U.S. Supreme Court Overturns Chevron – Impact on Health Care and Life Sciences

On June 28, 2024, the U.S. Supreme Court (the “Court”) issued a decision in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce (“Loper Decision”) overturning what is commonly referred to as Chevron deference. The Loper Decision has garnered significant media coverage and commentary from the legal community and politicians, including the Senate’s Minority Leader Mitch McConnell and Majority Leader Chuck Schumer, but what does it mean in practice for those in the health care and life sciences space? 

As background, the Chevron deference doctrine was established by the 1984 Court decision in Chevron v. Natural Resources Defense Council. The doctrine, simply put, meant that when a statute was ambiguous, federal courts were generally required to defer to the reasonable interpretation of agencies, subject to subsequent limitations set by the Court over time. 

In the Loper Decision, the Court has made a sharp turn away from this deference, with the majority opinion of the Court including the following statement:

Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires. Careful attention to the judgment of the Executive Branch may help inform that inquiry. And when a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within it.  But courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.

Of note, even when a statute does not delegate authority to an agency, the majority opinion of the Court in the Loper Decision specifically contemplates that courts may continue to “…seek aid from the interpretations of those responsible for implementing particular statutes.” However, this is framed as permissive and not mandatory.

There is likely to be a significant impact on the highly regulated health care and life science industries where day-to-day operations are greatly affected by the actions of agencies including the U.S. Department of Health and Human Services (“HHS”), the Centers for Medicare & Medicaid Services (“CMS”), the Food and Drug Administration (“FDA”), the Health Resources and Services Administration (“HRSA”), and the HHS Office for Civil Rights (“OCR”), amongst others. 

By removing the deference to agencies on their interpretation of statutes in certain circumstances, there will likely be more challenges to existing agency regulations. The majority opinion of the Court in the Loper Decision does specifically note that it was “…not call[ing] into question prior cases that relied on the Chevron framework” and goes on to state that:

The holdings of those cases that specific agency actions are lawful—including the Clean Air Act holding of Chevron itself—are still subject to statutory stare decisis despite our change in interpretive methodology. See CBOCS West, Inc. v. Humphries, 553 U. S. 442, 457 (2008). Mere reliance on Chevron cannot constitute a “‘special justification’” for overruling such a holding, because to say a precedent relied on Chevron is, at best, “just an argument that the precedent was wrongly decided.” Halliburton Co. v. Erica P. John Fund, Inc., 573 U. S. 258, 266 (2014) (quoting Dickerson v. United States, 530 U. S. 428, 443 (2000)). That is not enough to justify overruling a statutory precedent.

However, the Court also issued a decision on July 1, 2024 in Corner Post v. the Board of Governors of the Federal Reserve System (“Corner Decision”) that could lead to a significant increase in challenges to older regulations. Rather than the six-year statute of limitations starting from when an agency’s action becomes final, the Court’s majority opinion in the Corner Decision states:

The default statute of limitations for suits against the United States requires “the complaint [to be] filed within six years after the right of action first accrues.”  28 U. S. C. §2401(a). We must decide when a claim brought under the Administrative Procedure Act “accrues” for purposes of this provision. The answer is straightforward. A claim accrues when the plaintiff has the right to assert it in court—and in the case of the APA, that is when the plaintiff is injured by final agency action.

The Corner Decision dissenting opinion raises concerns with the impact of the Corner Decision, including by stating:

After today, even the most well-settled agency regulations can be placed on the chopping block.  And please take note: The fallout will not stop with new challenges to old rules involving the most contentious issues of today. Any established government regulation about any issue—say, workplace safety, toxic waste, or consumer protection—can now be attacked by any new regulated entity within six years of the entity’s formation.  A brand new entity could pop up and challenge a regulation that is decades old; perhaps even one that is as old as the APA itself. No matter how entrenched, heavily relied upon, or central to the functioning of our society a rule is, the majority has announced open season.

In addition to increasing the challenges to current regulations, both the Loper Decision and the Corner Decision may ultimately make it harder for agencies to utilize the rulemaking process to expand upon the scope of existing statutes and therefore to impose new requirements in the health care and life sciences spaces. One can certainly argue the merits and pitfalls created by such a scenario. In any event, there may be some periods of uncertainty for the impacted industries when litigation challenging agency actions becomes more common and the outcomes of such litigation are less predictable.

The reduction in agency deference resulting from the Loper Decision could also lead to scenarios where there are inconsistent court determinations across the country, creating circuit splits.  Healthcare and FDA regulatory industry participants will need to keep a closer eye on changing compliance requirements, especially those with a national footprint, depending on the locations where they have operations. Likewise, in addition to current state law considerations, when contemplating expansion opportunities, then current, and in flux, federal regulatory frameworks in applicable jurisdictions will need to be reviewed and factored into decision-making.

The impact to legislation may even affect legislation and topics that have bipartisan support for the current term. Modern Healthcare noted with respect to the Loper Decision that “[e]ven broadly supported bipartisan goals such as setting limits on artificial intelligence in healthcare, expanding telehealth, and curbing pharmacy benefit managers will require second looks and perhaps new agreements, in certain cases, between Republicans and Democrats to restore some of the executive branch authority the Supreme Court took away.”  

Agencies may need to look to Congress to modify or expand current statutes in order to achieve policy goals (and/or to obtain more statutory deference). In a scenario where there is potentially more reliance on Congress, the situation could be ripe for increased lobbying efforts by interested parties, including large industry groups, who could have more of an opportunity than they previously did to advocate for their positions and for less statutory deference to applicable agencies. There is also the potential that this could lead to more collaboration as there may be more of a need for agencies to ensure buy-in from impacted stakeholders.

While there are certainly many unknowns with respect to the specific elements of industry operations that the Loper Decision will ultimately have an effect on, it is likely that the impact will be monumental.