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Drug Pricing, Obamacare Rules Vulnerable After Chevron Ruling [1]

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Date: 2024-07

Federal oversight of transgender care, abortion services, drug pricing, and other health policies are more open to legal challenges following the US Supreme Court’s decision to scrap a test for when courts should uphold agency regulation under vague laws.

The US Department of Health and Human Services regulates medicines, insurance, and other areas under ambiguously worded statutes. Congress has often left the specifics in the highly technical and scientific area of health law to HHS and its sub-agencies. Courts have deferred to the agency’s reading of the complex law.

The high court’s June 28 decision to end the Chevron doctrine promises to embolden opponents of an array of HHS regulatory action involving the Health Insurance Portability and Accountability Act (HIPAA), the Affordable Care Act, and Food and Drug Administration safety calls, attorneys say.

“The regulatory constructs around abortion, privacy, mifepristone, transgender health care that have either arisen as new regulations or ping-pong back and forth, depending on who’s in the White House, are not likely to receive deference by the courts under this decision,” said Robert Bradner, partner at Holland & Knight.

The health agency’s traditional leeway in making policy decisions may no longer be as broad now that the high court has made it easier for opponents to challenge its policies.

“So much of what HHS, FDA and CMS does will be vulnerable, simply because a lot of what they do is really technical, and it’s really based on having a good understanding of scientific data, epidemiology and public health,” said Carmel Shachar, director of Harvard Law’s Health Law and Policy Clinic at the Center for Health Law and Policy Innovation.

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Judicial Interpretation

Now, with the Supreme Court having narrowed the room it gave to agencies in its 1984 decision in Chevron v. Natural Resources Defense Council, attorneys say the doors are open to a number of challenges to complex policy and scientific decisions.

At least one lawsuit against HHS has already been filed. Three New Jersey hospitals sued the agency June 28, challenging Secretary Xavier Becerra’s “irrational and unlawful” interpretation of statutes that address how Medicare reimburses for providing care. The case involves a dispute over how the agency calculated their reimbursements for providing care for a disproportionately high percentage of low-income patients.

Litigation is particularly likely when ambiguity is baked into a statute. For example, an HHS rule interpreting HIPAA as protecting abortion health-care records from law enforcement is more open to litigation.

That’s “because HIPAA is a kind of a generic statute about privacy of health-care records, not any specific type of health-care records,” said Maura Monaghan, a partner at Debevoise & Plimpton LLP. Wherever there isn’t explicit language, “that’s where challenges could arise.”

Judges may be more likely to stamp their own views on health policy than in other areas given the politicization of the subject and everyone’s firsthand experience with health care.

That will be particularly challenging, Shachar said, because while judges are very smart and they’re experts in the law, “they are not medical experts, and they’re not health administrative experts.”

“What might sound reasonable to them is actually unworkable from a health system standpoint,” Shachar said.

And with judges more empowered to render health-care decisions rather than accept regulators’ interpretations, there’s an increased likelihood of circuit splits and cases headed for the Supreme Court, Monaghan said.

Drug Price Negotiations

In addition to the HIPAA abortion rule and other actions the agency may take on reproductive rights, HHS efforts like those around providing health care could more easily be challenged.

In the decades since Chevron, courts have often deferred to the agency’s policymaking decisions.

Among those instances was Southeast Alabama Medical Center v. Sebelius, in which the US Court of Appeals for the District of Columbia Circuit upheld much of an HHS rule interpreting terms under the Medicare statute for adjusting hospital payment rates based on region under the Chevron standard.

The US Court of Appeals for the Ninth Circuit looked to Chevron in Resident Councils of Washington v. Leavitt. In that case, the court upheld a rule involving nursing home standards.

The Centers for Medicare & Medicaid Services will also be more vulnerable without Chevron, particularly with activity around Medicare drug price negotiations, “especially because the pharmaceutical industry has been trying to challenge this from as many angles as possible,” said Reshma Ramachandran, an assistant professor at the Yale University School of Medicine.

“This will be another instance in which the pharmaceutical industry will challenge CMS, saying that CMS too broadly interpreted their authority in terms of how they’re setting negotiation parameters,” she added.

And given the controversy around vaccine approvals, such FDA decisions could likewise be challenged more easily without Chevron, Monaghan said. The same would go with other preventive treatments, she said.

“If the FDA approval of those drugs is up for debate, you can have different federal courts reaching different results,” Monaghan said.

‘Hot Ticket Items’

A post-Chevron world also leaves the door open to questioning FDA calls on drugs and renewing challenges to the Affordable Care Act, actions that could threaten to stymie not only the Biden administration but future ones.

In drafting health laws, Congress has tended to leave a much for agencies to figure out, Shachar said, noting an abundance of “secretary shall” language in the ACA as an example.

With allof the “politically controversial, hot ticket items” under the umbrella of health, she said, the HHS and agencies under it could expect an onslaught of lawsuits aiming to shape policy.

“You’re talking about access to reproductive care, but you’re also talking about the ACA programs,” Shachar said. “You’re going to see a ton of impact litigation.”

Drafting Regulations

Health policy experts say the HHS will likely be more cautious in drafting regulations post-Chevron.

“They will need to do a more extensive legal review to be able to determine if Congress has given them explicit authority to issue those regulations,” Ramachandran said, adding that more lawyers, instead of scientific or technical experts, will likely need to be hired for the regulatory process.

Agencies will “be much more dissuaded to actually issuing regulation,” Ramachandran said.

The justices’ opinion overturning Chevron also reacts to “the interpreting and then reinterpreting of particular statutes when presidential administrations change,” Bradner said.

One example is different administrations’ rulemaking on Section 1557 of the Affordable Care Act, which prohibits discrimination by entities that primarily provide health care and receive federal funding.



The Biden administration recently issued a final rule, reversing a Trump-era policy and restoring protections for gender identity and sexual orientation. The Biden rule is under fire in federal court.

“This is a significant shift of power away from agencies and back to the courts,” Bradner said of the justices’ approach.

The case is Loper Bright Enterprises v. Raimondo, U.S., No. 22-451, opinion 6/28/24.

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[1] Url: https://news.bloomberglaw.com/health-law-and-business/drug-pricing-obamacare-rules-vulnerable-after-chevron-ruling

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