Looking Ahead: Budget Reconciliation Package to the House Floor
The budget reconciliation package is expected to be considered by the full U.S. House of Representatives as soon as May 22, 2025. The House Committee on Rules is scheduled to meet on May 21, 2025, at which time additional changes to the legislation may be made. The House Committee on Rules is a key procedural checkpoint that clears the pathway for bills to be considered on the floor, as well as set the rules regarding debate on the bill.
Hearings This Week
The U.S. Senate Committee on Appropriations will hold a subcommittee hearing on May 20, 2025, titled "A Review of the President's Fiscal Year 2026 Budget Request for the Department of Health and Human Services." U.S. Department of Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. will testify.
The House Committee on Oversight and Government Reform will hold a hearing on May 20, 2025, titled "Mandates, Meddling, and Mismanagement: The IRA's Threat to Energy and Medicine."
The Senate Committee on Appropriations' Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies will hold a hearing on May 22, 2025, titled "A Review of the President's Fiscal Year 2026 Budget Request for the Food and Drug Administration." U.S. Food and Drug Administration (FDA) Commissioner Dr. Martin Makary will testify.
Week in Review: Budget Bill Advances
House committees with jurisdiction over healthcare policy held markups on 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 advanced their portions of the reconciliation package along party-line votes. While many amendments were offered, none were incorporated into the legislative text, leaving the bill text largely the same as when it was introduced for consideration.
The House Committee on the Budget voted on May 18, 2025, to advance the reconciliation package to the floor for a vote. However, the bill was moved forward only after four members of the committee who are aligned with the House Freedom Caucus voted "present" to highlight their continued concern that the package doesn't go far enough to reduce federal spending by Medicaid. During the negotiations, Speaker Mike Johnson (R-La.) reportedly discussed moving up the timeline for Medicaid work requirements from 2029 to possibly 2027, while conservatives remain steadfast in their efforts to change the Federal Medical Assistance Percentage (FMAP).
HHS Secretary Kennedy testified before the Senate Committee on Health, Education, Labor and Pensions (HELP) and House Committee on Appropriations to defend the Trump Administration's fiscal year (FY) 2026 "skinny budget" request on May 14, 2025.
Administrative Updates
Secretary Kennedy Testifies Before 2 Congressional Committees
HHS Secretary Kennedy appeared before the Senate HELP Committee and the House Appropriations Committee on May 14, 2025, to discuss the Trump Administration's FY 2025 budget request for the HHS. During both hearings, Secretary Kennedy was asked an array of questions by members but made several notable comments about actions underway at the department, including:
- Indicating he directed the FDA commissioner to complete a "comprehensive review" of safety data for mifepristone. He also said that he expects warning labels for mifepristone to be reinstituted and may require in-person dispensing for the medication. In response to a question from Sen. Josh Hawley (R-Mo.) regarding safety protocols for mifepristone, Secretary Kennedy said that "policy changes will ultimately go through the White House, through President Donald Trump." President Trump previously indicated he would not make major changes to the availability of mifepristone.
- Sharing his support for eliminating tax deductions for direct-to-consumer (DTC) television advertising for prescription drugs. Bipartisan legislation has previously been introduced to eliminate the tax deductions and will soon be reintroduced by Sens. Hawley and Jeanne Shaheen (D-N.H.).
- Announcing the HHS will release a four-page document outlining dietary recommendations for Americans, similar to the Dietary Guidelines for Americans, which has been undergoing its regularly scheduled update.
Legislative Updates
After a more than 26-hour markup, the House Energy and Commerce Committee passed along party lines legislation that will constitute the committee's portion of the reconciliation bill. The bill was largely unchanged from the text that was released prior to the markup. Nearly 100 amendments were offered, considered and ultimately rejected, many of which were offered by Democrat members and centered on the healthcare impacts of changes to Medicaid that are included in the legislation. Democratic members also shared stories of current Medicaid beneficiaries who may be impacted by policy changes. Republican members throughout the markup focused on the bill as one that will address waste, fraud and abuse within Medicaid and ensure that only those eligible for Medicaid receive it.
The Energy and Commerce Committee's portion of the reconciliation bill saved a higher amount – around $1 trillion across the subcommittees under its jurisdiction – than the budget resolution directed it to identify ($880 billion). As a result, committee and Republican leadership have around $100 billion in savings that they can use to put toward revising or adding provisions that cost money such as the state and local tax (SALT) deduction. Increasing the SALT cap from $10,000 and offsetting the cost by speeding up the time by which the community engagement requirement for Medicaid recipients, also known as work requirements, will take effect is currently under consideration. While initially slated to begin in 2029, leaders are considering having work requirements take effect as soon as 2026 to offset the cost of the SALT deduction changes and appease Republicans who want larger structural changes to Medicaid.
The House Committee on the Budget held a meeting on May 16, 2025, to stitch together the portions of the reconciliation package passed by House committees. However, a vote on advancing the package was postponed after several Republican members aligned with the Freedom Caucus indicated their reservations to the package. Opposition from those Republicans centered upon a lack of more substantial changes to reduce Medicaid spending. Committee Republicans who represent moderate districts – especially those in blue states – continue to push for changes to the SALT deduction to allow single individuals and married couples to deduct a higher amount of state and local taxes paid from their federal taxes. Moderate Republicans from New York and California are pushing for a cap at or above $30,000, a significant increase from the $10,000 limit established by the Tax Cuts and Jobs Act.
Regulatory Updates
CMS Releases New Strategy for CMMI
The Centers for Medicare & Medicaid Services (CMS) released a new strategy for the Center for Medicare and Medicaid Innovation (CMMI) on May 13, 2025, including a white paper authored by CMMI Director Abe Sutton. In its announcement, the CMMI indicated it will focus on three main pillars moving forward:
- promote evidence-based prevention
- empower people to achieve their health goals
- drive choice and competition for people
Additionally, the CMMI will test new models within Medicare Advantage (MA) and modify existing models to increase access to primary care, including preventive health initiatives. The CMMI noted that features of the model could include inferred risk scores (patient condition analytics based on claims, prescriptions and labs), regional benchmarks and new quality measures. CMMI restated its commitment to "supporting independent providers" through increasing competition, inclusion of downside risk in new models and risk bearing by individual providers. The strategy also noted that CMMI models "can require site-neutral payments across settings to reduce costs and reinvest hospital capacity in outpatient and community-based care through changes to certificate of need requirements."
The CMMI will also explore waivers for accountable care organizations (ACOs) that assume the risk of providing durable medical equipment (DME) that bypass National Coverage Determinations (NCDs) so long as they support patients transitioning to receiving care in their homes or to ensure patients may remain in their homes as opposed to more costly care settings. Other waivers will also be explored, especially those that lower the cost of healthcare, including "structural reform to drug pricing that supports innovation and access."
In the strategy, "data access" was described as a key driver of improving quality and reducing costs. Strategies to achieve these goals include data transparency through public reporting and leveraging new technology.
Last Congress, the House Energy and Commerce Committee held a hearing on CMMI. During that hearing, Republican members were critical of the CMMI for not producing more immediate, sizable cost savings, despite receiving $10 billion every 10 years to test innovative payment models. Moving forward, it is increasingly likely that participants in CMMI models will be expected to meet new requirements related to disease prevention and addressing chronic disease, both of which are priorities of Secretary Kennedy and CMMI Director Sutton.
CMS Proposed Rule on Provider Taxes, with Focus on MCOs
CMS issued a proposed rule on May 12, 2025, titled "Medicaid Program; Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care-Related Tax Loophole Proposed Rule." The proposed rule has been issued amid significant debate in Congress regarding changes to the Medicaid Program, specifically regarding whether states are improperly levying provider taxes to lower the amount states spend on their Medicaid programs. The proposed rule clarifies CMS' interpretation of when a provider tax may be considered "generally redistributive" and aims to prohibit states from explicitly taxing certain entities at a higher rate than other entities, such as Medicaid business Managed Care Organizations (MCOs). Federal law requires that provider taxes be implemented similarly across different provider entities and services. States may request a waiver from CMS to impose a tax that is not uniform and broad based, but that tax must pass a statistical test to provide the proposal is "generally redistributive." While not explicitly named in the proposed rule, there are seven states that currently have provider taxes that would be considered non-compliant should the proposed rule be finalized: California, Illinois, Massachusetts, Michigan, New York, Ohio and West Virginia.
The House Energy and Commerce Committee's reconciliation bill includes a provision that prohibits states from expanding the provider tax rate or changing who is taxed after the bill is enacted. Given that the provision is being considered in a package that Republican leaders aim to pass by July 4, 2025, the provision from the bill and the proposed rule (if finalized) would interact. Under the bill language, it is possible that other state arrangements could be found to be impermissible in the future, and those states would not be able to make changes to their tax structures because the provider tax moratorium would already be in effect.
HHS, FDA Issue Request for Information to Support Deregulatory Agenda
The HHS and FDA issued a Request for Information (RFI) on May 13, 2025, titled "Ensuring Lawful Regulation and Unleashing Innovation to Make Americans Healthy Again." The RFI requests public comments and recommendations on HHS and FDA regulations that should be eliminated "to lower healthcare costs, reduce burdens on physicians, and address the prevalence of chronic disease." Public comments are due by July 14, 2025.
The RFI is a component of the Trump Administration's deregulatory approach. The announcement details changes to HHS rulemaking efforts that are consistent with President Trump's Executive Order (EO) 14192, "Unleashing Prosperity Through Deregulation." EO 14192 seeks to limit the number of regulations issued by federal agencies and reduce regulatory burdens. As part of that aim, HHS will implement the following measures:
- at least 10 existing regulations, guidance documents, memos, policy statements and similar directives will be eliminated for every new regulation proposed
- all new regulations in FY 2025 will be required to cost "significantly less than zero," indicating new regulations will be expected to generate savings
- HHS will publish annual reports detailing costs associated with new regulations and explanations for how rules being eliminated will offset the cost of implementing new regulations
For more information on how to submit public comments, see Holland & Knight's previous alert, "HHS, FDA Issue Request for Information to Support Administration's Deregulatory Agenda," May 14, 2025.
Most-Favored-Nation Drug Pricing EO: What to Know
President Trump signed an EO on May 12, 2025, that aims to ensure that Americans pay no more for prescription drugs than the lowest price paid by other developed nations. The "Most-Favored-Nation" (MFN) EO instructs the HHS secretary to facilitate DTC purchasing at these prices and communicate target prices to pharmaceutical manufacturers within 30 days. If manufacturers do not comply, further regulatory actions may be taken.
The EO also tasks the U.S. Department of Commerce secretary and U.S. Trade Representative with addressing international practices that drive up drug prices for U.S. consumers. This policy builds on a similar initiative introduced during President Trump's first term, which proposed tying Medicare Part B payments for the top 50 most expensive drugs to prices paid in other high-income countries – specifically Organization for Economic Co-operation and Development (OECD) countries with at least 60 percent of the U.S. per capita Gross Domestic Product (GDP). That model excluded countries with low sales volumes and was ultimately blocked by a federal court for not following congressionally mandated rulemaking procedures.
The impact of the current EO remains uncertain. Many of its provisions are voluntary, and it's unclear how pharmaceutical companies will respond, especially regarding DTC sales at MFN prices. More clarity is expected as the administration takes further steps to implement the EO, and as affected stakeholders continue to weigh in. An announcement made by the HHS and the CMS on May 20, 2025, discussed immediate steps that would be taken to implement the EO on MFN. It is expected that additional information will be issued in the coming weeks, including specific price targets. The announcement notes that the Trump Administration has identified those specific price targets and that it expects pharmaceutical manufacturers will meet them. Specifically, the announcement asks manufacturers to commit "to aligning US pricing for all brand products across all markets that do not currently have generic or biosimilar competition with the lowest price of a set of economic peer countries. The MFN target price is the lowest price in an OECD country with a GDP per capita of at least 60 percent of the U.S. GDP per capita."
For more information, see Holland & Knight's previous alert, "Trump Administration Revives Most-Favored-Nation Drug Pricing: Here's What to Know," May 14, 2025.
CMS Releases Draft Guidance for Third Cycle of Medicare Drug Price Negotiations
The CMS released draft guidance on May 12, 2025, that aims to enhance program transparency, prioritize the selection of high-cost prescription drugs for Medicare and reduce potential negative effects on pharmaceutical innovation resulting from negotiated maximum fair prices. The guidance also explains how CMS would choose certain drugs for renegotiation that were initially negotiated for applicability in 2026 and 2027. Comments are due by June 26, 2025.
FDA Announces Actions to Institute Post-Market Assessments of Food Additives, Remove Ingestible Fluoride from Drug Products for Children
The FDA announced on May 15, 2025, that it will move forward with plans to remove certain food additives and other ingredients from products marketed in the U.S. In the coming weeks, the FDA will issue a draft proposal regarding how it will review ingredients and chemicals that are actively in use, as well as detail what the post-market assessment of ingredients will look like. It is expected the FDA's draft proposal will be available for public comments. The announcement of the draft proposal follows announcements by the HHS earlier this year that Secretary Kennedy had asked the then-acting FDA commissioner to explore rulemaking opportunities to address the generally recognized as safe (GRAS) process, though the announcement doesn't include new directions to tighten the FDA's oversight of the food supply.
On May 13, 2025, the FDA also announced actions to remove ingestible fluoride prescription drug products for children from the U.S. market. The FDA aims to complete a safety review of the targeted products and open a public comment period on the products by Oct. 31, 2025. The announcement specifically notes the potential impact of ingestible fluoride products on the gut microbiome of children, which is in line with Secretary Kennedy's concerns about the connection between increased rates of chronic disease and certain foods and food ingredients. Secretary Kennedy has long criticized the addition of fluoride to drinking water; however, that decision is largely left to state and local governments. Utah recently became the first state in the nation to pass legislation banning its use.
Operation Stork Speed Moves Forward
The HHS and FDA launched Operation Stork Speed on March 18, 2025, a significant initiative to bolster the availability and safety of infant formula in the U.S. On May 13, 2025, the HHS and FDA published an RFI and data to initiate the nutrient review process for infant formula.
The FDA is requesting comments on the below six questions:
- What new scientific data or information since the 1998 comprehensive assessment should we consider regarding nutrient requirements for healthy, full-term infants that are associated with positive short- and/or long-term health outcomes?
- What scientific data or information have emerged since the 1998 comprehensive assessment regarding nutrient intakes for healthy, full-term infants that are associated with poor short- and/or long-term health outcomes?
- Which existing nutrients required in 21 C.F.R. § 107.100 should we review? Please explain your rationale.
- For the nutrients required in 21 C.F.R. § 107.100, what, if any, adjustments should be made to existing minimum or maximum levels? For the 20 nutrients with only a minimum level, which, if any, should have a maximum level added? Please explain your rationale. For example, describe how changes might positively impact health outcomes.
- What other nutrients (e.g., docosahexaenoic acid and arachidonic acid) or specifications for nutrients (e.g., ratio of linoleic acid to alpha-linolenic acid), if any, should we consider adding to 21 C.F.R. § 107.100? Please explain your rationale.
- Which nutrients, if any, should we remove from 21 C.F.R. § 107.100? Please explain your rationale.
Comments are due on Sept. 11, 2025.
MAHA Institute Holds Inaugural Event, Announces Upcoming MAHA Report
The Make America Healthy Again (MAHA) Institute held its inaugural event on May 15, 2025, kickstarting a volunteer-run, Political Action Committee (PAC)-funded initiative with a bold aspiration to reform the American food and drug systems. Calley Means, health advisor to The White House and brother of Casey Means, nominee to be U.S. Surgeon General, was one of several notable attendees that included FDA Principal Deputy Commissioner Sara Brenner, as well as other interested stakeholders from the public and across government agencies within HHS. Over the course of the 10-hour event, topics included diet and nutrition, pesticide exposure, medication overuse, waste and structural reform. Calley Means emphasized the importance of a focus on children's health, which he argued has been neglected by the Democratic party platform. Several speakers echoed criticisms of HHS subagencies, Medicare and Medicaid, and broad system inefficiencies. An upcoming MAHA report is set to release May 22, 2025, and the MAHA Commission may present a roadmap to President Trump later this summer to outline key recommendations.
Legal Updates
HHS Weighs Next Steps in Case Over April 2024 Privacy Rule
In a May 12, 2025, filing with a Texas district court, the HHS noted that the April 2024 final rule, "HIPAA Privacy Rule To Support Reproductive Health Care Privacy," is one of several agency actions that are under consideration at the HHS. The April 2024 final rule was finalized by the Biden Administration and sought to strengthen protections under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to prohibit law enforcement authorities from gaining access to patients' private health information related to reproductive health. The final rule was issued following efforts by Republican attorneys general to seek medical records related to abortion, especially information on patients who traveled across state lines to access reproductive healthcare. The filing also notes that the HHS plans to take no imminent action and does not ask the court for a stay of proceedings, indicating the rule may be subject to rescission or significant revision by the Trump Administration, especially following recent requests for information announced by the Trump Administration on regulatory actions issued by the HHS.
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