Health Care

Federal courts continue to uphold the Medicare Drug Price Negotiation Program, with multiple rulings emphasizing the voluntary nature of manufacturer participation. Key legal challenges from AstraZeneca, Boehringer Ingelheim, PhRMA, and others face setbacks as the government remains undefeated.

On May 12, 2025, the Centers for Medicare & Medicaid Services (CMS) issued draft guidance for the third cycle of the IRA’s Medicare Drug Price Negotiation Program (Negotiation Program).

In a move that underscores the growing urgency around healthcare cybersecurity, the U.S. Department of Health and Human Services (HHS) Office for Civil Rights (OCR) has released version 3.6 of its Security Risk Assessment (SRA) Tool.  The SRA Tool is a free resource designed to help covered entities and business associates conduct HIPAA-compliant risk assessments.  It is particularly focused on small and medium providers and can be a useful tool for any smaller entity subject to HIPAA.  Non-provider entities, including business associates, may need to make modifications to the tool to fit their operations and security infrastructure. 

In a cautionary tale for health care entities, the U.S. Attorney’s Office for the Eastern District of North Carolina recently announced the convictions of two health care executives who admitted to orchestrating a multi-year kickback scheme involving the use of gift cards to incentivize Medicaid patients to attend counseling sessions and submit urine drug tests. Although the Department of Health and Human Services’ Office of Inspector General (OIG) has issued multiple Advisory Opinions green-lighting other programs that include gift card distributions, these convictions underscore the importance of structuring patient incentives in strict accordance with OIG guidance.

The August 2025 edition of FDA in Flux highlights significant developments shaping the regulatory landscape for medical, life sciences, and consumer product sectors. Responding to President Trump’s executive order on reducing regulatory burdens, FDA announced the PreCheck program, with the goal of accelerating onshoring of drug manufacturing. FDA, HHS, and USDA have issued a joint request for data and information to develop a uniform definition of ultra-processed foods (UPF). FDA held a public meeting on August 4 to start negotiation for reauthorizing the Medical Device User Fee Amendments (MDUFA), providing a look at what stakeholders hope to achieve in terms of FDA commitments and performance goals. In July, FDA announced that it is revoking 52 individual “obsolete and unnecessary” food product standard-of-identity (SOI) regulations.

In follow-up to the May 12^th “Delivering Most Favored Nation Prescription Drug Pricing to American Patients” Executive Order, President Trump issued letters to seventeen manufacturers (Letters), reiterating the mandate for manufacturers to provide the United States with most-favored-nation pricing for drugs. 

As we previously reported, the Executive Order gave manufacturers 180 days to negotiate most-favored-nation drug pricing terms with the Department of Health and Human Services (HHS) before the Attorney General and the Chairman of the Federal Trade Commission (FTC) can bring enforcement action against manufacturers for anti-competitive practices. The Executive Order also warned manufacturers that the HHS Secretary and heads of other agencies would consider alternative measures to compel manufacturers to modify drug prices if “significant progress toward most-favored-nation pricing for American patients [was] not delivered.” These measures include, but are not limited to, issuing rulemaking to impose most-favored-nation pricing, certifying to Congress that importation is a viable drug cost-reduction strategy, and modifying or revoking existing drug approvals. 

In a significant legal development, a federal judge has temporarily blocked Arkansas from enforcing Act 624. Act 624 prohibits pharmacy benefit managers (PBMs) from owning or operating pharmacies in the state, effectively forcing vertically integrated companies to divest or shut down their Arkansas pharmacy operations. However, on July 28, 2025, U.S. District Judge Brian Miller granted a preliminary injunction to several major PBMs and affiliated entities, halting the law’s implementation pending final resolution of the case.

On July 31, 2025, the United States Department of Justice (DOJ) announced a pair of settlements with companies accused of having violated the False Claims Act (FCA) by falsely representing their compliance with certain cybersecurity requirements applicable to federal contractors. These two settlements highlight key aspects of DOJ’s enforcement priorities: (1) DOJ’s strong focus on enforcing the FCA in the cybersecurity space, and (2) DOJ’s willingness to reward companies that self-disclose violations. All government contractors certifying compliance with regulatory and contractual requirements must stay vigilant and take the steps needed to comply. 

In the CY 2026 Medicare Physician Fee Schedule proposed rule (PFS Proposed Rule), released on July 14, 2025, the Center for Medicare and Medicaid Innovation (CMMI) introduced the Ambulatory Specialty Model (ASM), a new payment model focused on specialists who treat heart failure and low back pain in ambulatory settings. If implemented as proposed, participation in ASM will be mandatory for specialists, including cardiologists, orthopedic surgeons, pain management specialists, anesthesiologists, and neurosurgeons, who are located in designated regions and treat Medicare Fee-for-Service (FFS) beneficiaries for heart failure or low back pain. Participating providers will continue to bill Medicare FFS but will receive payment adjustments – positive, neutral, or negative – based on their performance across four domains: cost, quality, care improvement, and interoperability. 

The CY 2026 Physician Fee Schedule Proposed Rule (PFS Proposed Rule) introduces significant changes to how drug manufacturers must treat Bona Fide Service Fees (BFSFs) when calculating Average Sales Price (ASP) for Medicare Part B drugs. While the rule is directed at manufacturers, it has important implications for plans, pharmacy benefit managers (PBMs), group purchasing organizations (GPOs), and other entities that receive BFSFs, particularly if the Centers for Medicare & Medicaid (CMS) proposes similar changes to Part D. 

The Rhode Island Medical Spas Safety Act (RI MSSA) was signed into law by Governor Daniel McKee on June 30, 2025, and is the latest example of the increasing regulation of medical spas.

The Center for Medicare and Medicaid Innovation (CMMI) recently announced a six-year payment model for 2026-2031 called the Wasteful and Inappropriate Service Reduction (WISeR) Model. This blog post outlines key considerations for health care providers and suppliers to prepare for WISeR, which becomes effective January 1, 2026. 

U.S. District Court for the Southern District of Iowa issued a comprehensive preliminary injunction blocking enforcement of key provisions of Iowa Senate File 383.

A July 14, 2025 U.S. Food & Drug Administration (FDA) warning letter to a prominent wellness product and services company offers a blunt reminder that medical device requirements cannot be waived or overlooked merely because a company advertises the product for wellness and lifestyle purposes. The advisory action also indicates that FDA’s Center for Devices and Radiological Health (CDRH) remains steadfast in its enforcement of device regulations despite ongoing changes in other centers and throughout the agency.

On July 11, 2025, the Ninth Circuit Court of Appeals affirmed the criminal conviction of laboratory operator Mark Schena for violations of the Eliminating Kickbacks in Recovery Act, 18 U.S.C. § 220 (EKRA) based on compensation paid to marketers who sold testing on behalf of Schena’s laboratory. 

A few elements of this decision are particularly significant, including the court’s finding that percentage-based compensation arrangements are not per se illegal under EKRA and that evidence of undue influence over providers’ decision-making must be presented to demonstrate that the compensation was paid to “induce a referral” in violation of the statute.  The decision is also notable for its reliance on case law interpreting the Anti-Kickback Statute to reach this conclusion.

Within the first six months of President Trump’s second term, his Administration and the GOP have already implemented significant policies that are reshaping health care in the United States. Through his Administration’s restructuring of the Department of Health and Human Services (HHS), promulgation of Marketplace Integrity and Affordability rules, sweeping RADV audit changes, and now the passage of the One Big Beautiful Bill Act (OBBA), entities throughout the health care industry—particularly managed care plans and sub-capitated providers—will need to readjust to the new paradigm. 

Since April 2024, the California Department of Health Care Access and Information (HCAI), Office of Health Care Affordability (OHCA) has received twenty-six Material Change Transaction Notices (Notices) as part of its authority to review certain proposed California health care transactions. (See our prior posts here and here.) In twenty-three of the proposed transactions, OHCA has reviewed the Notices and waived a full Cost and Market Impact Review (CMIR), with two transactions still under review. 

In a brief press release published on July 9, 2025, the Department of Justice (DOJ) announced the issuance of more than 20 subpoenas to doctors and clinics as part of investigations into health care fraud, false statements, and related federal violations. The actions specifically target health care providers involved in transgender medical procedures for minors, representing a significant enforcement response that warrants careful analysis.

Of Counsel Bridgette Keller is joined by Joanne Hawana, Ben Zegarelli, and John Daley, as they offer advice for navigating communications with the FDA.

The July 2025 edition of FDA in Flux highlights five significant developments shaping the regulatory landscape for medical, life sciences, and consumer product sectors.