced” compounded medications. While three of the indicted alleged co-conspirators pleaded guilty, Mr. Beene took the case to trial and was found not guilty on six counts. The jury was unable to reach a verdict on nine additional counts. These remaining counts left the door open for prosecutors to retry the case against Mr. Beene in an attempt to secure a conviction.
A federal grand jury indicted Mr. Beene and his alleged co-conspirators in July of 2020 for allegedly using their positions as pharmacy executives at Main Avenue Pharmacy to identify the most expensive medications, such as compounded scar creams, pain creams, migraine medication, and vitamins, and create pre-written prescription pads to encourage doctors to write prescriptions that would result in the highest pharmacy reimbursement, even where the medications were not medically necessary. The defendants then allegedly disbursed the prescription pads nation-wide through their contacts with marketing companies. As part of the scheme, the marketers would pay telehealth companies and healthcare providers to authorize the prescriptions, which were then sent back to the conspirators’ pharmacy and filled. The defendants would then submit requests for reimbursement from patient’s private health insurance, Tricare, and Medicare. After receiving their reimbursements, the defendants allegedly paid kickbacks to the marketers for the prescriptions received.
Federal prosecutors argued that the signed contracts with the marketers laid out the illicit kickback arrangement with the pharmacy. In total, the defendants, along with Main Avenue Pharmacy, were alleged to have received almost $34 million in reimbursements.
Two of the defendants, Jeffrey Andrews, the former pharmacy Chief Financial Officer, and Adam Brosius, the former pharmacy Director of Business Development and President, pleaded guilty to charges of conspiracy earlier this year. The remaining defendant Robert Schneiderman had previously pled guilty in 2022 to conspiracy to commit health care fraud and conspiracy to violate the Anti-Kickback Statute. Sentencing is scheduled for June 2025.
Mr. Beene did not agree to a plea deal and proceeded to trial where he argued that there was insufficient evidence of an illegal conspiracy and that he acted in “good faith”, or, in other words, that in his honest opinion and belief his conduct was entirely legal. Mr. Beene acknowledged that he served as the National Sales Manager of the Main Avenue Pharmacy, where he used his skill and knowledge of graphic software to clean up pre-prepared prescription pads and developed marketing plans, but showed that he had no previous health care work experience. Based on his limited health care training and understanding, Mr. Beene claimed that he lacked the understanding that certain business practices, such as commission-based payments to marketers or insufficient oversight of prescription authorizations, could be considered unlawful. Witnesses against Mr. Beene included his alleged co-conspirators Brosius and Schneiderman, others who worked at the pharmacy, and pharmacy patients.
The trial record indicates that the jury intently reviewed the evidence and jury instructions, sending notes to the judge during deliberations asking for specific pieces of evidence or copies of relevant statutes. In their verdict, the jury acquitted Mr. Beene of all counts related to the allegations that he caused the pharmacy to submit allegedly fraudulent claims to Medicare and other health care plans. However, after five days of deliberations, the jury could not come to a conclusion on the counts of conspiracy to commit health care fraud or to violate the Anti-Kickback Statute and other alleged payments of illegal kickbacks. The government’s conspiracy theories rested on Mr. Beene entering into an agreement with others to commit the crimes. After the verdict was issued, a juror reached out to defense counsel offering to speak regarding the verdict offering to answer any questions about the case and stating “ . . . I want you to know your team did a fantastic job at trial . . . I wanted to ensure I exhausted all options in securing a Not Guilty verdict on all counts. We were so close . . . I am unsure of the chances for a retrial, but the government’s case is weak.”
Mr. Beene’s acquittal is a reminder that the government does not win every case it brings to trial, especially where the regulations are complex and intent is not easily proven. In heavily regulated industries like health care, it can be difficult for industry participants to parse through convoluted regulatory framework. For jurors without any health care industry experience, it can be even more difficult to understand or focus on the non-criminal intent behind convoluted business practices. While the Department of Justice continues to aggressively pursue health care fraud cases, Mr. Beene’s acquittal shows that proving illicit intent in the midst of the increasing complexities of regulatory compliance is difficult and a conviction is not a foregone conclusion simply because the government alleges that individuals “knew” that their conduct was improper. The government must prove knowledge beyond a reasonable doubt.
McDermott+ Check-Up: January 24, 2025
THIS WEEK’S DOSE
Senate Committees Continue Nomination Hearings. Senate-wide votes have begun as the confirmation process progresses.
House VA Committee Holds Oversight Hearing on Community Care. Members of the House Veterans’ Affairs (VA) Committee examined Congress’ role in improving veterans’ healthcare.
White House Revokes Biden-Era Healthcare EOs. The rescinded executive orders (EOs) relate to health equity, prescription drug costs, and artificial intelligence (AI).
Trump Pauses Regulatory Activity. The pause includes external communications for all agencies.
CONGRESS
Senate Committees Continue Nomination Hearings. The Senate VA Committee held a hearing for VA secretary nominee Doug Collins and subsequently voted for his confirmation with broad bipartisan support. His confirmation vote will now be scheduled for consideration by the full Senate. Russell Vought’s nomination for Office of Management and Budget (OMB) director advanced out of the Senate Homeland Security and Governmental Affairs Committee in an 8 – 7 vote along party lines earlier this week. The Budget Committee held another hearing for Vought’s nomination, where Democrats expressed concerns about potential cuts to Medicaid, especially for low-income and elderly individuals. Republicans focused on the importance of reducing waste, fraud, and abuse in healthcare and advocated against providing care to undocumented immigrants. The Senate Budget Committee will vote on Vought’s confirmation in the coming days, after which his confirmation should be scheduled for consideration by the full Senate.
House VA Committee Holds Oversight Hearing on Community Care. In the hearing, members agreed that Congress has a role to play in improving care for veterans and supporting community care, and expressed concern about the lack of access to VA facilities across the country. Many Democratic members emphasized the need for more hearings on this issue, particularly with witnesses from the VA and third-party VA administrators.
ADMINISTRATION
White House Revokes Biden-Era Healthcare EOs. President Trump was inaugurated on January 20, 2025, and he spent his first day issuing new EOs and revoking others signed into law by former President Biden, 12 of which were healthcare-related. Revoking these EOs has little immediate impact, because additional steps would be necessary to effectuate changes to current policy. The revocations may be indicative of future policymaking, however. Below is a summary of a few key rescinded EOs:
Strengthening Medicaid and the ACA. This EO directed the US Department of Health and Human Services (HHS) to consider creating a special enrollment period for the health insurance marketplace in response to COVID-19. It also directed HHS and the US Departments of Labor and the Treasury to examine and consider suspending or rescinding policies or practices that may undermine Medicaid, Affordable Care Act (ACA) coverage, or the Health Insurance Marketplace. The EO also revoked two first-term Trump Administration EOs: Minimizing the Economic Burden of the Patient Protection and ACA Pending Repeal, and Promoting Healthcare Choice and Competition Across the United States.
Lowering Prescription Drug Costs for Americans. This EO directed the Centers for Medicare & Medicaid Innovation Center to consider models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes high-quality care.
Safe, Secure, and Trustworthy Development and Use of AI. This EO set forth principles that executive agencies should follow when utilizing AI, including requirements that AI be safe, secure, responsible, and equitable. The EO also established the White House AI Council, which consisted of the assistant to the president and deputy chief of staff for policy, and representatives from various agencies and departments, including HHS.
Through another EO, President Trump started the process of withdrawing the United States from the World Health Organization (WHO), citing mishandling of the COVID-19 pandemic and an inability to demonstrate independence from the political influence of WHO member states. The EO directs OMB and the US Department of State to pause transfer of funds to the WHO and recall any personnel working in any capacity at the WHO.
Trump Pauses Regulatory Activity. As part of the transition, the new Trump Administration issued an EO that paused regulatory activity, including issuance of new proposed rules unless an exemption is provided. While this is typical of a new Administration, memos from department heads have placed more restrictions on third-party and formal communications, even outside of the rulemaking process. For HHS, the “freeze” in regulatory activity is set to run until February 1, 2025.
QUICK HITS
MACPAC Holds January 2025 Meeting. The Medicaid and CHIP Payment and Access Commission (MACPAC) meeting included discussion related to home- and community-based services, opioid-use disorder treatment, residential services access for children and youth, external quality review for managed care organizations, the transition from pediatric to adult healthcare, and the All-Inclusive Care for the Elderly model.
President Trump Announces Investment in AI Infrastructure. The president announced the Stargate Project, which is a multibillion-dollar investment by private technology companies. The project’s goal is to create AI infrastructure in the United States and includes a focus on curing diseases.
NEXT WEEK’S DIAGNOSIS
We expect the new Administration to continue to release EOs and take additional actions on healthcare in the coming week. The House will be in recess next week, and the Senate will be in session, with confirmations expected to continue in committees and on the floor. HHS secretary nominee RFK Jr. will appear before the Senate Finance and Health, Education, Labor, & Pensions Committees next week. Other hearings include a Senate VA Committee hearing on the VA’s community care program, and a Senate Aging Committee hearing on fiscal policies related to seniors.