For the last 40 years, when federal legislation was ambiguous or left an administrative gap, courts were required to defer to the interpretation of federal agencies. This stipulation, called the Chevron deference, gave government organizations the ability to advance their regulatory priorities.
But in June, when the Supreme Court voted 6-3 to overturn the doctrine, it brought significant impact for the healthcare industry and federal regulators like the FDA and the Centers for Medicare & Medicaid Services (CMS).
“The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous,” the Supreme Court wrote (PDF) in its majority opinion.
In a LinkedIn post, former FDA chief Scott Gottlieb, M.D., said that he expects courts to continue to defer to the agency on fact-based decisions, such as those on drug approvals and product reviews. But he does expect that there will be “considerable churn over the next few years as litigants come forward and courts sort out when and how to respect the FDA’s prior decisions.”
In considering the ramifications for the healthcare industry, Anshul Mangal, a former patent attorney and now the president of biopharma consulting firm Project Farma, identified a laundry list of potential court cases that could emerge.
“We’re really opening Pandora’s box on what could be challenged,” Mangal said in a recent podcast interview with Fierce Pharma.
In her dissenting Supreme Court opinion, Associate Justice Elena Kagan wrote that the Chevron deference was a particularly important tool for scientific agencies such as the FDA.
“It has become part of the warp and woof of modern government, supporting regulatory efforts of all kinds—to name a few, keeping air and water clean, food and drugs safe, and financial markets honest,” Kagan wrote. “Agencies have expertise in those areas, courts do not. Some demand a detailed understanding of complex and interdependent regulatory programs. Agencies know those programs inside-out, again, courts do not.”
Kagan cited a 2020 case in which Teva challenged the FDA’s regulation of multiple sclerosis treatment Copaxone, which hinged on the classification of the drug and the agency’s ability to regulate it.
“When does an alpha amino acid polymer qualify as a ‘protein’?” Kagan asked. “I don’t know many judges who would feel confident resolving that issue. (First question: What even is an alpha amino acid polymer?). But the FDA likely has scores of scientists on staff who can think intelligently about it, maybe collaborate with each other on its finer points, and arrive at a sensible answer.”
One of the areas subject to challenge will be the FDA’s interpretation of statutes surrounding marketing exclusivity, like those affecting pediatric, biologic and orphan drugs, according to Chicago-based law firm Sidley Austin.
“The FDA’s determinations on the availability and duration of these exclusivity periods have significant financial consequences for manufacturers and competitors alike,” Sidley wrote in a post-Chevron decision update. “It is thus no surprise that FDA’s exclusivity determinations have frequently been challenged in court, often with success. Other disputes, however, have been resolved in FDA’s favor based on a perceived ambiguity in the relevant statute.”
As for the CMS, there will likely be more legal focus on drug pricing regulation and the Inflation Reduction Act, according to Mangal.
“The CMS often uses novel interpretations of the law to implement policies, such as those regarding Medicare drug negotiations or the Medicaid drug rebate program,” Mangal said. “These interpretations could be now vulnerable to legal challenges, especially as stakeholders argue that CMS has overstepped its authority.”
In his discussions with companies and experts surrounding the implications of the Chevron ruling, Mangal has found a “mixed bag” of reactions. While there is optimism that companies have much to gain in their sudden ability to challenge agency interpretations of statutes, they also are wary of an uncertain playing field that is “more contentious, more unpredictable and could potentially delay the approval of new drugs,” he said.
“This could lead to a more volatile regulatory environment, with the stability and predictability that we’ve always relied on turned on its head," Mangal explained.
Oddly enough, the Chevron doctrine arose in 1984 from a dispute over how the Environmental Protection Agency (EPA) interpreted the Clean Air Act. At the time, the Reagan administration, which had significant influence over the EPA and favored business-friendly regulations, didn’t want courts interfering with government interpretations of statutes. Forty years later, it was conservatives urging for an end of Chevron as a pro-business measure.
The overturning of Chevron arose from a simple dispute in which two commercial fishing companies challenged the National Marine Fisheries Service for requiring them to pay up to $700 per day for the boarding of government compliance monitors on their boats. The companies took their appeal all the way to the Supreme Court.