Holland & Knight Health Dose: May 13, 2025

Looking Ahead: Budget Reconciliation Markups

U.S. House of Representatives committees are scheduled to begin markups on additional portions of the budget reconciliation package on May 13, 2025. Both the House Committee on Ways and Means and the House Committee on Energy and Commerce, in addition to the House Committee on Agriculture, released the versions of the legislative text they will mark up. The legislative text released by the committees include significant healthcare policy changes they will pursue, among others, to offset the cost of extending tax provisions from the Tax Cuts and Jobs Act and implement other more recent priorities of President Donald Trump. U.S. Department of Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. will testify before the U.S. Senate Committee on Health, Education, Labor and Pensions (HELP) and the House Committee on Appropriations to defend the Trump Administration's fiscal year (FY) 2026 budget request.

Hearings This Week: Congressional Hearings on Healthcare and Prescription Drug Supply Chain

The Senate Committee on the Judiciary will hold a hearing on May 13, 2025, at 10:15 a.m., titled, "PBM Power Play: Examining Competition Issues in the Prescription Drug Supply Chain."

The House Committee on Appropriations will hold a hearing on May 14, 2025, at 9:30 a.m., on the FY 2026 budget request for the HHS. Secretary Kennedy will testify.

The Senate HELP Committee will hold a hearing on May 14, 2025, at 1:30 p.m., to discuss President Trump's proposed HHS budget for FY 2026. Secretary Kennedy will testify.

The Senate Committee on Indian Affairs will hold an oversight hearing on May 14, 2025, titled "Delivering Essential Public Health and Social Services to Native Americans – Examining Federal Programs Serving Native Americans across the Operating Divisions at the U.S. Department of Health and Human Services."

Week in Review: Legislative Text Markups

The House Ways and Means Committee released the legislative text on May 12, 2025, that will be marked up by the full committee on May 13, 2025. The text includes many of President Trump's priorities, including no tax on tips or overtime, enhanced child tax credits and extensions of tax cuts from the Tax Cuts and Jobs Act, which was signed into law during the first Trump Administration. The Ways and Means Committee package is expected to cost $3.7 trillion and includes a $4 trillion increase to the debt limit. Several healthcare-related tax items are also reflected, including:

• changes to the ability of beneficiaries to contribute to or use Health Savings Accounts (HSAs) based on the type of health insurance they are enrolled in
• changes to the tax treatment of on-site employee health clinics, physical activity and fitness related expenses
• prohibitions on Medicare coverage for certain non-citizens who meet specific conditions
• creation of new credits for employers whose employees receive set amounts of money to cover health insurance premiums and certain other medical expenses

The House Energy and Commerce Committee released the legislative text on May 11, 2025, that will be marked up on May 13, 2025. The text includes a multitude of key health priorities, including:

• a moratorium until Jan. 1, 2035, on the implementation of two healthcare rules finalized during the Biden Administration: "Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment" and "Medicaid Program; Streamlining the Medicaid, Children's Health Insurance Program, and Basic Health Program Application, Eligibility Determination, Enrollment, and Renewal Processes"
• requires states to complete more frequent verifications of addresses for potential and current Medicaid enrollees, ensure deceased enrollees and healthcare providers are removed from Medicaid programs, implement new provider screening requirements and enhanced eligibility checks for enrollees
• implements Medicaid community engagement for Medicaid beneficiaries (also known as work requirements)
• prohibits Medicaid and Children's Health Insurance Program (CHIP) coverage for those without verified citizenship
• requires pharmacies to participate in the National Average Drug Acquisition Cost (NADAC) survey, which measures pharmacy acquisition costs
• requires pharmacy benefit managers (PBMs) in Medicare Part D to share information related to their business practices with Medicare Part D Prescription Drug Sponsors, including information on formulary decisions
• limits compensation for PBMs to a flat fee to "delink" compensation for PBMs from drug list prices
• prohibits "spread pricing" in Medicaid
• a moratorium on new or increased provider taxes and revisions on payment limits for state directed payment programs
• streamlines the ability of providers to enroll in Medicaid programs in states other than their own, based on the Accelerating Kids' Access to Care Act
• prohibits federal Medicaid and CHIP funding for certain gender transition procedures for minors
• delays Medicaid disproportionate share hospital (DSH) cuts until 2029-2031
• requires Medicaid demonstration programs under Section 1115 waivers to be budget neutral
• establishes a single conversion factor for clinicians who are qualifying participants in Advanced Alternative Payment Models and for those who aren't, as well as set the update to the single conversion factor at 75 percent of the Medicare Economic Index (MEI) in calendar year (CY) 2026 and at 10 percent of the MEI for CY 2027 and future years
• expands and clarifies exclusion for orphan drugs with more than one indication from being subject to Medicare Drug Price Negotiation, based on the ORPHAN Cures Act

A letter from the Congressional Budget Office (CBO) on May 12, 2025, found that the provisions under consideration by the Energy and Commerce Committee across all of its subcommittees – not limited to the Health Subcommittee – would create savings of more than $880 billion from 2025-2034.

It is expected that the markups in both committees will be long drawn-out processes, taking more than a day to complete, with amendments expected to be filed, considered and voted on. It is expected that the vast majority of amendments offered will fail.

Administrative Updates

Executive Order Updates: Research and Drug Prices

The Trump Administration has continued to release wide-ranging executive orders (EOs). For brief overviews of the numerous orders published by the Trump Administration, see our "Trump's 2025 Executive Orders: Updates and Summaries" tracking chart.

Recently issued EOs related to research and drug prices include:

• "Regulatory Relief to Promote Domestic Production of Critical Medicines," which directs the U.S. Food and Drug Administration (FDA) to, within 180 days, take steps to eliminate duplicative or unnecessary regulations or guidance to streamline the approval of domestic manufacturing plants for pharmaceutical products. The EO also directs the FDA commissioner to, within 90 days, enhance the inspection of foreign manufacturing facilities. The U.S. Environmental Protection Agency (EPA) is also directed to streamline reviews of permits to expand domestic manufacturing capacity in the U.S.
• "Improving the Safety and Security of Biological Research," which directs the Office of Science and Technology Policy (OSTP) to prohibit federal funding for gain-of-function research, including research conducted by foreign entities in certain countries, and establish guidance to place restrictions on gain-of-function research. Gain-of-function research is a broad area of scientific inquiry that examines how and why an organism gains a new property or an existing property is altered. The terms "gain-of-function" and "loss-of-function' refer to any genetic mutation in an organism that, respectively, confers a new or enhanced ability or causes the loss of an ability, which can also often occur naturally.
• "Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients," which directs the HHS to take "immediate" steps to end so-called "global freeloading" and ensure the U.S. receives a Most-Favored-Nation (MFN) price for prescription drugs. The EO also instructs the U.S. Trade Representative (USTR) and U.S. Department of Commerce to take action to end global freeloading and address related national security concerns. If no progress is made, the HHS secretary will pursue rulemaking to impose MFN pricing and communicate MFN price targets to pharmaceutical manufacturers. The Trump Administration previously attempted in President Trump's first term to advance similar policies during the first term, but those efforts were blocked by the courts due to procedural issues due to a lack of notice and comment period. It is very likely this effort will again face legal challenges from the pharmaceutical industry.

Personnel Updates

• Vinay Prasad will be the director of the Center for Biologics Evaluation and Research (CBER) at the FDA. He was previously a professor at the University of California-San Francisco and is a hematologist and oncologist by training.
• Casey Means has been nominated to be U.S. surgeon general. President Trump's previous nominee, Dr. Janette Nesheiwat, withdrew her nomination from consideration on May 7, 2025.
• Jeremy Walsh has been appointed as the FDA's first chief artificial intelligence (AI) officer and will be "head of IT and AI" according to his LinkedIn post. Walsh was most recently chief technologist at Booz Allen Hamilton where he handled AI and cloud-based projects for the last 14 years.

Legislative Updates

Senate Finance Committee Ranking Member Sends Letter to HHS on Staff Cuts

Ranking Member of the Senate Finance Committee, Sen. Ron Wyden (D-Ore.), sent a letter to Secretary Kennedy regarding the firing and dismissal of HHS staff who handle Freedom of Information Act (FOIA) requests. FOIA is a federal law that ensures public access to government records. Certain FOIA staff at agencies across HHS were reportedly included in reductions in force (RIFs) that resulted in the firings of several thousand HHS employees. The letter comes in advance of Secretary Kennedy's testimony before the Senate HELP Committee on May 14, 2025.

Regulatory Updates

FDA Grants Three New Color Additive Petitions

Following the HHS' announcement on April 22, 2025, that the FDA would lead several initiatives to remove certain food additives, the FDA announced on May 9, 2025, that it had granted three new petitions to authorize the use of natural alternatives to petroleum-based synthetic dyes. The announcement accomplishes a key part of the initiatives, one of which was to fast-track the review of natural additives, including for Galdieria extract blue, butterfly pea flower extract and calcium phosphate. The petitions reference FDA reviewers' findings that data and information indicate that the natural additives are safe at levels consistent with good manufacturing practices. The only remaining natural additive that was listed in the initial HHS and FDA is gardenia blue, indicating additional authorization for that additive may be published in the coming weeks.

In line with the HHS' and FDA's previous announcements on food additives and their potential impact on chronic disease, the FDA and National Institutes of Health (NIH) launched on May 9, 2025, a joint Nutrition Regulatory Science Program to study ultra-processed foods, food additives and dietary exposures' impact on health of patients. As part of the joint program, the FDA and NIH will develop a research agenda to inform policy developments.

In line with the HHS' and FDA's previous announcements on food additives and their potential impact on chronic disease, the FDA and National Institutes of Health (NIH) launched on May 9, 2025, a joint Nutrition Regulatory Science Program to study ultra-processed foods, food additives and dietary exposures' impact on health of patients. As part of the joint program, the FDA and NIH will develop a research agenda to inform policy developments.

FDA Announces Intent to Incorporate the Use of AI in Product Reviews

The FDA announced on May 8, 2025, that it would begin integrating the use of AI across the FDA's centers by July 2025 to speed reviews of products under the FDA's jurisdiction. The announcement followed the completion of a pilot program at the FDA, which allowed for the use of AI to support scientific reviews. The AI platform will be integrated within the FDA's internal data platforms and, according to the FDA Commissioner Dr. Martin Makary, will be used to speed review processes and limit the amount of time spent by reviewers on administrative tasks. This announcement is in line with Dr. Makary's previous statements regarding his desire to speed review timelines and build upon efforts by the previous administration to issue guidance on the use of AI in product development for drug and device manufacturers.

FDA Announces PDUFA Reauthorization Stakeholder Meetings

The FDA has requested stakeholders submit their intent to participate in a series of meetings by Aug. 4, 2025, in order to inform recommendations for the next Prescription Drug User Fee Act (PDUFA) program. The statutory authority for PDUFA expires in September 2027. New legislation will be required for the FDA to continue collecting user fees for the prescription drug program. According to the FDA, these meetings are expected to begin in September 2025.

NIH/CDC Root Causes of Autism Initiative Update

After walking back the idea of an autism repository, the NIH and the Centers for Disease Control and Prevention (CDC) announced a "partnership to enable NIH to build a real-world data platform enabling advanced research across claims data, electronic medical records, and consumer wearables." According to Secretary Kennedy, the partnership will be used to "uncover the root causes of autism and other chronic diseases. We're pulling back the curtain – with full transparency and accountability – to deliver the honest answers families have waited far too long to hear."

The initiative will begin by establishing a data use agreement under the Centers for Medicare & Medicaid Services' (CMS) Research Data Disclosure Program focused on Medicare and Medicaid enrollees with a diagnosis of autism spectrum disorder (ASD). According to the announcement, researchers will focus on:

• autism diagnosis trends over time
• health outcomes from specific medical and behavioral interventions
• access to care and disparities by demographics and geography
• the economic burden on families and healthcare systems

Legal Updates

Attorneys General File Challenge to Cuts at HHS

Attorneys general from 19 states and the District of Columbia filed a lawsuit on May 5, 2025, challenging cuts to and the restructuring of HHS. The lawsuit was filed in federal court in Rhode Island and alleges that the Trump Administration violated the law and improperly skirted congressional authority when it announced on March 27, 2025, that it planned to consolidate HHS offices and lay off more than 10,000 employees. The lawsuit asks the court to halt the reorganization and restore health programs that were eliminated, arguing that the restructure of HHS has prevented the department from carrying out statutorily required functions.

Judge Asks DOJ For Additional Information on Case of Paused Federal Healthcare Grants

A federal judge in Massachusetts directed lawyers from the U.S. Department of Justice (DOJ) on May 8, 2025, to provide the Trump Administration's definition(s) of diversity, equity and inclusion to inform the judge's decision on whether the pause of the distribution of federal grant funding was done on a valid basis. A coalition of states and the District of Columbia sued the Trump Administration on April 4, 2025, to challenge the Trump Administration's efforts to pause, rollback or delay grant funding being distributed from the NIH to research institutions nationwide. The U.S. Supreme Court ruled in a previous case that a district court lacked jurisdiction over what the majority opinion held is a contract dispute under the federal Tucker Act.

NSF Indirect Cost Rate Cap Draws Legal Challenge

Several associations representing academic institutions and research universities, along with 13 research universities, filed a joint lawsuit in the U.S. District Court for the District of Massachusetts on May 5, 2025. They are challenging the Trump Administration's recent decision to reduce funding for essential research that contributes to a stronger America.

According to one of the petitioners, the lawsuit aims to stop the National Science Foundation (NSF) from implementing a new policy that would lower the reimbursement rate for Facilities and Administrative (F&A) costs, also known as indirect costs. This reimbursement rate is deemed critical by the organizations for covering the expenses of conducting innovative research.

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