Health Law Advisor

In June 2024, the U.S. Food and Drug Administration ("FDA") clarified, with respect to the Drug Supply Chain Security Act (“DSCSA”)[1], that it will not extend the one-year stabilization period for the enhanced drug distribution requirements beyond November 27, 2024.[2] At the same time, the FDA also issued exemptions, through November 27, 2026, for small pharmacies from certain DSCSA requirements, and is allowing all other trading partners to request waivers or exemptions from the enhanced drug distribution security requirements.[3]

DSCSA Background

The DSCSA provides for the tracking and tracing of drug products from drug manufacturers through the supply chain down to dispensers, requirements for investigating and dispositioning suspect and illegitimate drug products and federal licensing requirements for wholesalers and third-party logistics providers. The driving force behind the DSCSA is to prevent counterfeit drugs from entering the supply chain and to prevent such drugs from harming patients if they do enter the supply chain. Under the law, manufacturers, repackagers, wholesale distributors, third-party logistics providers, and dispensers (“Trading Partners”) each have affirmative obligations governing how they must transfer ownership of prescription drug products and the specific product data or tracking data that must be maintained and shared between buyers and sellers of such products. Further, Trading Partners must have processes in place for drug product verification, as well as an affirmative obligation to identify, investigate and manage suspect or illegitimate products, such as counterfeit or intentionally adulterated products.

On June 11, 2024, U.S. Senators Ed Markey and Elizabeth Warren from Massachusetts, introduced proposed legislation titled The Corporate Crimes Against Health Care Act (“CCAHCA”), aimed at addressing a perceived “looting” of health care systems by for profit private equity investors. According to Sen. Warren, the bill was introduced to “root out corporate greed and private equity abuse in the health care system,” “prevent exploitative private equity practices,” and to specifically ensure that actions such as “looting” do not happen again by addressing trigger events and targeting real estate investment trusts.

The CCAHCA proposes to impose significant criminal penalties, compensation clawbacks, and civil penalties against executives of private equity firms and health care entities that are found to have contributed to the death or injury of a patient through a triggering event. Additionally, the bill imposes certain requirements that impact real estate investments funds (REITs) and would require annual reporting requirements for change of control transactions.

New from the Diagnosing Health Care Podcast: Laboratories in the United States are facing a major regulatory landscape shift.

The U.S. Food and Drug Administration (FDA) has finalized a new rule ending its historical blanket enforcement discretion over laboratory developed tests (LDTs). What does this mean for labs going forward?

On this episode, Epstein Becker Green attorneys James Boiani, Rob Wanerman, and Megan Robertson lay out the new landscape, analyze existing and potential challenges, and identify key developments to watch for as this new regulatory era unfolds.

Key Takeaways

• Federal courts are no longer required to defer to federal agencies’ reasonable regulatory interpretation of ambiguous federal statutes under the 1984 Chevron
• In this new Loper landscape, increased engagement at all points of the federal legislative and federal regulatory process is more important than ever, especially for those in the heavily regulated health care industry.

I. What Did the Supreme Court Do? What Changed with the Loper decision?

In a 6-3 decision authored by Chief Justice John Roberts, the Supreme Court overruled the longstanding Chevron doctrine—under which federal courts would defer to federal agencies’ interpretation of their own statutes if the underlying statute was ambiguous and the interpretation was reasonable. The Court determined that this Chevron deference was inconsistent with the Administrative Procedure Act’s (APA) tasking to federal courts the duty to interpret federal statutes. Although the Court overruled the original decision in Chevron, the Court went out of its way to state that it “does not call into question prior cases that relied on the Chevron framework. The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite the Court’s change in interpretive methodology.”

As stated in an amicus brief authored by prominent advocates, and as discussed at oral arguments, health care, as one of the most regulated industries, will be significantly impacted by the end of Chevron deference.

Federal regulatory agencies may have to alter their use of existing statutes to address new concerns under the post-Chevron landscape. Federal agencies also may have to go back to Congress to address new, emerging regulatory concerns not yet considered by statute.

New from the Diagnosing Health Care Podcast: In a recent landmark decision, the U.S. Supreme Court overruled the Chevron doctrine in the case of Loper Bright Enterprises v. Raimondo.

This ruling has significant implications for employers and other entities in the health care and life sciences industries, as it changes the way courts are likely to interpret and apply regulations issued by federal agencies.

On this episode, Epstein Becker Green attorneys George Breen, Stuart Gerson, Rob Wanerman, and Paul DeCamp analyze the fallout of this monumental decision, discuss what it means for entities seeking to challenge ambiguous statutes and regulations, and assess how to proceed from here.

Recently, the California Legislature made a series of major revisions to Assembly Bill 3129 (“AB 3129” or “the Bill”), a highly anticipated piece of legislation expected to have a substantial impact on transactions in California’s healthcare space.  Although Epstein Becker Green has previously discussed the Bill (see original post here, as well as a first update here), this blog post will discuss the legislature’s most recent revisions on June 19 and June 27.

Why Assembly Bill 3129 Was Introduced

The Bill was introduced by Assembly Member Wood and is supported by Attorney General Bonta in response to growing concerns about the increasing involvement of private equity and hedge funds in California’s healthcare sector. As private equity firms have increasingly acquired healthcare facilities and provider groups, California’s legislature wants to strengthen oversight to ensure that these transactions are conducted in a transparent manner that protects patients, ensures access, and preserves affordability.

What the Bill Will Do

AB 3129 seeks to address these concerns by requiring private equity groups and hedge funds to provide written notice to, and obtain the written consent of, the Attorney General before engaging in any change of control or acquisition involving healthcare facilities, provider groups, or nonphysician providers. This includes changes of control, acquisitions, or agreements that may impact healthcare services or access.

When I was working on my Masters in data science, one of the projects I did was to create an algorithm that would take an intended use statement for a medical device and predict whether FDA would require a clinical trial.  It worked fairly well, with accuracy of about 95%.

Since that’s a dynamic algorithm in which the user inputs an intended use statement and gets a prediction of FDA’s decision, I wanted to go about a similar task this month: create a static word cloud to show what words are most associated with intended use statements where FDA has required a clinical trial.  At least in theory, this static representation might give you a sense of words in an intended use statement that are more likely to push your device toward a clinical trial.

The ability to obtain public records in New Jersey is about to undergo a massive overhaul. A new bill, S2930 (the “Reform Bill”), was signed into law by New Jersey Governor Phil Murphy on June 5, 2024, and has the potential to make it more difficult for requestors to obtain access to certain government records.

The controversial move to pass the Reform Bill has been called out by numerous critics for imposing limits on government transparency and inviting corruption to the state. Governor Murphy’s response has remained that the Reform Bill considers these concerns and aims to simplify the current public record requests process by imposing much-needed limitations and modernizations. The Reform Bill will be effective 90 days following enactment.

New Jersey’s Reform Bill is not the only open record law introduced recently. A number of different states, including Utah, Louisiana, and Michigan, have introduced and, in some cases, passed different kinds of government transparency bills in their respective state governments. However, the level of transparency ranges, with some of these bills limiting public record access, while others introduce more public transparency.

On Friday, June 14, the Texas Supreme Court declined to consider a case that asked the Court to determine whether frozen embryos are persons or property under Texas law.

In our ongoing series of blog posts, we have examined key negotiating points for tenants in triple net health care leases. We also have offered suggestions for certain lease provisions that will protect tenants from overreaching and unfair expenses, overly burdensome obligations, and ambiguous terms with respect to the rights and responsibilities of the parties. These suggestions are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, and maintenance and repair obligations. This latest post focuses on negotiating holdover provisions. Holdover provisions should be carefully negotiated in order to limit a tenant’s liability for expenses arising from unforeseen circumstances.

What happens if a tenant does not vacate on lease expiration without having negotiated a renewal or a new lease? Circumstances may arise which interfere with a tenant’s ability to vacate premises in a timely manner, such as delays in new space being ready for occupancy or delayed or terminated negotiations with respect to a lease for intended new space.