Overturning Chevron Deference Could Lead to Confusion, Chaos Across Pharmaceutical Industry

In July 2024, the United States Supreme Court reversed the doctrine of Chevron deference with their decision in Loper Bright Enterprises v Raimondo. The 6-3 ruling has the potential to upend the ability of federal agencies—including the FDA, the Department of Health and Human Services (HHS), and the Centers for Medicare & Medicaid Services (CMS)—to interpret the laws they administer, giving the courts the prerogative to rely on their own interpretation of what can be rather vague laws.^1,2,3

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Arguments Surrounding Loper

In their decision, the Court overturned the landmark 1984 ruling in Chevron v Natural Resources Defense Council. In that case, the Court ruled that, when a law passed by Congress was not explicit on a specific statute from a federal agency, courts must defer to a reasonable interpretation made by the agency rather than their own judgement.^4,5

Chief Justice John Roberts penned the opinion of the Court. “Chevron is overruled,” Roberts wrote, citing the Administrative Procedure Act of 1946 (APA), a law that governs how federal agencies develop regulations, in his belief that “courts must exercise their independent judgement in deciding whether an agency has acted within its statutory authority.”⁶

In her dissent, Justice Elena Kagan significantly opposed the overruling of Chevron. “In one fell swoop, the majority today gives itself exclusive power over every open issue—no matter how expertise-driven or policy-laden—involving the meaning of regulatory law,” Kagan wrote, warning that the effects of this decision could be wide-reaching and immense.⁶

The overturning of Chevron reverberated throughout the health care and pharmaceutical industries. On the day Chevron was overturned, the American Cancer Society, American Heart Association, American Lung Association, and 13 other associations released a joint statement claiming that the Court’s decision “threatens to disrupt [the] public health care system.”⁷

“We anticipate that today’s ruling will cause significant disruption to publicly funded health insurance programs, to the stability of this country’s health care and food and drug review systems, and to the health and well-being of the patients and consumers we serve,” the associations wrote in the news release.⁷

Impacts to the FDA

One of the greatest potential areas of change for regulatory agencies relating to the ruling could be the ability to challenge areas where organizations or individuals believe agencies such as the FDA or HHS have overreached, according to Ron Lanton III, Esq, a regulatory attorney and partner at Lanton Law PLLC, in an interview with Pharmacy Times.⁸

“It is believed that the reversal of the doctrine will result in legislators having to become more specific in technical areas, such as health care, where they have placed most of the responsibility on the federal agency,” Lanton said. “Many observers are expecting a wave of challenges ultimately leading to self-regulation in the pharmaceutical industry.”⁸

An example Lanton provided is the possibility of pharmaceutical companies challenging FDA approvals based on the plain text of the federal Food, Drug, and Cosmetic Act. The act authorizes the FDA to approve drugs based on effectiveness from “well-established and controlled investigations.”⁹

This statute leaves ambiguity as to what exactly a well-controlled investigation is, Lanton explained. The FDA has historically made approval decisions based on their interpretation of evidence in clinical trials as being adequate to support the public’s use, but the reversal of Chevron could allow other stakeholders to challenge what information FDA approvals are based on.⁸

The FDA will have to rely on the APA’s text in creating regulations and guidance, in addition to leaning on Congress, rather than their own administrative guidance, to answer ambiguous questions in the industry. Lanton also noted that emergency regulations or fast-track approvals may need to be phased out, “as they may create more risk to challenges.”⁸

However, Lanton also predicts that a major impact to the FDA’s functions will not be seen, discussing that the agency could protect itself from the Loper decision by using non-binding guidance documents, with an increase in industry roundtables and self-regulation.⁸

“The courts have been moving in this direction for some time in regard to getting rid of Chevron and the FDA has most likely prepared for this,” Lanton explained. “The FDA has a unique relationship with Congress which will serve it well in creating rules and regulations without ambiguities.”⁸

Additionally, Lanton questioned the logic of the pharmaceutical industry “biting off the hand that feeds them,” by creating chaos in challenging FDA decisions, since the industry still relies on the FDA’s thorough clinical trial process for drugs to gain approvals. For over a century, the agency has been known to have a “gold standard” approval process for drugs and medicines, which may deter would-be legal challenges.⁸

Risks to CMS, HHS, and Other Agencies

Other agencies, such as CMS, are at risk of challenges due to the overturning of Chevron. CMS oversees complex health care issues, administering the country’s publicly-funded health insurance programs. Much of their work involves forging relationships with third parties, such as insurance companies, and giving these companies power to manage patient populations. CMS also can audit providers to ensure that patients are being treated fairly and affordably.^8,10

It’s agencies such as these that “could be heavily targeted by groups looking to lower drug prices,” Lanton explained. The use of these third-party contractors could open the potential for CMS to not be statutorily allowed to give these contractors agency post-Loper.⁸

Additionally, funding for HHS could be targeted if the use of these government funds is not specifically tied to legislation (as Loper now requires), or if their use is contrary to an opposing political party’s platform.⁸

While the overturning of Chevron leaves these agencies at greater risk of disturbances, challenges still must go through a court of law, and any real action that takes advantage of the Loper decision needs to be backed up by a vast number of resources, as “it costs a lot of money to sue the federal government—actually, to sue anyone in the health care system,” according to Lanton.⁸

Beyond any specific expected challenges, the main gripes from major health care and pharmaceutical associations is that Congress—and the courts—do not have the bandwidth or experience required to tackle complex health-related questions that can impact millions of patients.¹⁰

In an amicus brief filed by the American Cancer Society, the National Health Law Program, and other associations prior to Chevron’s overturning, they provide examples of circuit court decisions that they believe “demonstrate the impracticability” of the potential decision. They write that it is “unrealistic” to expect that Congress could draft statutes with precision and thoroughness.¹⁰

Furthermore, Congress would have to stay on top of Medicare and Medicaid programs constantly to “identify and plug—through timely legislation—every statutory gap that becomes apparent.” Given these decisions need to be informed by policy choices, the associations wrote that “generalist judges lack the expertise that agency personnel possess to make such determinations.”¹⁰

By placing the responsibility of fleshing out complicated statutes on judges rather than regulatory agencies, the Loper decision “risks creating a patchwork scheme of potentially conflicting judicial interpretations,” according to the amicus brief. The associations warn that “the resulting uncertainty would be extraordinarily destabilizing,” and that “a post-Chevron litigation tsunami would seem all but guaranteed.”¹⁰

Pharmacist and Agency Response

Given the potential complexity and confusion that the Loper decision could lead to, pharmacists are within their right to be concerned. But Lanton recommends that pharmacists “stick to the rules already in place and not worry about a challenge if you are in the industry.”⁸

Lanton explains further that much of the scope of practice rules and regulations of pharmacy are based on state regulations, rather than federal regulations. Therefore, the full scope of the impact of the ruling remains to be seen, especially in relation to the impact on state pharmacy law. Until that is known, pharmacists should continue to adhere to their state boards of pharmacy and seek their guidance if any Chevron-related issues arise in practice.⁸

Additionally, Lanton noted that federal agencies may be able to refer more cases to their state counterparts “in order to insulate them from Loper challenges.” Regulatory agencies should create specific, detailed, and challenge-proof regulations in the post-Chevron era, according to Lanton.

REFERENCES

1. Quinn M. Supreme Court overturns Chevron decision, curtailing federal agencies’ power in major shift. CBS News. Published June 28, 2024. Accessed August 14, 2024. https://www.cbsnews.com/news/supreme-court-chevron-deference-power-of-federal-agencies/

2. Howe A. Supreme Court strikes down Chevron, curtailing power of federal agencies. SCOTUSblog. Published June 28, 2024. Accessed August 14, 2024. https://www.scotusblog.com/2024/06/supreme-court-strikes-down-chevron-curtailing-power-of-federal-agencies/

3. Daly M. What it means for the Supreme Court to throw out Chevron decision, undercutting federal regulators. AP. Published June 28, 2024. Accessed August 14, 2024. https://apnews.com/article/supreme-court-chevron-regulations-environment-4ae73d5a79cabadff4da8f7e16669929

4. Cwiklinski J, Legal Information Institute. Chevron deference. Cornell Law School. Updated July 2024. Accessed August 14, 2024. https://www.law.cornell.edu/wex/chevron_deference#:~:text=The%20scope%20of%20the%20Chevron,made%20by%20the%20administrative%20agency.

5. Franco MA, Bradner RH. What does the overturning of Chevron mean for health care? Holland & Knight. Published July 3, 2024. Accessed August 14, 2024. https://www.hklaw.com/en/insights/publications/2024/07/what-does-the-overturning-of-chevron-mean-for-healthcare

6. Supreme Court of the United States. Loper Bright Enterprises, et al. vs Raimondo, Secretary of Commerce, et al. No. 22—451. Syllabus. Argued January 17, 2024. Decided June 28, 2024. Online version accessed August 14, 2024. chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://www.supremecourt.gov/opinions/23pdf/22-451_7m58.pdf

7. American Academy of Pediatrics, American Cancer Society, American Cancer Society Cancer Action Network, et al. Supreme Court decision to overturn ‘Chevron deference’ threatens to disrupt public health care system. American Heart Association Newsroom. News Release. Released June 28, 2024. Accessed August 14, 2024. https://newsroom.heart.org/news/supreme-court-decision-to-overturn-chevron-deference-threatens-to-disrupt-public-health-care-system

8. Lanton, R. Pharmacy Times Interview. July 31, 2024. Accessed August 14, 2024.

9. Lam C, Patel P. Food, Drug, and Cosmetic Act. In: StatPearls [Internet]. Updated July 31, 2023. Published online January 2024. https://www.ncbi.nlm.nih.gov/books/NBK585046/

10. American Cancer Society, American Cancer Society Cancer Action Network, National Health Law Program et al. Brief of Amici Curiae. Published September 22, 2023. Accessed online August 14, 2024. https://www.fightcancer.org/sites/default/files/docs/JAI/230912a_ac_brief_for_efiliing_1.pdf