Increasingly, Life Sciences and Healthcare Providers Proactively Consider Offensive Challenges to U.S. Government Agencies

In the U.S., life sciences companies and healthcare providers are increasingly willing to challenge the determinations of federal regulators. At the same time, courts are often less willing to defer to, and more willing to scrutinize, agency action. The result has been a burst of contentious proceedings and litigation between private industry and the federal government. In 2023, we expect to see increased or continued agency proceedings and litigation in three key areas: FDA approval or clearance, drug pricing, and No Surprises Act (NSA) implementation.

Sponsors are Increasingly Challenging FDA at All Stages of Development

At FDA, disagreements with sponsors arise regularly. Sponsors today seem more willing to consider their full range of options at every stage in the product lifecycle. One important area where sponsors seem increasingly willing to challenge the agency is where there is scientific disagreement about emerging data regarding safety or efficacy — an area where sponsors historically have acceded to FDA’s regulatory determinations. This is especially true where there is disagreement within the agency and where advisory committees have reached divided recommendations.

These efforts often begin and stay within FDA’s internal administrative appeal pathways, but increasingly, a significant number are leading to public meetings, hearings, or litigation. When pursued to a court ruling, litigation can help to clarify the law that FDA must apply. For instance, several cases in the past few years have had a dramatic effect on how FDA implements regulatory exclusivities for innovative drug products. That in turn has led to renewed policy discussions about the appropriate implementation of these important programs and calls for Congress to address the relevant statutory provisions.

FDA Approval Is Not Always Good Enough for Medicare Reimbursement

Even when companies clear FDA’s hurdles, new challenges have emerged at CMS. In a recent example, despite FDA’s approval of Aduhelm — the first drug in the monoclonal antibody class to obtain FDA approval as safe and effective for its indicated use — CMS decided that the drug had not been shown to be sufficiently safe and effective to qualify for Medicare coverage outside the confines of randomized controlled trials. CMS’s decision is troubling in that it departs from the agency’s practice of deferring to FDA’s decisions regarding the safety and effectiveness of drugs. We anticipate that in 2023, CMS will be evaluating whether to update its decision in the monoclonal antibody class, whether it might use this approach in other categories, and whether such determinations will be able to withstand challenges.

Such challenges to drug pricing and related frameworks will continue into 2023. They are likely to include closely watching existing and any new litigation involving the 340B drug pricing program and litigation around the legality of the so-called accumulator and maximizer programs, access to co-pay support for Medicare beneficiaries, and the definition of line extensions. Life sciences companies should actively monitor the implementation of the Inflation Reduction Act and the drug wastage rebate for consistency with the Administrative Procedures Act as the regulations and guidance under these regimes unfold in 2023 and beyond.

No Surprises Act Will Continue to Spark Provider Challenges

Finally, on the healthcare provider front, we anticipate that the NSA implementation will continue to be an active subject of litigation and agency engagement in 2023. The litigation successes that healthcare providers have experienced under the NSA will encourage healthcare providers to proactively evaluate opportunities for similar administrative challenges, if other laws and regulations are passed that have a significant impact on healthcare providers’ financial viability.