Since the inauguration of President Trump, the Affordable Care Act (ACA) has taken quite a few significant jabs and blows. When Congress failed to repeal the ACA, Congress instead eliminated the individual mandate penalty through the GOP tax bill. The individual mandate penalty was one of the main pillars of the ACA because it effectively widened the pool of participants who buy health insurance in order to keep costs down. While removal of this penalty hit the ACA where it hurt, the true threat to the stability of the ACA arose when the Trump Administration announced that it would no longer defend the ACA against a challenge filed by twenty states that believe the individual mandate itself is unconstitutional and that key parts of the act are invalid. What is the outlook for the ACA?

Congressional Efforts to Repeal

The House has voted to repeal or amend the ACA at least 50 times, but their efforts have never made it past the Senate. Despite this history of failure, there are still Republicans pushing for the repeal of the ACA.  On June 19, 2018, a coalition of conservatives released the outline of a new plan for repealing and replacing the ACA. The plan emphasizes the use of block grants, implementing risk pools, removing essential health benefits, and minimum loss ratio requirements.  As it stands, the plan will likely succumb to the fate of its predecessors.  Even if the bill passed the House, there are fewer Republicans in the Senate than the last time the repeal went to a vote. However, if after the upcoming mid-term elections the Republicans win Senate seats in Montana and Missouri and keep the majority in the House, the ACA could truly be in jeopardy.

Lawsuits

Meanwhile, twenty states have filed a lawsuit against the ACA’s individual mandate arguing that the elimination of the tax penalty without the elimination of the mandate is unconstitutional because it leaves the mandate without the exercise of Congress’s taxing power. The Supreme Court’s 2012 ruling may come back to haunt ACA proponents. The Supreme Court held that the individual mandate is constitutional because it constitutes a tax and that the ACA could not function without the mandate in place. Those filing suit argue that because the tax penalty is eliminated it is a tax-less mandate and thus unconstitutional because Congress cannot exercise its taxing power. As such, the mandate is such a key provision that the whole ACA should be thrown out if the provision cannot be severed.  In other words, the whole cannot exist without the entirety of its parts.

States Embrace Medicaid Expansion

Amid the slew of blows taken by the ACA, there is one provision left unscathed—Medicaid expansion.  The number of states expanding Medicaid continues to grow. For example, Virginia recently passed an expansion of Medicaid, and the Governor of Utah signed a Medicaid expansion bill.  Interestingly, some Republican-leaning states have embraced the expansion due in part to the current Administration’s support of work requirements. In fact, Maine is currently in a dispute with its Governor about the implementation of the expansion of Medicaid that was approved by Maine voters.

The Outlook

With the ACA constantly under attack from multiple vantage points, it is safe to say that the Act will have to fight to survive. Although heavily dependent on the November elections, it is possible that the ACA will survive additional congressional efforts to repeal the bill.  Further, the popularity of Medicaid expansion would make it difficult to repeal the bill in its entirety. More states are embracing Medicaid Expansion, and there is evidence available of the positive effects expansion has on access to care. The survival of the ACA really hinges on how U.S. District Judge Reed O’Connor interprets the law as he presides over the twenty-state suit, especially considering that the Trump Administration has already stated that it does not intend to defend the ACA. Stakeholders will have wait patiently to see how the outcome of the upcoming elections and the pending lawsuit will affect the ACA’s future.

In yet another development on the fight to address the opioid epidemic, U.S. Attorney General Jeff Sessions announced on Tuesday, April 17th that the U.S. Drug Enforcement Administration (“DEA”) will issue a Notice of Proposed Rulemaking (“NPRM”) amending the controlled substance quota requirements in 21 C.F.R. Part 1303. The Proposed Rule was published in the Federal Register yesterday and seeks to limit manufacturers’ annual production of opioids in certain circumstances to “strengthen controls over diversion of controlled substances” and to “make other improvements in the quota management regulatory system for the production, manufacturing, and procurement of controlled substances.”[1]

Under the proposed rule, the DEA will consider the extent to which a drug is diverted for abuse when setting annual controlled substance production limits. If the DEA determines that a particular controlled substance or a particular company’s drugs are continuously diverted for misuse, the DEA would have the authority to reduce the allowable production amount for a given year. The objective is that the imposition of such limitations will “encourage vigilance on the part of opioid manufacturers” and incentivize them to take responsibility for how their drugs are used.

The proposed changes to 21 C.F.R. Part 1303 are fairly broad, but could lead to big changes in opioid manufacture if implemented. We have summarized the relevant changes below.

Section 1303.11: Aggregate Production Quotas

Section 1303.11 currently allows the DEA Administrator to use discretion in determining the quota of schedule I and II controlled substances for a given calendar year by weighing five factors, including total net disposal and net disposal trends, inventories and inventory trends, demand, and other factors that the DEA Administrator deems relevant. Now, the proposed rule seeks to add two additional factors to this list, including consideration of the extent to which a controlled substance is diverted, and consideration of U.S. Food and Drug Administration, Centers for Disease Control and Prevention, Centers for Medicare and Medicaid Services, and state data on legitimate and illegitimate controlled substance use. Notably, the proposed rule allows states to object to proposed, potentially excessive aggregate production quota and allows for a hearing when necessary to resolve an issue of material fact raised by a state’s objection.

Section 1303.12 and 1303.22: Procurement Quotas and Procedure for Applying for Individual Manufacturing Quotas

Sections 1303.12 and 13030.22 currently require controlled substance manufactures and individual manufacturing quota applicants to provide the DEA with its intended opioid purpose, the quantity desired, and the actual quantities used during the current and preceding two calendar years. The DEA Administrator uses this information to issue procurement quotas through 21 C.F.R. § 1303.12 and individual manufacturing quotas through 21 C.F.R. § 1303.22. The proposed rule’s amendments would explicitly state that the DEA Administrator may require additional information from both manufacturers and individual manufacturing quota applicants to help detect or prevent diversion. Such information may include customer identities and the amounts of the controlled substances sold to each customer. As noted, the DEA Administrator already can and does request additional information of this nature from current quota applicants. The proposed rule would only provide the DEA Administrator with express regulatory authority to require such information if needed.

Section 1303.13: Adjustments of Aggregate Production Quotas

Section 1303.13 allows the DEA administrator to increase or reduce the aggregate production quotas for basic classes of controlled substances at any time. The proposed rule would allow the DEA Administrator to weigh a controlled substance’s diversion potential, require transmission of adjustment notices and final adjustment orders to a state’s attorney general, and provide a hearing if necessary to resolve material factual issues raise by a state’s objection to a proposed, potentially excessive adjusted quota.

Section 1303.23: Procedures for Fixing Individual Manufacturing Quotas

The proposed rule seeks to amend Section 1303.23 to deem the extent and risk of diversion of controlled substances as relevant factors in the DEA Administrator’s decision to fix individual manufacturing quotas. According to the proposed rule, the DEA has always considered “all available information” in fixing and adjusting the aggregate production quota, or fixing an individual manufacturing quota for a controlled substance. As such, while the proposed rule’s amendment may require manufacturers to provide the DEA with additional information for consideration, it is not expected to have any adverse economic impact or consequences.

Section 1303.32: Purpose of Hearing 

Section 1303.32 currently grants the DEA Administrator to hold a hearing for the purpose of receiving factual evidence regarding issues related to a manufacturer’s aggregate production quota. The proposed rule would amend this section to conform to the amendments to sections 1303.11 and 1303.13 discussed herein, allowing the DEA Administrator to explicitly hold a hearing if he/she deems a hearing to be necessary under sections 1303.11(c) or 1303.13(c) based on a state’s objection to a proposed aggregate production quota.

Industry stakeholders will have an opportunity to submit comments for consideration by the DEA by May 4, 2018.

[1] DEA, NPRM 21 C.F.R. Part 1303 (Apr. 17, 2018).

Faced with the inability to repeal the Affordable Care Act (“ACA”) outright, the Trump Administration and Congress have taken actions to provide more health insurance options for Americans.  Thus far, the Administration announced that they would no longer make cost sharing reduction (“CSR”) payments to insurers on the Exchanges and extended the time period in which short-term, limited-duration insurance (“STLDI”) plans could be offered.  Meanwhile, Congress removed the individual mandate in the 2017 tax bill. The Administration asserts that these efforts are all solutions geared toward helping more Americans receive care as premiums are rising.  A March 28, 2018 Gallup poll showing that health care costs are a higher concern for Americans, over the economy supports the Administration’s asserted justification. However, some states have recently taken their own steps to provide more health coverage options for their citizens while discounting the ACA, possibly reflecting a sense of dissatisfaction with the seemingly dragging feet of the Federal Government.

Idaho

The Governor of Idaho released an Executive Order on January 5, directing the Idaho Department of Insurance to approve options that follow all state-based requirements, even if not all ACA requirements are met, so long as the carrier offering the option also offered an exchange-certified alternative in Idaho and authorized the Director of the Department of Insurance to seek a waiver from the U.S. Department of Health and Human Services in conjunction with this Executive Order, if the Director believed it is appropriate or necessary.

Idaho officials then released Bulletin No. 18-01 on January 24, which provides new provisions for “state-based plans” for those individuals who do not qualify for premium subsidies under the ACA. Under Idaho’s proposal, insurers would be allowed to (1) sell plans with 50% higher premiums for people with pre-existing conditions; (2) exclude coverage for pre-existing conditions for people who had a gap in coverage; (3) vary premiums by 5-to-1 based on age; (4) exclude coverage for some ACA essential benefits such as maternity care; and (5) set a $1 million annual cap on benefits. All of these provisions are prohibited by the ACA.

In February, Idaho sought approval for the Bulletin by Center for Medicare and Medicaid Services (“CMS”); however, CMS denied the proposition. CMS Administrator Seema Verma wrote a letter stating that Idaho’s proposed requirements are not in compliance with the ACA and warned that, if Idaho did not enforce the ACA standards, CMS would be forced to step in and directly enforce the ACA protections in the Idaho market.  If any health insurance issuer that is subject to CMS’s enforcement authority fails to comply with the ACA requirements, it may be subject to civil monetary penalties for each violation of up to $100 each day, for each responsible entity, for each individual affected by the violation.  Despite the response from CMS, Idaho still seeks to expand coverage options for Idaho residents.

Iowa

In a similar fashion, Governor Kim Reynolds urged the Iowa legislature to make health insurance affordable for Iowa residents in the Condition of the State Address.  On April 2, the Governor signed into law a bill that allows small businesses or self-employed individuals to band together to buy coverage through association health plans that do not comply with ACA plans.  The legislation would allow insurers to deny coverage to those with pre-existing conditions, create lifetime caps, and does not offer maternity care.   However, proponents of the bill emphasize that the coverage would not be considered insurance, but rather would simply function as a “health benefits plan”.  Proponents also note that these plans are cheaper alternatives for small employers or the self-employed.

Key Takeaways

States creating affordable health coverage with blatant disregard for the ACA is a note-worthy development in today’s tense healthcare climate. The outcome of the push of these initiatives by states is crucial because they are challenging the Administration’s willingness to enforce the ACA. Tolerance of such state plans would lead to cherry-picking, which would inevitably cause further destabilization of the market. Notably, CMS and Secretary of Health and Human Services Alex Azar have each emphasized upholding ACA as the law of the land. Stakeholders should pay attention to the outcome of these proposals because not only would the implementation of these plans destabilize markets, but the plans could also incentivize more states to follow suit and create their own plans.

On February 20th the Department of the Treasury, Department of Labor, and Department of Health and Human Services (together the “tri-agencies”) released a proposed rule which would alter how long short-term, limited-duration insurance (“STLDI”) plans could be offered. Under current rules the maximum duration that a STLDI plan can be offered is less than 3 months, if the proposed rule is enacted that period would be extended to less than 12 months.  The tri-agencies are accepting comments on the proposed rule until April 23rd.

What are short-term, limited-duration health insurance plans?

STLDI plans were designed to provide temporary coverage for consumers who otherwise could not access longer-term health insurance products (such as a consumer transitioning between jobs). Coverage offered by STLDI plans is not considered Minimum Essential Coverage and because STLDI plans do not meet the definition of “individual health insurance coverage” established by the Public Health Service Act they are exempted from many of the Affordable Care Act (“ACA”) requirements. Due to the fact that STLDI plans don’t have to comply with ACA requirements they commonly feature preexisting condition exclusions, annual and life time limits, feature higher cost-sharing requirements, and are medically underwritten they tend to be less expensive and attract younger, healthier enrollees.

Why are the regulations changing?

The proposed rule was issued in response to President Trump’s October 12, 2017 executive order which, among other things, instructed the tri-agencies to reconsider the Obama era rule which limited the time period STLDI plan could be offered to less than 3 months. The presumed intent of proposed rule is to foster more and less expensive health insurance options for individuals in the individual market.  However, the Obama administration initially issued the regulations limiting STLDI plans after observing that the plans were adversely impacting the marketplace risk pools, and the political motivation to adversely impact those risk pools and through them “Obamacare” can’t be fully discounted.

What is the likely impact?

The consensus among policy makers is that extending the duration of the coverage period that STLDI can be offered is likely to increase the number of consumers who elect to enroll in these plans over health insurance that constitutes Minimum Essential Coverage. The number of people enrolling in STLDI plans is likely to increase further in 2019 when consumers will no longer face a tax penalty for failing to maintain minimum essential coverage. One estimate suggests that if the proposed rule is enacted in 2019, 4.2 million consumers will enroll in the STLDI plans and 2.9 million fewer people will maintain Minimum Essential Coverage. While we don’t know the scope this would have on the risk pools in the individual market, it warrants monitoring by plans and providers moving forward.

On December 14, the Federal Communications Commission (FCC) voted to remove regulations that prohibit providers from blocking websites or charging for high quality service to access specific content. Many worry that allowing telecommunications companies to favor certain businesses will cause problems within the health care industry. Specifically, concerns have risen about the effect of the ruling on the progress of telemedicine and the role it plays in access to care. Experts worry that a tiered system in which service providers can charge more for speed connectivity can be detrimental to vulnerable populations.  Although the ramifications of the ruling are not entirely known, an exception for health care services would ensure that vulnerable populations can continue to gain access to care.

Telemedicine is often used as a tool to improve care by providing access to those who wouldn’t ordinarily have access to care. Through video consultation, patients have the ability to check-in with health care providers and access health specialists. Robust connectivity is vital for these services and community providers, and rural areas may lack the financial means to pay for optimal connectivity in a tiered framework.

In the past, the FCC recognized the importance of broadband connectivity to the health care industry. In 2015, the FCC‘s Open Internet Order acknowledged that health care is a specialized service that would be exempt from conduct based rules.  However, the new rule may undermine the 2015 Order and thus leave vulnerable populations at risk.

Moreover, the technology industry would likewise benefit from a health services exception. Innovation in health care delivery could be stifled by the FCC ruling and hurt the population as a whole. From tech start-ups to access-to-care advocates, various members of the health care ecosystem may need to anticipate building coalitions and urge the FCC to create an exception for health care services.

The state-action antitrust exemption grew out of the 1943 decision of Parker v. Brown, 317 U.S. 341 (1943), in which the Supreme Court explained that “nothing in the language of the Sherman Act or in its history suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislatures.”  And, relying on principles of federalism, the Supreme Court gave deference to the state as a sovereign body.

Subsequent decisions expanded the reach of state-action to state and local governmental agencies (including counties and municipalities), as well as private parties.  In California Retail Liquor Dealers Ass’n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980), the Supreme Court held that the actions of state and local governmental agencies was exempt if they were undertaken pursuant to a clearly articulated state policy.  Also in Midcal, the Supreme Court ruled that private parties could take cover under this exemption if they acted pursuant to a clearly articulated state policy and were actively supervised.

However, the federal enforcement agencies have become increasingly frustrated with what, in their view, are the adverse competitive consequences of state-action, particularly as it relates to the health care industry. And, over the years they have actively pursued cases designed to shape and narrow this judicially created exemption.  For example, based on cases brought by the Federal Trade Commission, the Supreme Court clarified that only activity that is undertaken pursuant to a “clearly articulated and affirmatively expressed” state policy to displace competition, and is the “foreseeable result” of what the state authorized, can be covered by state-action, see FTC v. Phoebe Putney Health Sys., 568 U.S. 261 (2013), and, more recently, the Supreme Court agreed that even activities of a state agency (such as a state licensing board) must be actively supervised before state-action can apply if the agency is dominated by market participants, see N.C. State Bd. of Dental Exam’rs v. FTC, 135 S. Ct. 1101 (2015).

And the assault on state-action continues. Maureen K. Ohlhausen, the acting Chair of the Federal Trade Commission (until confirmation of Joseph Simon), in a recent speech given at the George Washington University Law School entitled Competition Policy at the FTC in the New Administration, indicated that the Commission will continue to “work to define and confine the anticompetitive effects that flow from state action.”  And earlier in November, the Federal Trade Commission and the Antitrust Division of the Department of Justice jointly filed an amicus brief in the United States Court of Appeals for the Ninth Circuit in the matter of Chamber of Commerce v. City of Seattle (Appeal No. 17-35640), seeking to convince the Court (in a case to which neither federal agency is a party) to apply an extremely narrow interpretation of conduct covered by a Seattle ordinance regulating the provision of taxi services.

The bottom line is that as a matter of stated policy, the federal antitrust enforcement agencies will continue their pursuit to limit application of the state-action exemption, and parties looking to rely on state-action to insulate their activity from antitrust challenge should take note. Attacks on other judicially created antitrust exemptions, and to the extent possible, Certificate of Need and Certificate of Public Advantage statutes, will also continue.

Perspectives on Health Care and Life Sciences advisory by Bob Atlas, President of EBG Advisors, Inc. 

Following is an excerpt:

The U.S. Senate and House of Representatives have both passed their tax reform bills and will now confer toward creating a unified bill that both chambers can support, and that President Trump will sign. The two bills differ in some key respects, but their implications for health care are already rather clear. Some aspects of the legislation explicitly touch health care, while other effects would be indirect. Overall, it appears that most of the changes would adversely affect many health care industry participants, especially those in the nonprofit sector that would not gain from the reduction in the corporate tax rate that is the central feature of the legislation. …

Read the full post here or download a PDF of this piece.

In response to Republicans’ failure to repeal the Affordable Care Act (ACA), the Trump Administration is using administrative action to modify the ACA and health insurance options for Americans. On October 12, 2017, President Trump signed an executive order that instructs various departments to consider regulations related to association health plans and short-term insurance. Shortly after, the Administration announced that they would no longer make cost sharing reduction (CSR) payments to insurers on the Exchanges.  Section 1402 of the ACA requires insurance companies to reduce the amount that eligible low-income policyholders pay out of pocket for co-payments and deductibles.  Accordingly, the federal government must reimburse insurers for reductions when the Secretary of HHS is notified.

Without these payments, insurers will either increase premiums or pull out of the Exchanges altogether. In anticipation of the announcement, some insurers have already increased premiums for the 2018 enrollment period. In spite of this, policy makers can mitigate the harm that could be felt as a result of not funding CSR payments.

The Passage of the Murray-Alexander Stabilization Bill

Senator Lamar Alexander (R-TN), Chairman of the Senate Committee on Health, Education, Labor, and Pensions (HELP) and Ranking Member Senator Patty Murray (D-WA) revealed a bipartisan plan to help stabilize the insurance market. The Murray-Alexander Bill seeks to stabilize the insurance market by funding the CSR subsidies and increasing state flexibility in their administration of the Marketplace.

The bill proposes to fund CSR payments for the remainder of 2017, as well as 2018 and 2019. The bill also reduces the time for the Center for Medicare and Medicaid Services (CMS) review of 1332 waivers, from 180 days to 90 days and creates a new 45 day expedited review process for qualifying circumstances. Through Section 1332 waivers, states are allowed to implement insurance market innovations that provide coverage “comparable” in benefits and affordability.

The Congressional Budget Office (CBO) scored the Murray-Alexander Bill and found that it would cut the federal deficit by $3.8 billion in the next decade. The CBO notes that savings would come from states offering lower-cost policies, attracting younger and healthier individuals into the market.  Insurers would lower their premiums because of the influx of younger individuals and in the long-term, save the government more than $1.1 billion in premium tax credits. Despite the savings scored by CBO, the Murray-Alexander bill will not have an affect on 2018 plans. Further, the bill may not pass before open enrollment ends on December 15.  The bill has bipartisan support in the Senate, but will have difficulties in the House because of Speaker Paul Ryan’s opposition to the current version.

State Efforts

States can play a role in telling insurers where to apply their premium increases. For example, states could tell insurers to apply premiums to only Silver marketplace plans, all metal level plans inside and outside the marketplace, or all Silver plans inside and outside the marketplace. About 30 states assumed that CSR payments would not be disseminated and either encouraged or required states to increase premiums onto marketplace silver plans only. States that choose this option allows consumers in the marketplace to receive premium tax credits and consumers outside the marketplace to not experience any increase in premiums. Additionally, some legal scholars and health policy experts argue that states could pay for the premium themselves and then bill the federal government.

Legal Challenges

Eighteen states and the District of Columbia sued the Trump Administration seeking an immediate injunction to block President Trump from ending CSR payments to insurers. California federal judge, U.S. District Judge Vince Chhabria, denied the motion for an injunction.  Judge Chhabria argued that states had enough time to plan for the end of the cost-sharing payments and adjusted accordingly. Although Judge Chhabria has denied the injunction, California Attorney, General Xavier Becerra, will still proceed with the lawsuit.

Despite the Trump Administration’s attempt to unravel parts of the ACA, states and Congress are working to anticipate more downstream impacts and must act to find solutions or ways to mitigate the issues that will arise for low-income policy holders.

Stakeholders should anticipate a continuation of unstable markets as insurers will have to adjust their rates or leave the Exchanges if there are no changes made to fund CSR payments. State regulators will have to use creativity and flexible ways to help their constituents.

The Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice (“Antitrust Division”) released their respective year-end reviews highlighted by aggressive enforcement in the health care industry. The FTC, in particular, indicated that 47% of its enforcement actions during calendar year 2016 took place in the health care industry (including pharmaceuticals and medical devices). Of note were successful challenges to hospital mergers in Pennsylvania (Penn State Hershey Medical Center and Pinnacle Health System), and Illinois (Advocate Health Care Network and North Shore University Health System). In both actions, the FTC was able to convince the court that the merger would likely substantially lessen competition for the provision of general acute-care hospital services in relevant areas in violation of section 7 of the Clayton Act. See FTC v. Penn State Hershey Med. Center, 838 F. 3d 327 (3d Cir. 2016); and FTC v. Advocate Health Care Network et al No. 1:15-cv-11473, 2017 U. S. Dist. LEXIS 37707 (N.D. Ill.Mar. 16, 2017)

The Antitrust Division, in similar fashion, touted its actions to block the mergers of Aetna and Humana, and Anthem and Cigna. Complaints against both mergers were filed simultaneously in July of 2016, and tried before different judges in the Federal District Court for the District of Columbia. After extensive trials, Judge Bates blocked the Aetna/Humana deal, and Judge Amy Berman Jackson blocked the Anthem/Cigna transaction. United States v. Aetna Inc., No. 1:16-cv-1494, 2017 U.S. Dist. LEXIS 8490 (D.D.C. Jan 23, 2017) and United States v. Anthem Inc., No. 1:16-cv-01493, 2017 U.S. Dist. LEXIS 23614 (D.D.C. Feb8, 2017).

In addition to their enforcement activities, the agencies promoted jointly issued policy guidelines, including their “Antitrust Guidance for Human Resources Professionals.” Although not specific to any industry, this guidance has particular relevance to the health care industry. Among other things, this guidance makes clear that naked wage-fixing (such as the wave of wage fixing claims relating to nurses) and no-poaching agreements (that would include agreements not to hire competing physicians) are not only per se illegal, but also subject to criminal prosecution.

While a marginal enforcement shift may be in store as a result of the change in administration, most signs point to a continued focus on the health care industry. Maureen K. Ohlhausen, appointed by President Trump as acting Chair of the FTC, reiterated in a speech recently delivered at the spring meeting of the American Bar Association’s antitrust section, that “[i]t’s extremely important we continue our enforcement in the health care space.” Likewise the Acting Director of the FTC’s Bureau of Competition – Abbott (Tad) Lipsky, appointed by Chairman Ohlhausen, applauded the FTC’s success in challenging the Advocate/Northshore Hospital merger noting, in a related FTC press release, that the “merger would likely have reduced the quality, and increased the cost, of health care for residents of the North Shore area of Chicago.”

Makan Delrahim, President Trump’s selection (awaiting confirmation) to head the Antitrust Division, recently lobbied on behalf of Anthem and its efforts to acquire Cigna, and has openly stated with respect to certain announced mergers, that size alone does not create an antitrust problem. Nevertheless, given the political climate and overall impact the health care industry has on the U.S. economy, the Antitrust Division’s efforts to open markets in the health care sector, particularly to generics and new medical technologies by challenging pay for delay deals and scrutinizing unnecessarily restrictive agreements among medical device manufacturers is likely to continue.

A wild card affecting future antitrust enforcement is increasing possibility of passage of the Standard Merger and Acquisitions Review Through Equal Rights Act of 2017 (H.R. 659 a/k/a the “SMARTER ACT”). This bill, recently approved by the House Judiciary Committee, would eliminate the FTC’s administrative adjudication process as it relates to merger enforcement, forcing the FTC to bring all such actions in court. In addition, it would align current preliminary injunction standards such that both the FTC and DOJ would face the same thresholds required of the Clayton Act rather than the more lenient standard under the FTC Act. A similar bill passed the House in 2016, but was not taken up by the Senate.

Surprisingly amidst the Federal Bureau of Investigation (FBI) uproar, President Trump today signed an executive order addressing cybersecurity for the federal government and critical infrastructure, along with international coordination and cyber deterrence. The substance of the order, which is about to be made public, comes from various press releases and interviews with administration officials. The order is composed of three sections on cybersecurity and IT modernization within the federal government, protecting critical infrastructure, and establishing a cyber deterrence policy and coordinating internationally on cyber issues. In directing cabinet agencies to protect critical infrastructure, the order references the Obama administration’s “section 9” list of most critical entities, which already has prompted questions from industry.  Specifically, the order directs the Commerce Department and the Department of Homeland Security to coordinate an effort to reduce botnet cyber-attacks through a voluntary partnership with industry. This effort mirrors health industry association comments to Commerce’s National Institute of Standards and Technology (NIST), which next week will have an open forum to address the many comments made to its  rulemaking proposals. Interestingly, the Order directs the cabinet agencies to coordinate their own efforts with NIST.  The White House staff has been quoted as saying that “it is about time” the federal government was held to the same standard as private industry in addressing cybersecurity. Consistent with Industry requests, the framework is a voluntary tool actually developed in collaboration with industry, which argues that flexibility is required because policies must be adapted to the needs of different entities.

On the health care cyber front, it is interesting to note that James Comey’s last formal speech was given on May 8th to the American Hospital Association in which he raised concerns about the ability of the FBI to combat cyber-attacks and urged cooperation with hospitals and health systems not to get patient records but “fingerprints of digital intrusion.” I note that this is the point of the work of InfraGard, a cooperative effort between industry and the FBI, and is consistent with the public proposals of the Information Sharing and Analysis Organization Standards Organization (ISAO-SO), established by executive order.  Further information regarding those efforts, in which this author is active, can be provided at sgerson@ebglaw.com.

Comey’s abrupt departure suggests that his statements may quickly become passing memories, but the cooperative tone struck is more than a little inconsistent with proposals, for example, from the Department of Health & Human Services’ Office of Civil Rights (OCR), the enforcement agency for Health Insurance Portability and Accountability Act (HIPAA) matters, and from the Federal Trade Commission (FTC), which soon may inherit enhanced powers as the Federa l Communications Commission is attempting to leave the cyber security enforcement field.  Both the Office of Human Rights and the FTC stress enforcement as the optimal mode of gaining cyber compliance.

In the coming days, you may expect further analysis by Epstein Becker Green of OCR’s developing enforcement stance and other emergent government policies in the wake of the new Executive Order.