Health Law Advisor

On July 25, 2024, a federal “Health Over Wealth Act” was introduced in the U.S. Senate and House of Representatives. The bill would amend the Public Health Service Act, requiring the Secretary of Health and Human Services (HHS) to enforce certain transparency, accountability, and other requirements with respect to for-profit corporations that own health care systems.

S. 4804 was introduced by Senator Edward D. Markey (D-Mass), chair of the Health, Education, Labor, and Pensions Committee on Primary Health, and Retirement Security, before being referred to the Committee on Finance. H.R. 9156 was introduced by Representative Pramila Jayapal (WA-07), member of the House Judiciary Subcommittee on Health, Employment, Labor, and Pensions.

New from the Diagnosing Health Care Podcast: Knock, knock! If the Drug Enforcement Administration (DEA) is already at your door, it may be too late.

Enforcement is on the rise, and the microscope is fixed on controlled substances. What can industry stakeholders do to prevent penalties and protect themselves from DEA scrutiny?

On this episode, Epstein Becker Green attorneys Melissa Jampol, David Johnston, and Avery Schumacher discuss recent and pending updates to DEA rules and guidance, outline steps stakeholders can take to prepare for an inspection, and share tips on what to do when the DEA arrives.

In our ongoing series of blog posts, we examined key negotiating points for tenants in triple net health care leases. We also 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, when implemented, are intended to result in efficient lease negotiations and favorable lease terms from a tenant’s perspective. In our previous blog posts, we considered the importance of negotiating initial terms and renewal terms, operating expense provisions, assignment and subletting terms, maintenance and repair obligations, and holdover provisions. This latest blog post focuses on negotiating surrender terms. Tenants should understand and negotiate their obligations for removal of alterations, equipment and other personal property, and the condition in which leased premises must be surrendered at the expiration or earlier termination of the lease term. Failure to do so could result in delays in a tenant’s ability to vacate the leases premises as well as unforeseen significant costs.

Most commercial leases provide that alterations and improvements made by or on behalf of a tenant become the property of landlord and must be surrendered with the leased premises upon expiration or earlier termination of the lease unless landlord requires removal. We suggest tenants request language in the lease requiring landlord to advise at the time it consents to such alterations and improvements whether or not the same must be removed, rather than landlord having the right pursuant to the terms of the lease to demand removal at the time of expiration or earlier termination. Having such a term in place eliminates the element of surprise and provides tenant with certainty as to which alterations and improvements tenant is required to remove. Tenants may also want to limit the removal requirement so that any alterations or improvements that cannot be removed without significant damage are to remain in the leased premises upon expiration of the lease term.

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.