Fallout from the Supreme Court Decision to Reverse Chevron Deference

This article is a follow-up of the two-part series to help the industry in understanding the potential reversal of Chevron vs NRDC and its impact on the regulatory landscape.

The Supreme Court’s recent Chevron ruling might significantly change how federal agencies including Health and Human Services (HHS) and the Food and Drug Administration’s (FDA) can promulgate regulations when federal statutes do not address or are ambiguous about areas of desired regulatory action. The Loper Bright Enterprises v. Raimondo, Secretary of Commerce and Relentless, Inc. v. Department of Commerce decision came on the heels of two other recent Supreme Court decisions, which may force limitations on the FDA’s ability to use injunctions and may give companies cause to challenge the use of administrative proceeding.

?Already, at least two lawsuits have been filed for which Chevron deference ruling will have a significant impact. Hackensack Meridian Health filed a lawsuit against HHS Secretary Xavier Becerra over Medicare practices and specifically challenges the formula used by the Center for Medicare & Medicaid Services to establish reimbursement for a disproportionate share of its hospital payments. The American Clinical Laboratory Association sued the FDA to reverse the Lab Developed Test definition that states that those tests are medical devices and have the rule vacated. The plaintiffs, in both cases, are challenging the regulator’s interpretation of governing statutes.

?Let’s look at the three decisions and their potential impacts:

Chevron Deference reversal – Courts cannot rely upon Agencies to interpret statutes

Implications of Chevron deference reversal on future challenges to FDA regulations:

• Prior court decisions based upon Chevron deference are upheld
• Decisions by courts will be inconsistent because different judges may apply different interpretations of the law
• Legal challenges to new regulations might increase.
• FDA will be limited in creating new regulations that are not clearly authorized in statutes.
• It might take longer time for new regulations to be implemented as the FDA will want to ensure that the new regulations are defensible.
• FDA’s use of Guidance for Industry documents may be challenged for interpretations of statutes.
• FDA’s ability to regulate new technologies might be stymied without new legislation that specifically gives FDA authority to regulate it. This obviously will add significant time before FDA could promulgate regulations as the development of legislation is a deliberative process. In the short-term, the decision might delay FDA’s recent plans to publish guidances on the use of AI in drug development, clinical trials, and manufacturing.
• The U.S. Congress and the FDA will have to collaborate when writing legislation to be explicit and minimize any ambiguities in the statutes that are passed.

?Current regulations including CGMP regulations will not be affected by the Chevron decision since Section 701 of the Food Drug and Cosmetic Act (FDCA) gives specific authority to enact regulations to the HHS Secretary or such officer or employee that he may designate for the purpose of enacting regulations. The development of regulations for compounding will also be protected because they are required in Section 503A of the FDCA. In both cases, the ambiguous sections of the FDCA or issues not specifically addressed will be the focus of any court challenges.

?Administrative Proceedings cannot be used to impose fines

On June 27, 2024, in the Securities and Exchange Commission v. Jarkesy, the Supreme Court ruled that the Securities and Exchange Commission (SEC) cannot impose fines to penalize a plaintiff in its administrative proceedings because that practice violates the Seventh Amendment “right of trial by jury” in all “suits at common law.”

?The FDA has used administrative detention and civil penalty hearing actions to enforce the FDCA and protect public health. The use of these actions now may be challenged in court.

?Proof of the need for Injunctive Relief reverts to the traditional equitable standard

On June 27, 2024, the Supreme Court, in the Starbucks Corp. v. McKinney case ruled that the traditional equitable requirements for obtaining an injunction from Winter v. Natural Resources Defense Council, Inc. apply to this case.

?The FDA has used its injunctive power to enforce the FDCA. This injunctive power was granted by Congress and provides that courts shall have jurisdiction, for cause shown, to restrain violations. The FDA has consistently used its court case precedents which relied upon its public health function arguments with the courts and did not rely upon the Supreme Court’s requirement to apply the traditional equitable standards. Although, most FDA industry injunctions are the result of negotiated consent decrees, future actions that are taken by FDA to negotiate consent decrees may be challenged in court since it would require the court to follow the Winter traditional equitable standards.

?What has happened since the three Supreme Court cases were decided.

Former FDA Commissioner, Scot Gottlieb wrote on X that courts will still defer to the FDA on product review decisions, but some areas could be affected immediately.

House Representative Pramila Jayapal (D-Wash.) called for Congress to "immediately pass" the Stop Corporate Capture Act, which she introduced in 2021 and reintroduced in March 2023. This bill if passed would restore the principles of the Chevron Deference that courts should defer to regulatory agencies. In addition, Jayapal states that the legislation will strengthen federal rulemaking and ensure rulemaking is “guided by the public interest.”

Jaypal’s proposed legislation could have a chilling impact on the standard public commenting period for regulations, as it would require any person (including companies) submitting studies as part of a public comment to disclose who funded the study. In addition, it would impose fines on public companies for knowingly spreading false information in public comments of up to $1 mil. USD. ?

Alternative legislation has been proposed by U.S. Representative Kevin Hern (R-Okla.) Kevin Hern has proposed a legislative plan to further change the authority of Federal Agencies and place additional administrative controls over issuance and implementation of regulations.

?As I stated previously, there is a new era of administrative law. This new era could improve the quality of legislation and use of federal regulations, or it may have many unintended consequences that could hurt public health. It will increase the number of cases before the Federal Courts.

The two-part series can be found here:

?Part One: (28) What the Legal Challenges on the Future of FDA Regulations Mean: A Two-Part Series | LinkedIn

Part Two: (28) What the Legal Challenges on the Future of FDA Regulations Mean: Part Two | LinkedIn