Looking Ahead: Fiscal Year 2026 Appropriations
This week, the U.S. House of Representatives and U.S. Senate return to Capitol Hill following the Memorial Day recess. The Senate is expected to begin work behind the scenes on the budget reconciliation bill. Meanwhile, markups of bills to fund the federal government will kick off in the House Committee on Appropriations, as two subcommittees will meet on June 5, 2025, and mark up the fiscal year (FY) 2026 Military Construction, Veterans Affairs and Related Agencies Bill, along with the FY 2026 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Bill. While the bills advanced by the subcommittees are unlikely to represent the final appropriations bill sent to President Donald Trump's desk for his signature, the bills are instructive of how and to what extent the committee will implement President Trump's budget request.
The full House will vote on H.R. 2483, the SUPPORT for Patients and Communities Reauthorization Act of 2025, a bill to strengthen and reauthorize substance use disorder treatment and mental health services programs.
Hearings This Week
The Senate Committee on Health, Education, Labor and Pensions (HELP) will hold a hearing, "Reauthorization of the Over-the-Counter Monograph Drug User Fee Program," on June 4, 2025, at 10 a.m.
The House Committee on Science, Space and Technology will hold a joint Research and Technology and Energy Subcommittee hearing, "Pursuing the Golden Age of Innovation: Strategic Priorities in Biotechnology," on June 5, 2025, at 10 a.m.
The House Committee on Education and the Workforce will hold a hearing, "Examining the Policies and Priorities of the Department of Labor," on June 5, 2025, at 10:15 a.m.
The Senate Committee on Appropriations will hold a hearing, "Budgeting Hearing – Indian Health Service," on June 5, 2025, at 1:30 p.m.
Week in Review
The House and Senate were in recess from May 26-30, 2025, in observance of Memorial Day.
Administrative Updates
Executive Order Updates
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.
- An EO on May 23, 2025, titled "Restoring Gold Standard Science," aims to spur innovation and ensure American strength and leadership in technology. The EO details a plan to do this, which includes restoring a "gold standard for science to ensure that federally funded research is transparent, rigorous, and impactful, and that Federal decisions are informed by the most credible, reliable, and impartial scientific evidence available," as well as to restore "scientific integrity policies." The EO directs the director of the Office of Science and Technology Policy (OSTP) to issue guidance for agencies on how to implement "Gold Standard Science." Upon receipt of the guidance, federal agencies are directed to promptly update applicable agency policies. The EO also directs federal agencies to implement new rules and guidance regarding the use, interpretation and communication of scientific data. The EO is likely to open the door for alternative views to be included in federal processes, not limited to contracting or research.
Administration Releases Additional Budget Request Documents for FY 2026: HHS Highlights
Following the "skinny budget" released on May 2, 2025, the U.S. Department of Health and Human Services (HHS) has published its FY 2026 Budget in Brief and select agency Congressional Justifications. See all documents online. The Budget in Brief is a proposal and not binding law. It outlines President Trump's spending priorities and budget allocations for HHS. These documents reflect the Trump Administration's priorities and offer new details, especially around restructuring efforts across HHS. The budget request covers only discretionary funding and does not include legislative proposals that would impact mandatory programs such as Medicare or Medicaid. A top-line HHS funding overview is below:
- Total HHS Budget: $95 billion, a $31 billion reduction (25
percent) from FY 2025 levels
- Includes workforce reductions to 90 percent of pre-COVID levels, closure of five regional offices and cuts to more than 5,000 contracts
- Creates the Administration for a Healthy America (AHA), which is funded at $14 billion, a $6 billion cut from current levels of transferred programs
- Combines programs from the Health Resources and Services Administration (HRSA), Centers for Disease Control and Prevention (CDC), Substance Abuse and Mental Health Services Administration (SAMHSA) and Office of the Assistant Secretary for Health, which will now be included in AHA
- National Institutes of Health (NIH): $27.5 billion, a $18
billion reduction from FY 2025 levels
- The proposed NIH budget assumes a 15 percent cap on indirect costs
- Consolidates 27 institutes into eight. Only the National Cancer
Institute (NCI), National Institute of Allergy and Infectious
Diseases (NIAID) and the National Institute of Aging (NIA) remain
intact, though all face large cuts:
- NCI: $7.2 billion in FY 2025, reduced to $4.5 billion
- NIAID: $6.6 billion in FY 2025, reduced to $4.2 billion
- NIA: $4.4 billion in FY 2025, reduced to $2.7 billion
- Much of the agency's funding would go to new institutes
forged by combining existing ones. New institutes proposed:
- National Institute on Body Systems ($4.2 billion)
- National Institute on Neuroscience and Brain Research ($2.4 billion)
- National Institute of General Medical Sciences ($3.7 billion)
- National Institute for Child and Women's Health, Sensory Disorders and Communications ($1.4 billion)
- National Institutes of Behavioral Health ($2.8 billion)
- CDC: $4.1 billion, a $550 million reduction from FY 2025 levels
- U.S. Food and Drug Administration (FDA): $3.2 billion, a $409 million reduction from FY 2025 levels
- Centers for Medicare & Medicaid Services (CMS): $3.5
billion, a $673 million reduction from FY 2025 level
- Medicaid sees a net increase of $57.5 billion, but administrative matching funds cut by $1.2 billion
- 340B Drug Pricing Program is transferred from HRSA to CMS, with no funding increase (remains at $12 million)
Other Notable Proposals:
- Consolidation: HHS would reduce its 28 operating divisions to
15
- Agency for Healthcare Research and Quality (AHRQ) absorbed into the Office of the Secretary
- Eliminates the Patient-Centered Outcomes Research Institute (PCORI)
- Health Information Technology:
- Assistant Secretary for Technology Policy/Office of the National Coordinator for Health Information (ASTP/ONC) moved under the Chief Technology Officer (CTO), which receives $130 million, including $100 million for HHS cybersecurity and $30 million for ASTP/ONC, a 50 percent reduction from typical funding levels
- Trusted Exchange Framework and Common Agreement (TEFCA) implementation would continue
- Office for Civil Rights (OCR): Funding unspecified; HHS says it will continue supporting investigations
- Fraud & Abuse Enforcement: $1.7 billion in mandatory funding for the Health Care Fraud and Abuse Control Program and $941 million in new discretionary funding for anti-fraud efforts across HHS and the U.S. Department of Justice (DOJ)
Holland and Knight Launches Health AI Navigator
To help healthcare providers, investors and innovators stay ahead of the evolving regulatory landscape surrounding artificial intelligence (AI) in healthcare, Holland & Knight has launched its Health AI Navigator – a dynamic online tool designed to track and interpret AI-related federal and state policies impacting the healthcare industry. As AI technologies become increasingly embedded in healthcare delivery, diagnostics and administration, federal and state policy makers are considering new frameworks to ensure transparency, safety and ethical use.
Legislative Updates
Sen. Sanders Introduces Bill on Reference Pricing
Senate HELP Committee Ranking Member Sen. Bernie Sanders (I-Vt.) introduced the Prescription Drug Price Relief Act of 2025 (S. 1818) on May 20, 2025, which would lower the price of prescription drugs that are priced higher in the U.S. than the median price paid for the drug in other nations. On May 21, 2025, Sen. Sanders sought to pass the bill by unanimous consent, which fast-tracks bills for approval by the full Senate. However, the bill did not advance after an objection by Senate HELP Committee Chair Sen. Bill Cassidy (R-La.). In his remarks, Sen. Cassidy indicated that he objected to the bill moving forward and was working on his own legislative proposal related to drug pricing, indicating the Senate HELP Committee may take legislative action to implement portions of President Trump's EO on most-favored-nation pricing.
House Committee on Appropriations Releases FY 2026 Markup Schedule
House Committee on Appropriations Chair Rep. Tom Cole (R-Okla.) released the markup schedule for FY 2026. The markups of bills to fund different portions of the federal government are slated to begin June 5, 2025, with subcommittee markups of the FY 2026 Military Construction, Veterans Affairs and Related Agencies Bill and the FY 2026 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Bill. The FY 2026 Labor, Health and Human Services, Education and Related Agencies Bill – which funds the HHS – is slated to be considered last by the committee on July 24, 2025, as is consistent with previous years due to the significant size of the funding bill, as well as the number of controversial provisions likely to be considered. While the schedule is likely to shift slightly, the funding bills are likely to incorporate many of the reductions and changes sought by the Trump Administration.
The full schedule released by Chair Cole is available to view online.
Regulatory Updates
CMS Turns Focus to Medicare Advantage Plans, State Use of Medicaid Programs to Provide Health Services to Immigrants, Hospitals Providing Gender-Affirming Care
The CMS announced on May 21, 2025, the roll out of a strategy to enhance and accelerate audits of Medicare Advantage (MA) plans. While the strategy is mainly encapsulated in a press release, the CMS announced it would audit all eligible MA contracts and expedite the completion of audits in process for payment years 2018 through 2024, effective immediately. The strategy seeks to complete all remaining Risk Adjustment Data Validation (RADV) audits by early 2026. The audits will confirm that diagnoses used for payment are supported by medical records data. To achieve the goal of completing remaining audits, the CMS will seek to 1) increase capacity of its medical coding workforce from 40 to 2,000 by Sept. 1, 2025, 2) implement new technologies to enhance workflow and 3) enhance collaboration with the HHS Office of the Inspector General (OIG) to recover uncollected overpayments identified by past audits. However, amid ongoing downsizing efforts and continued effects of the reductions in force (RIFs), it is less likely CMS will be able to meet its goal to increase the number of medical coding staff within the next four months.
The CMS' Center for Medicaid and CHIP Services sent a memo, "Ending Taxpayer Subsidizing of Open Borders," on May 27, 2025, to an unnamed group of states. The memo notified the states, which were not publicly named, that CMS would begin enhanced oversight processes "to the extent consistent with applicable law" to ensure that "federal money is not used to pay for or subsidize healthcare for individuals with an unsatisfactory immigration status in a manner contrary to federal law. The memo cites an EO issued Feb. 19, 2025, titled "Ending Taxpayer Subsidization of Open Borders," to address how states use state and federal funding to facilitate the Medicaid programs.
On May 28, 2025, CMS sent a letter to a select number of hospitals that provide gender-affirming care to request information regarding how the hospital is adhering to certain quality standards and financial requirements. Though the hospitals that received the letters were not named, they were asked to submit financial data and answer questions on treatments and policies within 30 days. The letter implies that HHS may take more strict enforcement actions against hospitals that provide gender-affirming care services.
FDA Streamlines Regulatory Process to Enhance Importation of Prescription Drugs
The FDA announced updates to Section 804 of the Federal Food, Drug, and Cosmetic Act (FDCA) on May 21, 2025, which allow for the importation of certain prescription drugs from Canada. Updates include simplified compliance procedures for importers and clarified guidance for state-sponsored importation programs. The FDA will also offer new tools to improve communications with stakeholders and assist states and tribal nations who wish to submit a Section 804 Importation Program (SIP) proposals to the FDA for approval to initiate programs to begin importations of drugs from Canada under certain conditions. The updates were made following the issuance of an EO from April 15, 2025, titled "Lowering Drug Prices By Once Again Putting Americans First." The EO directed the FDA commissioner to "take steps to streamline and improve the Importation Program" within 90 days to "make it easier for States to obtain approval without sacrificing safety or quality." To date, only Florida has had its SIP proposal approved, yet the state has not begun the process of importing drugs for consumption.
FDA Announces Listening Sessions for Pharmaceutical and Biotech CEOs
The FDA announced on May 27, 2025, that it would hold a series of listening sessions across the country over the next two months to meet directly with the CEOs of pharmaceutical and biotechnology companies. The CEO forums will be led by FDA Commissioner Dr. Martin Makary, Principal Deputy FDA Commissioner Sara Brenner and Director of the FDA's Center for Biologics Evaluation and Research (CBER) Dr. Vinay Prasad. The listening sessions are only open to registrants with at least one investigational new drug (IND), new drug application (NDA) or biologics license application (BLA) on file with the FDA, and final attendance will be determined by the FDA. Interested CEOs may use this registration form to "express interest" in attending. Registration is also open to chief medical officers or heads of research and development. The dates and locations for the listening sessions are as follows, with specific locations and times to be provided to accepted participants:
- FDA Silver Spring, Maryland: June 5, 2025, 3-5 p.m. ET
- San Francisco: June 12, 2025
- San Diego: June 13, 2025
- Boston: June 17, 2025
- New York City: July 30, 2025
- Atlanta: TBD
While the stated purpose of the listening sessions is to offer an opportunity to share feedback with the FDA, leadership for the FDA's Center for Drug Evaluation and Research (CDER) and FDA's Center for Radiological Devices and Health (CDRH) are not included in the listening tour. In addition, the FDA has not shared how participants will be chosen to attend, how large of an audience the FDA will allow in each session, or how the feedback will be used to inform FDA policies or guidance moving forward.
FDA Issues Notice of Educational Conference for Animal Drug Stakeholder
On May 28, 2025, the FDA announced the second of five public meetings related to reauthorization of the Animal Drug User Fee Act (ADUFA) will be held on July 15, 2025, from 9 a.m. to 5 p.m. ET. The meeting will be held in person at the FDA's White Oak campus in Silver Spring, Maryland, as well as virtually. These meetings are part of the process to work toward reauthorization of ADUFA, which is currently set to expire in FY 2028.
FTC Renews Challenges of Orange Book Patent Listings
The Federal Trade Commission (FTC) announced on May 21, 2025, that it would renew challenges of more than 200 patents listed in the FDA's Approved Drug Products with Therapeutic Equivalence Evaluations, commonly known as the Orange Book for its orange covering. The FTC had previously sent warning letters to companies and notified the FDA of its challenges to the accuracy and relevance of the patent listings. Following its May 21, 2025, announcement, the FTC sent additional warning letters to entities implicated by the challenges. The renewed attention on listings that may be improperly limiting competition by delaying the entry of additional, potentially less expensive products, was a focus of the Biden Administration, which has continued in the Trump Administration. The renewal of the challenges follows shortly after a federal court upheld an order requiring a pharmaceutical company to remove several asthma inhaler patents from the Orange Book, confirming the FTC's previous argument in support of removing the listing of certain patents.
Although entities that received warning letters will have 30 days to withdraw or amend the patent listings upon receipt of the forwarded complaint from the FDA or certify that the patent listing complies with statutory and regulatory requirements, it is likely the FTC will continue to pursue a regulatory path to address unfair competition and seek to lower drug prices through administrative means.
MAHA Commission Releases Inaugural Report
The Make America Healthy Again (MAHA) Commission released its inaugural report on May 22, 2025, titled "The MAHA Report: Making Our Children Healthy Again." The report identifies four main factors it argues are driving up rates of chronic disease in the U.S. among children. While the report does not offer specific policies to combat issues presented, the report does call for next steps and a whole-of-government response. More concrete solutions can be expected in August 2025 when the commission is required by EO 14212 to provide a strategy addressing the issues in the assessment.
For additional analysis, please see Holland & Knight's full assessment of the report.
Treasury, DOL and HHS Announce Request for Information on Drug Price Transparency
The U.S. Department of the Treasury, U.S. Department of Labor and the HHS issued a new request for information (RFI) on May 22, 2025, on how to improve prescription drug price transparency and issued new guidance to require health plans and issuers to set clear dates for publishing price data. Also published are new resources for hospitals on the Hospital Price Transparency website to require hospitals to post the actual prices of items and services, not estimates. Comments are due 30 days after the publication of the notice in the Federal Register. Separately, CMS released its own RFI seeking input to identify challenges, improve compliance and enhance enforcement processes related to reporting of "complete, accurate, and meaningful pricing data by hospitals."
AMA Seeks Feedback on Proposal to Create New AI CPT Code Category
The American Medical Association (AMA) released information of a new effort by the Current Procedural Terminology (CPT) Editorial Panel's Digital Medicine Coding Committee (DMCC) to develop a new section/category within the CPT code set to help codify the growing number of algorithmically related medical solutions (AI/ML) that generate clinically relevant patient data such as biophysical signals, imaging data and lab results to produce clinically meaningful outputs that impact patient care.
This new section is still in development and is tentatively being called "Clinically Meaningful Algorithmic Analyses (CMAA)." The DMCC is looking for the input of interested or affected parties to ensure the framework stays relevant, scalable and aligned with how care is delivered and paid for today. Listening sessions on the topic began last week, with the next session occurring on June 10, 2025, from 7-8:30 p.m. ET. Registration is available online.
Legal Updates
Federal Court Issues Order Preventing Reorganization of Federal Agencies, HHS Included
A federal court issued a preliminary injunction on May 22, 2025, that prevents large scale layoffs as part of the reorganization of 19 different federal agencies, including HHS, from moving forward. The lawsuit was filed against the Trump Administration by a large union representing federal employees. In the judge's order, the judge notes that EO 14210 "usurps Congress's Article I powers and exceeds President Trump's lawful authority." The order also requires agencies to reverse RIF notices they've initiated. The Trump Administration quickly submitted a petition to the U.S. Supreme Court, and it is likely the case ends up before the Supreme Court.
Enforcement of Mental Health Parity Final Rule Put on Hold
The HHS, Treasury and Labor Departments issued a joint statement on May 15, 2025, announcing the departments would not enforce a final rule issued in 2024 titled "Requirements Related to the Mental Health Parity and Addiction Equity Act." The final rule, which was issued on Sept. 9, 2024, implemented new requirements related to mental health parity for the documentation and justification of "non-quantitative" treatment limits such as how health plans apply restrictions, reimbursement rates or set the composition of their health networks. The requirements sought to ensure patients seeking treatment for mental health or substance use disorder do not face greater restrictions than patients seeking other medical services.
The final rule was challenged by a group representing employer-sponsored health plans who alleged the requirements in the final rule would increase administrative costs for health plans and issuers, among other issues. In a May 9, 2025, motion filed in the case, the DOJ wrote that the departments would reconsider the final rule, potentially by modifying or rescinding the regulation, issue a "non-enforcement" policy and re-examine current enforcement processes as established by the Mental Health Parity and Addiction Equity Act (MHPAEA). Plan sponsors continue to be subject to pre-existing requirements as established by MHPAEA, the 2021 Consolidated Appropriations Act and previously issued final rules remain in force while the departments review the final rule.
Administration Does Not Appeal Ruling in Case Against LDTs Rule; Rule Now Vacated in its Entirety
The FDA decided not to appeal a court's ruling that found the agency exceeded its authority by issuing a final rule on May 6, 2024, titled "Medical Devices; Laboratory Developed Tests." The FDA had 60 days to file an appeal in the case, and its decision not to do so allows the rule to be vacated in full, with no ability for the case to be appealed in the future. The Trump Administration's decision not to appeal the ruling is in line with its focus on deregulation, making it more likely that Congress revisits legislation regarding Laboratory Developed Tests (LDTs) moving forward. Last Congress, Rep. Diana DeGette (D-Colo.) and former Rep. Larry Buchson (R-Ind.) introduced the VALID Act of 2023 (H.R. 2369) to create a legislative framework to grant the FDA the authority to regulate LDTs. The bill was considered in a legislative hearing but was not advanced from the House Committees on Energy and Commerce on Ways and Means.
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