A Changing Enforcement Landscape Under the New Administration
As the Trump Administration embarks on its second term, significant shifts in government enforcement priorities are quickly taking shape. Not surprisingly, this administration appears to be focusing on immigration, drug and violent crime offenses, and traditional fraud rather than more novel white-collar enforcement. Additionally, it appears as though the Department of Justice will face potential resource issues due to the efforts of the Department of Government Efficiency (DOGE). Whether that is through hiring freezes, resignations resulting from ending remote work, layoffs, and potential buyouts of federal employees, the reduction of resources could have a substantial impact on staffing for white-collar enforcement cases, which tend to be resource intensive. Nonetheless, businesses and industry professionals should be aware of these evolving trends to ensure compliance and readiness for potential government investigations. Below we highlight what we expect to see throughout this administration’s term.
Immigration: The Trump Administration has reaffirmed its commitment to stringent immigration enforcement. Prior to this administration taking office, agencies like the Department of Labor had been focused on underage labor violations and holding businesses accountable for third party staffing companies. Now, however, the focus will shift to the removal of anyone not legally in the United States, likely leading to an increase in ICE raids and I-9 audits, including in places like hospitals, schools and places of worship, all of which used to be safe havens for this type of enforcement activity.
DEI and False Claims Act Liability: President: President Trump’s executive order aimed at eliminating diversity, equity, and inclusion (DEI) policies introduces new compliance challenges for federal contractors and grant recipients. The order reverses federal contracting requirements dating back nearly 60 years, which obligated federal contractors and subcontractors to implement affirmative action programs. The January 21, 2025, executive order requires federal contractors and grant recipients to agree that their “compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions” under the False Claims Act (FCA). Second, it requires federal contractors and grant recipients to certify that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” The new certification and materiality requirements create heightened FCA risk for clients who participate in government programs and may incentivize whistleblowers to initiate qui tam actions.
Health Care: Health care enforcement, particularly those involving the FCA, is anticipated to continue at a steady pace. During President Trump’s first term, health care enforcement actions increased in his second year and remained steady thereafter, so we can likely expect a similar trend this term. Additionally, the newly established Department of Government Efficiency (DOGE) is taking steps to actively mine data for fraud, particularly in Medicare and Medicaid, which could lead to an increase in enforcement activities in the healthcare sector.
Foreign Corrupt Practices Act: While the Department of Justice (DOJ) achieved record enforcement levels for Foreign Corrupt Practices Act (FCPA) cases during the previous term, President Trump has signed an executive order directing the DOJ to pause criminal prosecutions related to the bribing of foreign government officials under the FCPA and instructing Attorney General Pam Bondi to prepare new guidelines for enforcement. The executive order comes a week after Attorney General Pam Bondi had already announced via a memo that the DOJ would be scaling back laws governing foreign lobbying transparency and bribes of foreign officials. In the memo, Attorney General Bondi also disbanded the National Security Division’s corporate enforcement unit and directed the Department of Justice’s money laundering office to prioritize cartels and transnational crime.
SEC Enforcement: We expect a major scaling back on the SEC’s focus on cryptocurrency, internal accounting and disclosure control violations. President Trump’s nominee as SEC chairman, Paul Atkins, is a known supporter of the crypto industry. Instead, we anticipate a renewed focus on traditional securities fraud cases, including like retail investor protection, Ponzi schemes, and insider trading. Under Chair Gensler, corporate penalties and disgorgement reached record highs, but with a Republican-controlled SEC we are likely to see smaller penalties and an adherence to disgorgement limitations set by the Supreme Court.
Antitrust: Antitrust enforcement is expected to pivot away from merger scrutiny towards addressing concerns related to “Big Tech” and alleged censorship. Additionally, there may be enforcement actions targeting alleged collusion on DEI issues, reflecting the administration’s executive orders and stated policy goals. Industries under high public scrutiny and foreign corporations should be particularly vigilant in preparing for potential agency scrutiny.
As the enforcement landscape continues to evolve, it will be crucial to stay informed and proactive.
The NIH IDC – Where Are We Now
On February 7, the National Institutes of Health (“NIH”) issued a Notice (NOT-OD-25-068) entitled “Supplemental Guidance to the 2024 NIH Grants Policy Statement: Indirect Cost Rates” (the “Notice”), though which NIH announced the adoption of a uniform indirect cost rate (“IDC Rate”) of 15% applicable to all new grants, and to existing grants awarded to Institutions of Higher Education (“IHEs”) – encompassing the vast majority of postsecondary educational institutions in the United States – as of the date the Notice was issued (February 7, 2025). The Notice also indicates the policy will apply for “all current grants for go forward expenses from February 10, 2025 as well as for all new grants issued.”
The Notice, as written and supported by underlying regulations, appears to apply the 15% IDC Rate to existing awards only for IHE recipients (see the Notice’s acknowledgment that “NIH may deviate from the negotiated rate both for future grant awards and, in the case of grants to institutions of higher education (“IHEs”), for existing grant awards. See 45 CFR Appendix III to Part 75, § C.7.a; see 45 C.F.R. 75.414(c)(1).” (emphasis added)). However, there is some ambiguity in the wording and existing non-IHE awardees should be prepared for a possibly broader read by the NIH. The IDC Rate covers “facilities” and “administration” costs of the grantee institution. As a general matter, an institution’s IDC Rate is pre-negotiated and although the NIH cited 27-28% as the average negotiated IDC Rate, it has been reported that many institutions negotiate upwards of 50-60%, with some even as high as 75%.
The NIH justified its action under 45 C.F.R. § 75.414(c)(1), pursuant to which “[a]n HHS awarding agency may use a rate different from the negotiated rate for a class of Federal awards or a single Federal award only when required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification as described in paragraph (c)(3) of this section.” Paragraph (c)(3) goes on to require that “[t]he HHS awarding agency must implement, and make publicly available, the policies, procedures and general decision-making criteria that their programs will follow to seek and justify deviations from negotiated rates.” Presumably the NIH is taking the position that this Notice serves as the publication of the criteria it will follow (and is following in real time through the Notice) to seek and justify this likely downward deviation from already negotiated rates held by grantee institutions for existing awards.
The NIH Notice was challenged in two different motions for temporary restraining orders (“TRO”): one filed by a collection of State Attorneys General (see Commonwealth of Massachusetts vs. National Institutes of Health, Case # 1:25-cv-10338) and the other by the Association of American Medical Colleges and other similar associations (Case # 1:25-cv-10340). The motions are based on several similar arguments: (1) the indirect rate change is arbitrary and capricious, (2) the rate change violates Section 224 of the Further Consolidated Appropriations Act, 2024, (3) NIH failed to comply with its own regulations for indirect cost rates, (4) NIH has no authority to make retroactive changes to indirect cost rates, and (5) notice and comment procedures are required because this is a substantive change because it imposes a new obligation that did not exist previously.
On February 10, the District Court for the District of Massachusetts granted the State Attorneys General’s request and entered a TRO blocking the implementation, application, and enforcement of the Notice within the Plaintiff States (i.e., within Massachusetts, Illinois, Michigan, Arizona, California, Connecticut, Colorado, Delaware, Hawaii, Maine, Maryland, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Rhode Island, Vermont, Washington and Wisconsin) until further order is issued by the Court. A hearing date has been set for February 21, 2025 at 10 a.m.
In a separate ongoing litigation, State of New York v. Trump (C.A. No. 25-cv-39-JJM-PAS), the District Court of Rhode Island issued a TRO on January 31, 2025, prohibiting the Defendants from freezing federal funding based on the Trump administration’s Executive Orders or the OMB Memorandum M-24-13 dated January 27, 2025 (“Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs”). On February 10, 2025, the same day as the motions to block the NIH’s uniform IDC, the judge in that matter, Chief Judge John J. McConnell, Jr. issued an Order to enforce the funding-freeze TRO in response to Plaintiff’s emergency motion, indicating that the Defendants must take certain steps to both restore funding and refrain from further violation of the TRO. Some media outlets have reported this Order as also blocking the NIH’s Notice related to IDCs. It is unclear at this time whether the NIH’s action in the Notice could be deemed to fall within the scope of the Executive Orders or the OMB Memo, and it does not appear this argument was made in the two motions for TROs brought against the NIH on February 10, 2025. That said, it is possible a cognizable claim could be made that the NIH’s actions constitute an attempt to cut off funding under another “name or title,” which was explicitly incorporated into the TRO issued by Judge McConnell (“Defendants shall also be restrained and prohibited from reissuing, adopting, implementing, or otherwise giving effect to the OMB Directive under any other name or title or through any other Defendants (or agency supervised, administered, or controlled by any Defendant), such as the continued implementation identified by the White House Press Secretary’s statement of January 29, 2025.”).
Given the NIH’s Notice and the various ongoing litigations, Institutions will also have to carefully evaluate their approach to submitting new grant applications and administering current awards.
Trending in Telehealth: January 6 – 27, 2025
Trending in Telehealth highlights state legislative and regulatory developments that impact the healthcare providers, telehealth and digital health companies, pharmacists, and technology companies that deliver and facilitate the delivery of virtual care.
Trending in the past weeks:
Provider training
Telepharmacy
Licensure exceptions
A CLOSER LOOK
Proposed Legislation & Rulemaking:
In Ohio, the Department of Mental Health and Addiction Services proposed amendments to the mobile response and stabilization services (MRSS) rule. The changes would clarify when telehealth is a “clinically appropriate” modality for delivering MRSS, such as when a clinician requests a mobile response and that clinician is not available to respond in person as part of the MRSS team.
New York’s FY 2026 budget includes legislation to join the Nurse Licensure Compact (NLC). Joining the NLC would make it easier for certain categories of nurses licensed in other states to practice in New York either physically or through telemedicine, and for New York providers to offer virtual care to their patients who travel to other states.
Also in New York, Senate Bill 1430 passed the Senate and was referred to the Assembly. The proposed legislation would establish the New York state abortion clinical training program within the Department of Health. The curriculum would include training on the delivery of abortion and other reproductive healthcare services through telehealth.
Vermont’s Office of Professional Regulation proposed amendments to the Administrative Rules of the Board of Pharmacy that further elaborate on the state’s telepharmacy practicing and licensure requirements. Under the proposed rules, telepharmacists would be subject to the same rules and standards applicable to all modalities of pharmacy practice. The proposed rule also provides that pharmacists licensed in other jurisdictions who wish to provide only telepharmacy services from outside of Vermont to individuals located in Vermont may apply for an out-of-state telepharmacist license.
Finalized Legislation & Rulemaking Activity:
North Dakota adopted rule amendments that provide exceptions to physician licensure for telehealth providers licensed in another state, including for continuation of care for an established patient, care while the patient is located within the state temporarily, preparation for a scheduled in-person visit, practitioner-to-practitioner consultations, and emergency circumstances.
The Ohio governor signed Senate Bill 95 into law. The legislation provides an exception to current state law that prohibits pharmacists from dispensing dangerous drugs through telehealth or virtual means.
The Texas Medical Board repealed 22 Tex. Admin. Code § 170, which included regulations concerning the electronic prescribing of controlled substances. The board also repealed 22 Tex. Admin. Code § 174, concerning telemedicine generally, and replaced it with the new 22 Tex. Admin. Code § 175. These regulations state that a physician may not provide telemedicine medical services to patients in Texas unless the physician holds a full Texas medical license or an out-of-state telemedicine license as of September 1, 2022. The regulations also set parameters for the provision of telemedicine services and requirements for prescribing via telemedicine. Notably, 22 Tex. Admin. Code § 175.3 specifies requirements for prescribing for chronic pain via telemedicine, and states that a physician must use audio and video two-way communication for prescribing for chronic pain unless certain criteria are met.
Why it matters:
States continue to recognize the importance of training providers on the delivery of services via telehealth. New York’s inclusion of telehealth in its proposed provider training programs not only affirms telehealth as an effective care delivery method, but also illustrates an understanding of the modern trend of healthcare delivery through alternate means. Ohio’s proposed rule amendments designating telehealth as a “clinically appropriate” care delivery modality for MRSS further underscores these principles.
Increased demand for telepharmacy services has prompted states to reevaluate their laws and regulations. The legislation in Ohio and regulatory amendments and proposals in Texas and Vermont illustrate states’ necessary responses to the increased demand for telepharmacy services.
States continue to enact legislation reflecting the importance of the ability to provide telehealth services across state lines. While telemedicine is often viewed as an option for care delivery, it is important for states to recognize that in some instances, telemedicine is the optimal or exclusive modality available. North Dakota’s adopted rule amendments and New York’s proposal to join the NLC are prime examples of states recognizing the utility and periodic necessity of virtual care delivery.
Telehealth is an important development in care delivery, but the regulatory patchwork is complicated.
It’s That Time of Year Again: Using OSHA’s Injury Tracking Application to Submit OSHA Forms 300, 300A, and 301
Pursuant to the Occupational Safety and Health Administration’s (OSHA) electronic reporting regulation, covered employers must submit their OSHA injury and illness records (OSHA Forms 300, 300A, and 301) using OSHA’s electronic Injury Tracking Application by March 2, 2025.
With the reporting deadline quickly approaching, employers should determine whether they must submit an electronic report, and if so, how to navigate the ITA system.
What is OSHA’s Injury Tracking Application?
Launched in January 2024, OSHA’s Injury Tracking Application (ITA) is on online portal that allows covered employers to submit their OSHA injury and illness records (OSHA Forms 300, 300A, and 301) electronically each year.
New ITA users will be required to create an account and complete an establishment profile before submitting the required records. Employers who reported via the ITA last year may use their existing account and establishment profile. However, returning employers should be sure to update their establishment profile to reflect any relevant changes over the reporting year. OSHA’s ITA User Guide and FAQ page provide helpful information about creating and maintaining an ITA account as well as navigating the ITA portal.
Must My Establishment Submit an Electronic Report?
Only certain establishments are required to submit electronic reports via the ITA each year. Reporting requirements differ depending on employer size and industry, as detailed below:
You must submit OSHA Form 300A via the ITA if:
Your establishment has 250 or more employees and is in an industry not listed in Appendix A to Subpart B of OSHA’s recordkeeping regulation; OR
Your establishment has 20–249 employees and is in an industry listed in Appendix A to Subpart E of OSHA’s recordkeeping regulation.
You must submit OSHA Forms 300A, 300, and 301 via the ITA if:
Your establishment has 100 or more employees and is in an industry listed in Appendix B to Subpart E of OSHA’s recordkeeping regulation.
OSHA does not notify employers as to whether they must electronically submit their injury and illness records using the ITA. To ensure OSHA compliance, employers must independently determine whether they are subject to the electronic reporting requirements. Luckily, OSHA recently created a helpful tool to assist employers in determining their electronic reporting requirements.
If My Establishment Is Exempt From Electronic Reporting, Do I Still Have to Complete OSHA Forms 300, 300A, and 301?
Even if you determine that your establishment is not required to submit electronic reports via the ITA, you must still keep a record of serious work-related injuries and illnesses using OSHA Forms 300, 300A, and 301 (or equivalent forms), unless your establishment is considered exempt. Employers who are uncertain about whether they must submit an electronic report this year should contact counsel for advice and clarification.
Healthcare Preview for the Week of: February 10, 2025 [Podcast]
Budget Reconciliation Process Begins
The Senate Budget Committee will hold a two-day markup on its budget resolution, officially kickstarting the reconciliation process. The resolution includes directions for committee work focused on immigration and energy policy. The Senate markup comes after House Republicans indicated they would mark up their own resolution last week. Senate Republicans prefer to pass two reconciliation bills this year, one on immigration and energy and another on tax policy, while House Republicans want to pass just one bill with all priorities. The House Budget Committee could still hold its own markup for its version of a budget resolution as early as this week, to chart its own path for reconciliation. At some point, both chambers will need to agree to a unified budget resolution to move the reconciliation process forward.
For healthcare, it will be important to watch what funding cuts Republicans want to use to fund their priorities. Policies up for consideration could include Medicaid work requirements, Medicaid per capita caps, and Medicare site neutral payment reforms. For a longer list, read our +Insight on the topic.
Last week, the Senate Finance Committee voted to move Robert F. Kennedy (RFK) Jr.’s nomination for secretary of the US Department of Health and Human Services (HHS) to the full Senate floor. Notably, Sen. Cassidy (R-LA), who expressed concerns about RFK Jr. in his nomination hearings, voted yes. The full Senate vote is likely to happen as early as this week. RFK Jr. is expected to be confirmed, after which more healthcare administrative actions will likely occur. These could include more healthcare executive orders, potentially inclusive of a rumored pending HHS personnel restructuring or reduction.
Over the weekend, the National Institutes of Health (NIH) issued guidance capping indirect costs for NIH grants at 15%, effective February 10. Indirect costs support overhead and administrative costs, with the average grantee receiving 30% for indirect costs. The cap will not apply to current grants, but only future grants. Research institutions, including universities and research hospitals, responded that capping indirect costs at 15% would create drastic harm and stymie medical research. Democrats argue that the guidance is illegal, and some Republicans, including Sen. Britt (R-AL), indicated that they will work with the NIH to mitigate harm to research centers. In addition to reducing federal expenditures, another likely goal of the Trump administration is ensuring that grantees do not use indirect costs to support diversity, equity, and inclusion efforts. Litigation on this issue is likely. Congress also could choose to incorporate new limits on indirect costs as a cost-saving measure in the appropriations process or even potentially within reconciliation.
Today’s Podcast
In this week’s Healthcare Preview, Debbie Curtis and Rodney Whitlock join Julia Grabo to break down the latest actions by the Trump administration, the upcoming Senate vote to confirm Robert F. Kennedy Jr. as HHS Secretary, and the state of the budget reconciliation process as the Senate Budget Committee moves forward this week with a budget resolution markup.
Vax On: Fourth Circuit Reinstates Plaintiff’s Religious Bias Suit in COVID Vaccine Mandate Case
On January 7, the United States Court of Appeals for the Fourth Circuit reversed and remanded a district court’s dismissal of a plaintiff’s Title VII religious bias suit—holding the case was sufficient to survive a motion to dismiss at the pleading stage. The matter, Barnett v. Inova Health Care Services, provides key insights and reminders for employers attempting to balance workplace policies with employees’ religious beliefs.
The matter concerned Inova’s COVID-19 vaccine policy. Inova’s policy mandated all employees receive the COVID-19 vaccine unless they had a religious or medical exemption. Barnett, the plaintiff, was a registered nurse and devout Christian. Inova first rolled out its COVID vaccine policy in 2021. At that time, Barnett requested a medical exemption based on lactation concerns but also objected on religious grounds. Inova granted Barnett’s exemption request. According to Barnett, later that year Inova revised its policy and required all employees with an existing vaccine exemption reapply under the new criteria. Barnett claims Inova then required all employees requesting a religious exception complete a questionnaire about their particular religious beliefs applicable to the COVID vaccine. The questionnaire—which Barnett attached to her lawsuit—requested the following information:
1. Describe the nature of your objection to the vaccine.
2. How would complying with the mandate burden your religious exercise?
3. How long have you held the religious belief forming the basis of your objection?
4. As an adult have you received any other vaccines?
5. If you do not religiously object to other vaccines, why do you object to the COVID vaccine?
6. Identify other medications/products you avoid because of your religious beliefs.
When completing the questionnaire, Barnett sought only a religious exemption. Therein, Barnett explained she was a devout Christian and made “life decisions after thoughtful prayer and Biblical guidance.” Barnett further claimed it “would be sinful for her” to take the vaccination having been “instructed by God” to abstain from it. Additionally, Barnett alleged that receiving the vaccine would be “sinning against her body.” Barnett’s stance on the vaccine did not arise directly from scripture but, instead, was “based on her study and understanding of the Bible and personally directed by God.” Inova ultimately denied Barnett’s exemption request—and discharged Barnett after briefly placing her on administrative leave.
According to Barnett, Inova effectively picked “winners and losers” from among those employees requesting an exemption. More particularly, Barnett claimed that Inova chose to exempt employees from more “prominent” or “conventional” religions, while denying Barnett’s request. Barnett claimed to practice a non-denominational form of Christianity.
In her lawsuit, Barnett brought one count of failure to accommodate and two counts of disparate treatment pursuant to Title VII of the Civil Rights Act. Barnett also brought overlapping state-law claims under the Virginia Human Rights Act.
Inova moved to dismiss Barnett’s complaint pursuant to Federal Rule 12 on the basis it failed to state a viable claim for relief. Primarily, Inova argued that Barnett’s concerns about the COVID vaccine were not sincerely religious in nature and, rather, amounted to personal preferences or fears. Inova claimed that Barnett’s reliance on “prayerful consideration” to make her vaccination decision—instead of scriptural authority—meant her choice was “untethered to a particular religious belief.” The district court sided with Inova and dismissed Barnett’s complaint on the pleadings. Barnett appealed that decision to the Fourth Circuit.
On appeal, the Fourth Circuit reversed and remanded the district court’s decision; wholly reinstating Barnett’s lawsuit. In its opinion, the Court of Appeals noted that to qualify for Title VII protection, a religious discrimination plaintiff must show her professed belief is (1) sincerely held and (2) religious in nature. The Fourth Circuit found Barnett met the first prong by alleging to be “a sincere follower of the Christian faith” who made “all life decisions” after “prayer and Biblical guidance.” Sincerity, the Court of Appeals noted, is “almost exclusively a credibility assessment” that can “rarely be determined on summary judgment, let alone a motion to dismiss.”
The Fourth Circuit also found Barnett’s complaint adequately demonstrated her beliefs were religious. In her lawsuit, Barnett alleged that getting the COVID vaccine would be “sinful…against her body”, defy instructions “by God”, and otherwise go against her “study and understanding of the Bible.” According to the Fourth Circuit, these allegations were “sufficient to show that Barnett’s belief is an essential part of a religious faith” and “plausibly connected” to her refusal to receive the COVID vaccine.
The Barnett opinion offers some important lessons. First, Rule 12 motions to dismiss are difficult to win, give plaintiffs a low bar to clear, and should be filed only when strategically appropriate; not as a matter of course. To survive a Rule 12 motion, a complaint need only plead facts that—taken as true—plausibly support a claim. In the context of discrimination suits, the Fourth Circuit noted that allegations offering a “reasonable inference” of discriminatory intent are sufficient. A plaintiff also does not need to establish a prima facie case to survive a Rule 12 motion. As the Fourth Circuit remarked, that is an “evidentiary standard, not a pleading requirement”.
Second, Barnett serves as a reminder that a religious belief need not be rooted in scriptural authority or dogma to form a viable discrimination claim. Similarly, a plaintiff’s theological interpretations need not be shared by their church’s leadership—or deemed valid by their employer—to qualify as religious in nature.
Third, at the pleading stage especially, courts give a wide berth to a plaintiff’s claim that their religious belief is “sincerely held.” As the Barnett court noted, whether a plaintiff’s religious belief is “sincere” is a credibility assessment that can rarely—if ever—be determined on the pleadings.
Fourth and finally, Barnett serves as a reminder that employers should consult experienced counsel before implementing any policies, procedures, or written questionnaires designed to evaluate whether employees may qualify for an exemption from vaccines or other workplace mandates. The plaintiff in Barnett attached Inova’s questionnaire as an exhibit to the publicly-filed complaint. Any business implementing these or other policies should seek advice from well-qualified outside counsel.
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Navigating the Matrix of State Healthcare Approvals
The outlook for federal antitrust enforcement remains murky, at best, with uncertainty about whether the new federal HSR rules, merger guidelines, and existing enforcement actions.
The forecast for state antitrust enforcement, however, is much clearer, particularly with respect to the healthcare industry.
State antitrust enforcers have taken a more active role in recent years, less willing to sit back while the Federal Trade Commission (FTC) or the Antitrust Division of the Department of Justice (DOJ) takes the lead in investigating potential anticompetitive conduct or corporate consolidations whose effects will be felt at the state level. Given the local nature of healthcare delivery and the sector’s importance to the well-being of a state’s citizens, it is no surprise that the healthcare industry has been a particular focus of state antitrust enforcement efforts. For example, in the past few years, several states have passed laws establishing state-level transaction notification regimes – often specifically targeting healthcare transactions – based on the federal HSR Act. These notification regimes, often referred to as “Baby HSRs” or “Mini HSRs”, can impose burdens on parties to transactions that otherwise fall below HSR Act reporting thresholds or involve transactions that have limited direct connections to the state. Moreover, these state-level reporting regimes often impose different requirements on transacting parties – some more onerous – than the HSR Act itself.
Unlike the HSR Act, these state-level regimes sometimes impose additional burdens and a higher level of scrutiny when one of the transacting parties is a private equity sponsor or is private equity backed. The rationale usually given for this private equity focus is that states are suspicious of private equity’s involvement with healthcare delivery – i.e., the profit motive will lessen the quality of the care delivered. These concerns about the profit motive lessening quality of care are also reflected in the states that have or are considering legislation to curb the friendly PC model.
The rise of state antitrust enforcement regimes in the healthcare industry is not new, with states implementing or considering new laws and regulations requiring additional approvals for healthcare transactions.
These emerging state-level reporting regimes are tracked in our interactive map available here, which identifies states with reporting regimes and provide a high-level indication of the types of requirements that may be imposed on healthcare transactions captured by the regimes. We encourage you to bookmark the page as we will continue to update the matrix as more states adopt reporting regimes or pass new laws to expand existing ones.
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Proposed FDA Rule May Require Stricter Testing for Talc in Cosmetic Products
Recent federal developments may soon require cosmetic companies to adopt stringent precautions to ensure that talc-containing products are free of asbestos, further safeguarding consumers from potential asbestos exposure. On December 26, 2024, the U.S. Food and Drug Administration (FDA) proposed a rule to establish standardized testing methods for detecting and identifying asbestos in talc-containing cosmetic products. This proposal is part of the FDA’s efforts to meet the requirements outlined in Section 3505 of the Modernization of Cosmetics Regulation Act of 2022 (MoCRA).
The four key provisions of the Proposed Rule include:
Mandatory Testing MethodsManufacturers using talc in their products must test representative samples of each batch or lot of talc-containing cosmetics. The FDA proposes the use of new forms of microscopy technology imaging systems to ensure consistent and reliable asbestos detection.
Supplier CertificationAlternatively, manufacturers may rely on certificates of analysis from qualified talc suppliers, provided the suppliers use the FDA-specified testing methods. Manufacturers must periodically verify the accuracy of these certificates through independent testing to ensure ongoing compliance.
Recordkeeping RequirementsManufacturers are required to maintain detailed records of all testing procedures and results. These records must be readily available to demonstrate compliance during FDA inspections or audits.
Enforcement ProvisionsProducts found to violate the testing or recordkeeping requirements would be deemed adulterated under the Federal Food, Drug, and Cosmetic Act (FD&C Act). Additionally, any detection of asbestos in talc-containing cosmetic products would render them automatically adulterated under the FD&C Act, regardless of the concentration.
Context and Implications
The FDA’s proposed rule comes amid longstanding concerns over the risk of asbestos contamination in talc, a naturally occurring mineral that is often mined near asbestos deposits. While the cosmetic industry has long been aware of these risks, the FDA is seeking to establish consistent and transparent standards to address potential cross-contamination.
Between 2021 and 2024, laboratory analyses sponsored by the FDA, including testing of more than 150 cosmetic products containing talc, found no detectable asbestos. However, these results do not eliminate the possibility of contamination in the broader market or during manufacturing processes.
Public Comment Period
As of this writing, the FDA has entered a 90-day public comments period following the proposed rule’s publication in the Federal Register. Industry stakeholders, consumer advocacy groups, and members of the public are encouraged to submit comments to shape the final rule.
The FDA proposes that this rule take effect 30 days after its publication in the Federal Register or by March 27, 2025.
Broader Regulatory Trends
This proposed rule reflects a growing trend toward stricter oversight of cosmetic products, aligning with broader consumer safety initiatives under MoCRA. Companies in the cosmetics industry should anticipate increased scrutiny and take proactive measures to ensure compliance with forthcoming regulations.
Recommendations for Manufacturers:
Manufacturers should review and augment existing supply chains by collaborating with talc suppliers to ensure their testing protocols align with FDA specifications.
Manufacturers can implement testing programs which include but are not limited to establishing internal testing capabilities or partner with accredited laboratories to verify product safety.
Manufactuers can prepare for any potential FDA audits by documenting all testing procedures and supplier certifications in detail, basically triple-checking record keeping policies to ensure they are robust.
By taking the above steps now to proactively address regulatory risks, cosmetic companies can ensure compliance with evolving FDA standards. The implementing of robust testing and compliance strategies early not only reinforces a commitment to consumer safety but also positions companies ahead of regulatory developments.
New York’s Paid Prenatal Leave: What NYC Employers Need to Know About the DCWP’s Proposed Amendments to the ESSTA Rules
On January 6, 2025, in the wake of the issuance of guidance by the New York State Department of Labor (NYSDOL) about the New York State Paid Prenatal Leave Law, which came into effect on January 1, 2025, the New York City Department of Consumer and Worker Protection (DCWP) proposed amendments to the rules related to New York City’s Earned Safe and Sick Time Act (ESSTA) to incorporate the state’s paid prenatal leave law requirements.
Quick Hits
New York State’s paid prenatal leave law, which went into effect on January 1, 2025, requires that employers provide employees twenty hours of paid leave per year to receive prenatal care.
The NYSDOL recently released new guidance in the form of answers to frequently asked questions (FAQs) to assist employers in understanding and implementing the new requirements under the Paid Prenatal Leave Law.
In part, the DCWP’s proposed amended rules are consistent with the paid prenatal leave law, but if adopted, certain provisions would impose additional requirements that exceed what is otherwise required under the state law.
Overview of the Proposed Rules
Notable provisions of the proposed rules include sections:
requiring employers to maintain and distribute a written policy addressing paid prenatal leave that meets or exceeds all of the requirements of the ESSTA;
authorizing employers to require reasonable written documentation that the use of paid prenatal leave was for purposes authorized by law if the use of such leave results in an absence of more than three consecutive days, and as with the ESSTA, specifying that an employer shall not withhold payment of paid prenatal leave when the required documentation is unattainable by the employee due to associated costs;
requiring the inclusion of information about the amount of paid prenatal leave used and the balance of available paid prenatal leave available for use on pay statements or by electronic means;
providing that upon mutual consent of employer and employee, the employee’s schedule may be changed instead of using paid prenatal leave, and specifying that employers shall not require an employee to work additional hours to make up for time used for paid prenatal leave or search for or find a replacement employee to cover hours during which the employee uses paid prenatal leave; and
specifying that the penalties that may be imposed by the DCWP for violation of the paid prenatal leave requirements include but are not limited to the full amount of any underpayment of wages owed and interest, liquidated damages of up to 100 percent of the total amount of wages found to be due and, for prohibited retaliation, liquidated damages of up to $20,000, reinstatement or front pay in lieu of reinstatement, lost wages, and injunctive relief.
Next Steps
A public hearing is scheduled for February 14, 2025, and interested parties may provide feedback during the comment period, which ends on the same day.
Employers with employees in New York City may want to review the proposed rules to determine what additional obligations they may face if the rules are adopted in substantially the same form as currently proposed.
The Colorado AI Act: Implications for Health Care Providers
Artificial intelligence (AI) is increasingly being integrated into health care operations, from administrative functions such as scheduling and billing to clinical decision-making, including diagnosis and treatment recommendations. Although AI offers significant benefits, concerns regarding bias, transparency, and accountability have prompted regulatory responses. Colorado’s Artificial Intelligence Act (the Act), set to take effect on February 1, 2026, imposes governance and disclosure requirements on entities deploying high-risk AI systems, particularly those involved in consequential decisions affecting health care services and other critical areas.
Given the Act’s broad applicability, including its potential extraterritorial reach for entities conducting business in Colorado, health care providers must proactively assess their AI utilization and prepare for compliance with forthcoming regulations. Below, we discuss the intent of the Act, what types of AI it applies to, future regulation, potential impact on providers, statutory compliance requirements, and enforcement mechanisms.
1. What Is the Act Trying to Protect Against?
The Act primarily seeks to mitigate algorithmic discrimination, defined as AI-driven decision-making that results in unlawful differential treatment or disparate impact on individuals based on certain characteristics, such as race, disability, age, or language proficiency. The Act seeks to prevent AI from reinforcing existing biases or making decisions that unfairly disadvantage particular groups.
Examples of Algorithmic Discrimination in Health Care
Access to Care Issues: AI-powered phone scheduling systems may fail to recognize certain accents or accurately process non-English speakers, making it more difficult for non-native English speakers to schedule medical appointments.
Biased Diagnostic Tools and Treatment Recommendations: Some AI diagnostic tools may recommend different treatments for patients of different ethnicities, not because of medical evidence but due to biases in the training data. For instance, an AI model trained primarily on data from white patients might miss early signs of disease that present differently in Black or Hispanic patients, resulting in inaccurate or less effective treatment recommendations for historically marginalized populations.
By targeting these and other AI-driven inequities, the Act aims to ensure automated systems do not reinforce or exacerbate existing disparities in health care access and outcomes.
2. What Types of AI Are Addressed by the Act?
The Act applies broadly to businesses using AI to interact with or make decisions about Colorado residents. Although certain high-risk AI systems — those that play a substantial factor in making consequential decisions — are subject to more stringent requirements, the Act imposes obligations on most AI systems used in health care.
Key Definitions in the Act
“Artificial Intelligence System” means any machine-based system that generates outputs — such as decisions, predictions, or recommendations — that can influence real-world environments.
“Consequential Decision” means a decision that materially affects a consumer’s access to or cost of health care, insurance, or other essential services.
“High-Risk AI System” means any AI tool that makes or substantially influences a consequential decision.
“Substantial Factor” means a factor that assists in making a consequential decision or is capable of altering the outcome of a consequential decision and is generated by an AI system.
“Developers” means creators of AI systems.
“Deployers” means users of high-risk AI systems.
3. How Can Health Care Providers Ensure Compliance?
Although the Act sets out broad obligations, specific regulations are still forthcoming. The Colorado Attorney General has been tasked with developing rules to clarify compliance requirements. These regulations may address:
Risk management and compliance frameworks for AI systems.
Disclosure requirements for AI usage in consumer-facing applications.
Guidance on evaluating and mitigating algorithmic discrimination.
Health care providers should monitor developments as the regulatory framework evolves to ensure their AI-related practices align with state law.
4. How Could the Act Impact Health Care Operations?
The Act will require health care providers to specifically evaluate how they use AI across various operational areas, as the Act applies broadly to any AI system that influences decision-making. Given AI’s growing role in patient care, administrative functions, and financial operations, health care organizations should anticipate compliance obligations in multiple domains.
Billing and Collections
AI-driven billing and claims processing systems should be reviewed for potential biases that could disproportionately target specific patient demographics for debt collection efforts.
Deployers should ensure that their AI systems do not inadvertently create financial barriers for specific patient groups.
Scheduling and Patient Access
AI-powered scheduling assistants must be designed to accommodate patients with disabilities and limited English proficiency to prevent inadvertent discrimination and delayed access to care.
Providers must evaluate whether their AI tools prioritize certain patients over others in a way that could be deemed discriminatory.
Clinical Decision-Making and Diagnosis
AI diagnostic tools must be validated to ensure they do not produce biased outcomes for different demographic groups.
Health care organizations using AI-assisted triage tools should establish protocols for reviewing AI-generated recommendations to ensure fairness and accuracy.
5. If You Use AI, With What Do You Need to Comply?
The Act establishes different obligations for Developers and Deployers. Health care providers will in most cases be “Deployers” of AI systems as opposed to Developers. Health care providers will want to scrutinize contractual relationships with Developers for appropriate risk allocation and information sharing as providers implement AI tools into their operations.
Obligations of Developers (AI Vendors)
Disclosures to Deployers: Developers must provide transparency about the AI system’s training data, known biases, and intended use cases.
Risk Mitigation: Developers must document efforts to minimize algorithmic discrimination.
Impact Assessments: Developers must evaluate whether the AI system poses risks of discrimination before deploying it.
Obligations of Deployers (e.g., Health Care Providers)
Duty to Avoid Algorithmic Discrimination
Deployers of high-risk AI systems must use reasonable care to protect consumers from known or foreseeable risks of algorithmic discrimination.
Risk Management Policy & Program
Deployers must implement a risk management policy and program that identifies, documents, and mitigates risks of algorithmic discrimination.
The program must be iterative, regularly updated, and aligned with recognized AI risk management frameworks.
Requirements vary based on the deployer’s size, complexity, AI system scope, and data sensitivity.
Impact Assessments (Regular & Event-Triggered Reviews)
Timing Requirements: Deployers must conduct impact assessments:
Before deploying any high-risk AI system.
At least annually for each deployed high-risk AI system.
Within 90 days after any intentional and substantial modification to the AI system.
Required Content: Each impact assessment must include the AI system’s purpose, intended use, and benefits, an analysis of risks of algorithmic discrimination and mitigation measures, a description of data processed (inputs, outputs, and any customization data), performance metrics and system limitations, transparency measures (including consumer disclosures), and details on post-deployment monitoring and safeguards.
Special Requirements for Modifications: If an impact assessment is conducted due to a substantial modification, it must also include an explanation of how the AI system’s actual use aligned with or deviated from its originally intended purpose.
Notifications & Transparency
Public Notice: Deployers must publish a statement on their website describing the high-risk AI systems they use and how they manage discrimination risks.
Notices to Patients/Employees: Before an AI system makes a consequential decision, individuals must be notified of its use.
Post-Decision Explanation: If AI contributes to an adverse decision, deployers must explain its role and allow the individual to appeal or correct inaccurate data.
Attorney General Notifications: If AI is found to have caused algorithmic discrimination, deployers must notify the Attorney General within 90 days.
Small deployers (those with fewer than 50 employees) who do not train AI models with their own data are exempt from many of these compliance obligations.
6. How is the Act Enforced?
Only the Colorado Attorney General has enforcement authority.
A rebuttable presumption of compliance exists if Deployers follow recognized AI risk management frameworks.
There is no private right of action, meaning consumers cannot sue directly under the Act.
Health care providers should take early action to assess their AI usage and implement compliance measures.
Final Thoughts: What Health Care Providers Should Do Now
The Act represents a significant shift in AI regulation, particularly for health care providers who increasingly rely on AI-driven tools for patient care, administrative functions, and financial operations.
Although the Act aims to enhance transparency and mitigate algorithmic discrimination, it also imposes substantial compliance obligations. Health care organizations will have to assess their AI usage, implement risk management protocols, and maintain detailed documentation.
Given the evolving regulatory landscape, health care providers should take a proactive approach by auditing existing AI systems, training staff on compliance requirements, and establishing governance frameworks that align with best practices. As rulemaking by the Colorado Attorney General progresses, staying informed about additional regulatory requirements will be critical to ensuring compliance and avoiding enforcement risks.
Ultimately, the Act reflects a broader trend toward AI regulation that is likely to extend beyond state borders. Health care organizations that invest in AI governance now will not only mitigate legal risks but also maintain patient trust in an increasingly AI-driven industry.
If health care providers plan to integrate AI systems into their operations, conducting a thorough legal analysis is essential to determine whether the Act applies to their specific use cases. This should also include careful review and negotiation of service agreements with AI Developers to ensure that the provider has sufficient information and cooperation from the Developer to comply with the Act and to properly allocate risk between the parties.
Compliance is not a one-size-fits-all process. It requires careful evaluation of AI tools, their functions, and their potential to influence consequential decisions. Organizations should work closely with legal counsel to navigate the Act’s complexities, implement risk management frameworks, and establish protocols for ongoing compliance. As AI regulations evolve, proactive legal assessment will be crucial to ensuring that health care providers not only meet regulatory requirements but also uphold ethical and equitable AI practices that align with broader industry standards.
Finally, FDA’s Final Word on Unapproved Use Communications
On January 7, 2025, the U.S. Food and Drug Administration (“FDA” or “Agency”) released a long-awaited guidance titled, “Communications From Firms to Health Care Providers Regarding Scientific Information on Unapproved Uses of Approved/Cleared Medical Products: Questions and Answers” (the “Guidance”).[1] The Guidance is a finalized version of the draft guidance released in 2023 (the “Draft Guidance”), which we covered here, and updates FDA’s collection of guidances on the topic, including its 2014 draft guidance titled, “Distributing Scientific and Medical Publications on Unapproved New Uses — Recommended Practices” (the “2014 Draft Guidance”)[2] and its 2009 guidance titled, “Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices” (the “2009 Guidance”).[3]
This is a long time coming, and the changes from the Draft Guidance appear to be a step toward a more permissive policy that facilitates critical scientific exchange within the life sciences industry. In the Guidance just issued, FDA updates its framework for communicating scientific information about unapproved uses of approved or cleared medical products to healthcare providers (“HCPs”) and outlines its enforcement policy and recommendations to ensure that such communications are informative, truthful, and non-misleading.
Background on FDA’s Regulation of SIUU Communications
HCPs often prescribe FDA-cleared and/or -approved products for uses other than the intended use cleared and/or approved by FDA for the product (i.e., “off-label” uses) when medically appropriate for specific patients, especially when no proven alternative treatments exist – and under the Food, Drug, and Cosmetics Act (the “FDCA”), they’re free to do so. However, the FDCA generally prohibits manufacturers of FDA-cleared and/or -approved drugs, devices, and biologics from promoting these products for any off-label use. Therefore, FDA is tasked with protecting public health by balancing HCPs’ need for information on unapproved uses with its general prohibition against the promotion of medical products for off-label uses.
In the 2009 Guidance and subsequent 2014 Draft Guidance, FDA established a narrow exception to its general prohibition against off-label promotion for scientific information – including scientific or medical reference texts, and/or clinical practice guidelines – that discusses off-label uses for FDA-cleared or -approved products provided by manufacturers to HCPs. In the 2009 Guidance and 2014 Draft Guidance, FDA outlined then-current parameters and best practices for providing scientific information to HCPs in a compliant manner under the FDCA.
The Draft Guidance further revised these previous guidances, most notably by expanding the scope, and clarifying important definitions, including scientific information on unapproved uses of a medical product (“SIUU”).
The final Guidance largely reflects the best practices for disseminating SIUU established throughout the prior guidances, but makes important changes that ease certain requirements and clarify definitions and parameters of FDA’s policy.
Key Changes in Final Guidance
The recent Guidance largely mirrors the Draft Guidance, with some significant revisions and additions penned in response to important criticisms raised during the Draft Guidance’s comment period. For example, commenters encouraged FDA to limit the scope of its enforcement policy and refrain from suggesting that early stage clinical trial data is insufficient to support SIUU communications, alleging that these features of the guidance may have a chilling effect on the communication of truthful, scientific information from manufacturers to HCPs.
In response to these and other comments, FDA adjusted and more clearly defined the scope of the final Guidance. Perhaps more significantly, FDA also modified its stance on the use of clinical trial data in SIUU communications. In the Draft Guidance, FDA stated that SIUU communications should be “based on studies and analyses that are scientifically sound and provide clinically relevant information,” and cautioned against using early-stage clinical data in SIUU communications,[4] specifically citing instances in which Phase 3 results diverged from Phase 2 results, illustrating that Phase 2 data used in SIUU communications could be misleading or inaccurate. However, in the new Guidance, FDA loosened its standard, requiring only that SIUU communications be based on studies and analyses that are “statistically sound” (but omitting the clinical relevance requirement set forth in the Draft Guidance). Moreover, FDA clarified that data from a properly-conducted, early-phase clinical study may be used to form a so-called “scientifically sound” source publication for an SIUU communication, removing its previous discourse on divergent results altogether. These changes signify a marked change in tone for FDA that gives manufacturers greater freedom in sourcing supporting information for SIUU communications.
Additionally, FDA clarified that so-called “persuasive marketing techniques” – which are not allowed in SIUU communications – include emotional appeals unrelated to the scientific content, jingles, and promotional tag lines. We have previously noted FDA’s apparent grudge against dancing in advertising and promotion[5] and jingles appear to be FDA’s newest gripe with respect to more whimsical product promotion.
Further, FDA clarified that SIUU communications should be separated from promotional materials and excluded from specific media platforms. Notably, online platforms with character limitations could restrict a manufacturer from fully disclosing all necessary information in a SIUU communication. However, despite these SIUU-specific limitations, FDA identifies some of the same themes as it has in guidances for other types of drug and device promotion, such as sufficient disclosure and balancing of competing interests.
An important addition to the final Guidance is communicated through a footnote and essentially allows for the sharing of SIUU communications to HCPs by anyone with specialized training.[6] Significantly, sharing SIUU communications is not limited to someone in scientific or medical affairs – allowing any representative from a firm to share so long as they have the requisite training in providing truthful, non-misleading scientific information about unapproved uses of the firm’s approved medical products and training in handling potential questions that might arise from the information shared, including directing HCPs to the best qualified to respond.
Finally, in the new final Guidance, FDA included a glossary of defined terms, as well as more detailed examples of compliant SIUU communications, including reprints, clinical practice guidelines, reference texts, and manufacturer-generated presentations.
Takeaways
While both the Draft Guidance and the new final Guidance aim to guide manufacturers in their communications with HCPs regarding off-label uses of FDA-cleared or -approved medical products, the new final Guidance establishes a more permissive approach to SIUU communications, addressing the First Amendment concerns about chilling speech that were raised in numerous comments from industry stakeholders.
Interestingly, FDA seems to have significantly backed off on the hardline stances it had previously taken regarding the types of data it deems sufficient to support SIUU communications. By permitting, in certain circumstances, the use of “early-phase clinical data” and/or “preliminary scientific data,” and eliminating the “clinically relevant” requirement, FDA is being more permissive with the type of support manufacturers may use to back their communications with HCPs. Here, FDA is not holding manufacturers to produce clinical findings that live up to the standard needed to, for example, be granted approval to market a drug; rather, FDA has whittled its expectation down to the “scientifically sound” standard. Based on the changes between the Draft and final Guidance, manufacturers may consider expanding their SIUU communications policies to include statements supported by early-stage clinical trial data, even if the data is not “clinically relevant,” as long as it is “statistically sound.”
Furthermore, FDA has opened up to firms the option of having any personnel share these SIUU communications with HCPs, requiring only that those who share the information have specialized training. These expanded options comport with FDA’s overall more liberal tone to the final Guidance, but, firms should still take care to ensure that those sharing SIUU communications are properly trained in providing truthful, non-misleading information, and handling questions that might arise about the information. What this training looks like will largely be driven by internal discussions between legal, compliance, and business stakeholders.
However, FDA hasn’t let the reins go completely. As reflected in the new Guidance, FDA continues to plainly restrict certain SIUU communications, such as the use of emotional appeal language, and – of course – SIUU communications must still be informative, truthful, and not misleading. Ultimately, manufacturers should continue to approach SIUU communications with caution, taking care to ensure that the source publications in SIUU communications are scientifically sound and avoiding the use of crafty, emotionally-driven marketing techniques.
FOOTNOTES
[1] Guidance, Communications From Firms to Health Care Providers Regarding Scientific Information on Unapproved Uses of Approved/Cleared Medical Products: Questions and Answers | FDA, FDA (Jan. 2025).
[2] Draft Guidance, Distributing Scientific and Medical Publications on Risk Information for Approved Prescription Drugs and Biological Products—Recommended Practices, FDA (June 2014).
[3] Guidance, Good Reprint Practices for the Distribution of Medical Journal Articles and Medical or Scientific Reference Publications on Unapproved New Uses of Approved Drugs and Approved or Cleared Medical Devices, FDA (Jan. 2009).
[4] See Draft Guidance, supra FN 2, at FN 27.
[5] Key Takeaways From FDA’s Latest Social Media Warnings, Law360 (Dec. 2024).
[6] See Guidance, supra FN 1, at FN 48.
McDermott+ Check-Up: February 7, 2025
THIS WEEK’S DOSE
Key Nominations Move Forward. Having advanced from the Senate Finance Committee this week, Robert F. Kennedy Jr.’s nomination for secretary of Health & Human Services will now go to the Senate floor.
Pathway on Reconciliation Is Uncertain. While the House Budget Committee was expected to start the reconciliation process this week with a markup of a budget resolution, that did not happen.
House Energy & Commerce Health Subcommittee Holds Hearing on Drug Threats. Members examined solutions to the opioid crisis.
Trump Issues EO Modifying the Regulatory Process. The executive order (EO) calls for fewer regulations and rescinds changes to the regulatory cost-benefit analysis.
Administration Modifies Public Health Data. The Centers for Disease Control & Prevention scrubbed its websites of mentions of gender identity and diversity, equity, and inclusion.
Legal Challenges Continue in Response to Trump Administration Actions. Federal judges have taken additional actions to block efforts to freeze certain federal funding, and a lawsuit was filed in response to a Trump EO on care for transgender youth.
CONGRESS
Key Nominations Move Forward. The Senate Finance Committee advanced Robert F. Kennedy (RFK) Jr.’s nomination to lead the US Department of Health & Human Services (HHS) in a 14 – 13 vote along party lines. The nomination now moves to the Senate floor. If every Democrat opposes the nomination in the floor vote, RFK Jr. could lose up to three Republican votes and still be confirmed as HHS secretary.
The Senate confirmed Russell Vought as director of the Office of Management & Budget (OMB) by a 53 – 47 vote. The Senate voted to confirm Doug Collins to lead the US Department of Veterans Affairs in a vote of 77 – 23. Dr. Mehmet Oz, President Trump’s nominee to lead the Centers for Medicare & Medicaid Services (CMS), began meeting with senators on Capitol Hill this week, the first step in his nomination process. He has not spoken publicly on Medicaid much before, but he was quoted this week as saying, “We have to take care of the most vulnerable among us. It’s a social calling for all of us . . . that funding freeze was not designed to affect Medicaid at all.”
Pathway on Reconciliation Is Uncertain. While the House was expected to start the reconciliation process with a markup of a budget resolution in the Budget Committee this week, that did not happen. House Republicans continue to negotiate with one another about the level of spending cuts and held a meeting at the White House with President Trump, after which they announced they were moving closer to an agreement. Because this will be a partisan process, Republicans need to be largely unified in order to proceed. During this uncertainty, Senate Budget Committee Chairman Lindsey Graham (R-SC) made it clear that the Senate is prepared to move forward with its own budget resolution, which would begin a two-bill approach to reconciliation, with an immigration, energy, and defense bill completed first and a tax bill tackled later in the year. Senate Republicans are set to meet with President Trump Friday night at Mar-a-Lago to promote this approach. The budget resolution is a necessary first step in the reconciliation process, and healthcare programs are expected to be on the table for spending cuts. For an overview on the budget reconciliation process and its impact on health policies, read our +Insight.
House Energy & Commerce Health Subcommittee Holds Hearing on Drug Threats. The hearing discussed the importance of expanding access to addiction and mental health services and ensuring wide availability of Narcan. Republican members primarily focused on the importance of border security in combatting the opioid crisis, and Democratic members emphasized the funding freeze’s adverse impacts on medical research and the critical roles that Medicaid and federally qualified health centers play in enabling access to care for substance use disorders.
ADMINISTRATION
Trump Issues EO Modifying the Regulatory Process. This EO requires that whenever an agency promulgates a new rule, regulation, or guidance, it must identify at least 10 existing rules, regulations, or guidance documents to be repealed. The EO tasks the director of OMB with ensuring standardized measurement and estimation of regulatory costs, and it requires that, for fiscal year 2025, the total incremental cost of all new regulations, including repealed regulations, be significantly less than zero. It is unclear what this 10 – 1 ratio means in practice or how it will be implemented.
Administration Modifies Public Health Data. To comply with President Trump’s EOs related to gender identity and diversity, equity, and inclusion, the Centers for Disease Control & Prevention first removed, then uploaded a modified version of, public information and data related to HIV and health information for teens and LGBTQ+ people on both its data directory and main webpage. In response, a medical advocacy group has sued multiple health agencies, stating that the removal of data deprives physicians and researchers of access to necessary information.
COURTS
Legal Challenges Continue in Response to Trump Administration Actions. Following legal challenges last week to the Trump administration’s now-rescinded OMB memo directing agencies to freeze certain federal funding, more federal judges have acted to halt the federal freeze. On January 31, a federal judge in Rhode Island granted a temporary restraining order to block the freeze, following a lawsuit from Democratic attorneys general from 22 states and the District of Columbia. On February 3, a federal judge in the District of Columbia issued a similar injunction in a lawsuit filed by several coalitions of nonprofits.
PFLAG National, GLMA, and transgender individuals and their families filed a federal lawsuit against the Trump administration’s EO “Protecting Children from Chemical and Surgical Mutilation.” The EO states that federal agencies shall not “fund, sponsor, promote, assist, or support the so-called ‘transition’ of a child from one sex to another.” Plaintiffs in the lawsuit, filed in the US District Court for the District of Maryland, argue that the EO will create harm by denying access to physician-prescribed, medically recommended care. Read the press release here.
In response to a lawsuit brought by unions representing federal workers, a federal judge in Massachusetts paused the deadline for the administration’s buyout program for federal workers. There is another hearing set for next week.
QUICK HITS
HHS OCR Announces Action on Anti-Semitism. The HHS Office for Civil Rights (OCR) will initiate compliance reviews related to reported incidents of anti-Semitism at four medical schools.
House Democratic Leaders Send Letter to GAO on Medicare Drug Price Negotiation. In the letter, Energy & Commerce Ranking Member Frank Pallone (D-NJ), Ways & Means Ranking Member Richard Neal (D-MA), and Education & Workforce Ranking Member Bobby Scott (D-VA) urged the US Government Accountability Office (GAO) to monitor the Medicare Drug Price Negotiation Program to ensure the Trump administration complies with the Inflation Reduction Act, which directed and authorized the GAO to conduct oversight of the program.
CMS Releases Statement on DOGE Collaboration. The short statement notes that two senior CMS officials are working with Elon Musk’s Department of Government Efficiency (DOGE).
NEXT WEEK’S DIAGNOSIS
Both chambers will be in session next week. The House Veterans’ Affairs Health Subcommittee will hold another hearing on community care, the House Ways & Means Health Subcommittee will hold a hearing on modernizing healthcare, and the Senate Special Committee on Aging will hold a hearing on optimizing longevity. As noted, the House Budget Committee may mark up a budget resolution that would start the budget reconciliation process, or the Senate could move first. The full Senate is on track to approve RFK Jr.’s nomination, and we expect the administration to continue taking executive action related to healthcare.