The Regulatory Race Is On: The Biden Administration Sprints to Issue Key Health Policies

Introduction

The upcoming election, and the approaching end of the President’s four-year term, introduce additional dynamics into the agencies’ rulemaking process and even the guidance process. From now through the November election, the Biden administration will be increasingly focused on pushing forward policies that fulfill campaign promises and achieve important policy priorities, while potentially being more circumspect about whether, and when, to issue policies that may be controversial. During an election year, the White House, through the Office of Management and Budget (OMB) and the Office of Information and Regulatory Affairs (OIRA), typically takes a stronger hand in determining how to balance agencies’ priorities, and how to manage the limited resources and timeline for issuing final rules (as well as proposed rules and, in some cases, certain guidances). Moreover, the Congressional Review Act (CRA) and the potential for a new administration to impose a regulatory freeze further collapses what an incumbent administration considers the optimal window and timing for issuing regulations and guidance.

These factors will directly affect which health care-related policies are issued and when. This alert summarizes these dynamics, some of the key health care-related policies that are anticipated for this year and the likely timing for action on these policies. Overall, we expect the next several weeks to be a critical time for the release of important priorities for the Department of Health and Human Services (HHS) and its component agencies. After that point, regulations will still be issued, but at a slower pace and at greater risk for the policies not to survive a change in administration, if one were to occur, or subsequent CRA action.

Key Takeaways

• Various rules and guidances affecting the health care and life sciences industries are currently pending, including proposals from FDA, CMS, and HRSA.
• The next few weeks, through mid-May, will be a critical period for the release of policies, particularly policies that are more controversial and lack broad, bipartisan support.
• After mid-May, certain policies will still be issued (such as those that essentially must be issued), but discretionary rules and guidances will be less common.

The Regulatory Agenda

Notice and comment rulemaking is a cumbersome process. It is difficult for any administration’s regulatory priorities to be fully implemented during a term of office, and as a result, an election year typically requires further prioritization among competing priorities of departments and agencies. In short, with certain exceptions, rulemaking must begin with a proposed rule, followed by a comment period. The issuing agency must then review the comments received, consider any revisions to the proposed rule and draft a final rule, along with a preamble addressing the comments received. That final rule is itself a proposal, which then must go through a formal clearance process through OMB/OIRA. When a final rule is submitted to OMB for final clearance, it will be listed on the dashboard. It could be days, weeks or months before OMB completes review, and the order in which rules move through OMB review is necessarily influenced by presidential priorities. In an election year, the White House, through OMB, will typically ensure that its key policies receive prioritized OMB attention, including being prioritized in chronology to help insulate those rules from being reversed or subject to a subsequent regulatory freeze, and also to be able to tout those priorities from the “bully pulpit” or on the campaign trail.

The Congressional Review Act

The CRA provides Congress with a method of conducting oversight of agency rulemaking by delaying the implementation of so-called “major rules” for 60 days following the rule’s submission to Congress or publication in the Federal Register. After a rule is reported to Congress, members have 60 days starting on the 15th day of the first legislative session to introduce a joint resolution of disapproval. Disapproval resolutions can pass with a simple majority—meaning they are not subject to Senate filibuster. They can, however, be vetoed by the President, with a two-thirds vote needed to override it. As a result, the CRA typically becomes most relevant when a president is no longer in office, and the president’s party controls neither chamber of Congress (otherwise, the president would presumably veto a disapproval resolution, and a president’s party would generally not support a disapproval resolution either). In 2017, for example, Republicans had complete control of Congress and the White House and used the CRA to repeal several federal rules promulgated during the Obama administration. Similarly, following the 2020 elections, the Biden administration signed three CRA resolutions into law passed by the Democratic-controlled Congress, overturning Trump administration policies.

If the resolution is passed, the rule at issue is invalid, and the agency is barred from issuing a substantially similar rule. The resolution operates as a binary tool; it must be brought against the entire rule and cannot be used to invalidate portions of the rule. This dynamic effectively immunizes policies that are incorporated into “mandatory” rules like Medicare’s annual payment rules.

Because congressional calendars are subject to change, it is challenging to determine the precise date on which a CRA lookback would begin. However, based on the current congressional schedule, rules submitted to Congress after mid-May 2024 would trigger the lookback mechanism, opening them to review in 2025. The pressure on the Biden administration to issue priority health policy rules ahead of this lookback period is apparent. Just in the past few weeks, the Biden administration has finalized several priority health policy rules including streamlining the processes for eligible individuals to enroll and retain their Medicaid, Children’s Health Insurance Program (CHIP) and Basic Health Program (BHP) coverage, and updating the administrative dispute resolution process for drug makers and health providers participating in the federal 340B drug discount program. Just this week, the administration issued a new rule to support reproductive health privacy under the Health Insurance Portability and Accountability Act of 1996 and Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 (together, HIPAA).

Health Care Regulations to Watch

1. FDA LDT Rule

The Food and Drug Administration (FDA) has several pending rules at OMB, such as a proposed rule to establish and require standardized testing methods for detecting and identifying asbestos in talc-containing cosmetic products as required by the Modernization of Cosmetics Regulation Act of 2022. Notably, OMB recently concluded review of the widely anticipated final rule to regulate laboratory-developed tests (LDTs) as medical devices. As previously noted in our analysis of the proposed LDT rule, this action is the latest chapter in FDA’s efforts to end its posture of generally exercising enforcement discretion with regard to LDTs, which the agency describes as in vitro diagnostic products (IVDs) “intended for clinical use and that [are] designed, manufactured, and used within a single laboratory that is certified under the Clinical Laboratory Improvement Amendments of 1988 (CLIA) and meets the regulatory requirements under CLIA to perform high complexity testing.” The agency is proposing to amend “FDA’s regulations to reflect that the device definition in the Federal Food, Drug, and Cosmetic Act (FD&C Act) does not differentiate between entities manufacturing the device.” In conjunction with this amendment, “FDA is also advancing a policy under which FDA intends to phase out its general enforcement discretion approach for LDTs, so that IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs.” The OMB concluded its review of the proposed rule on April 22, suggesting that it is on track for Federal Register publication in early- to mid-May.

2. Medicare Payment Rules

Although Medicare payment rules are “must pass” regulations and therefore not generally at risk of being undone by the CRA, they do take up resources in OMB. Currently pending promulgation are final rules related to the fiscal year 2025 Medicare hospital inpatient prospective payment system (IPPS) and long-term care hospital prospective payment system (LTCH PPS).

3. March-In Rights for Drugs

On December 8, 2023, the National Institute of Science and Technology (NIST), part of the Department of Commerce, which has overall responsibility for Bayh-Dole administration, issued a “Request for Information Regarding the Draft Interagency Guidance Framework for Considering the Exercise of March-In Rights” 88 Fed. Reg. 85593 (the Draft Guidance). The NIST Draft Guidance for the first time (and contrary to all prior NIH pronouncements) explicitly authorizes “march-in” on the basis of a drug’s price, but without much guidance on how to assess when a price should trigger “march-in.” A group of Republican senators recently requested that the U.S. Government Accountability Office (GAO) determine whether the NIST proposal meets the definition of a rule under the CRA, thus making the proposal subject to repeal.¹

4. Insurance Market Reforms

There are two proposed rules from the Centers for Medicare and Medicaid Services (CMS) reforming various aspects of health insurance coverage:

• Provider Nondiscrimination Requirements: The proposed rule would implement section 108 of the No Surprises Act, which directs the HHS to health plans from discriminating against qualified licensed health care professionals, solely on the basis of their licensure.
• Coverage of Certain Preventative Services: The proposed rule amends the final rules regarding religious and moral exemptions and accommodations regarding coverage of certain preventative services under title I of the Patient Protection and Affordable Care Act.

5. Medicaid

CMS also has the Medicaid Access rule, which contains a number of policies, including the “80/20” provision that would require 80% of all Medicaid payments to be spent on direct care workers and direct service professionals’ compensation for personal services. That rule has now been placed on display on the Office of Federal Register website, although it has not yet been formally published. Within a day of the text of the final rule being displayed, the Energy and Commerce Committee Subcommittee on Health scheduled a legislative hearing on a range of Medicaid proposals, including legislation related to the policy under the final Access Rule—signaling that Congress is not done engaging on these issues. Additionally, the agency proposed requirements related to manufacturers’ misclassification of covered outpatient drug products under the Medicaid Drug Rebate Program (MDRP).

6. New Payment Models

CMS issued proposed rules related to two new payment models including the Transforming Episode Accountability Model (TEAM) and the Increasing Organ Transplant Access (IOTA) Model, both focused on accountability for quality, cost and health equity.

7. Nursing Home Staffing Minimums

In his 2022 State of the Union address, President Biden announced his Nursing Home Reform initiative to ensure safe and quality care in nursing homes. CMS subsequently issued a proposed rule establishing minimum staffing standards for long-term facilities. On March 6, 2024, the House Ways and Means Committee advanced the Protecting American Seniors’ Access to Care Act of 2023, which would bar CMS from finalizing the regulation, on a 26-17 vote. Given the current opposition in Congress, the proposed minimum staffing rule appears to be a potential candidate for CRA repeal. On April 22, 2024, the proposed rule went on display on the Office of Federal Register website as part of Vice President Harris’ announcement in conjunction with the Medicaid Access Rule roll out and is scheduled to be published on May 10, 2024.

8. Health Care Fraud and Abuse

The Office of Inspector General (OIG) of the HHS issued two proposed rules that would establish new safe harbors under the Federal Anti-Kickback Statute (AKS) and revise OIG’s Medicare and Medicaid Program exclusion authorities.

9. Health Privacy and Data Protection

On June 9, 2023, the Federal Trade Commission (FTC) published a proposed rule to amend its 2009 Health Breach Notification Rule (HBNR) adopted under the HITECH Act. As discussed in our analysis of the Commission’s first HBNR enforcement action, the HBNR focuses on personal health records (PHRs)—electronic records containing individually identifiable health information that are managed, shared and controlled by or primarily for an individual—and requires vendors of PHRs and PHR-related entities to notify affected individuals, the FTC and potentially the media in the event PHR identifiable health information is acquired by an unauthorized person as a result of a breach of security. In response to the increasing proliferation of apps and other direct-to-consumer health technologies (e.g., fitness trackers, wearable blood pressure monitors, etc.), the agency seeks to clarify that the HBNR also applies to these types of applications and similar technologies.

Agency Guidance to Watch

In addition to these rules, OMB also reviews certain agency guidances that are considered significant (despite not having binding effect). For example, the widely anticipated FDA clinical trial diversity guidance, mandated by the Food and Drug Omnibus Reform Act of 2022 (FDORA), is still pending at OMB, well past the congressional deadline.

^{1 Letter from Sen. B. Cassidy dated March 4, 2024, available at https://www.help.senate.gov/imo/media/doc/march_in_gao_finalpdf.pdf.}