In Part 1 of this series, we explored the potential impacts on healthcare entities and pharmacies if the Supreme Court were to overturn the Chevron[1] Doctrine. On June 28, 2024, the Court did just that in the landmark decision, Loper Bright Enterprises et al v. Raimondo.[2] This ruling marks a significant shift in how federal courts will review federal agency interpretations of laws, potentially opening new avenues for healthcare providers and pharmacies to challenge agency decisions. In Part 2, we examine the Court’s decision, their reasoning, and specific implications for entities in the healthcare and life sciences space in this new post-Chevron landscape.
The Fall of Chevron: A Brief Recap
The Chevron Doctrine, established in 1984’s Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.,[3] required courts to defer to federal agencies’ interpretations of ambiguous statutes they were tasked with administering, provided those interpretations were reasonable. For nearly four decades, this principle has shaped the landscape of administrative law, often tilting the scales in favor of agency expertise over judicial interpretation.
Loper Bright Enterprises: The Vehicle for Change
In Loper Bright Enterprises, et al. v. Gina Raimondo, Secretary of Commerce, et al. (Loper), the plaintiffs challenged a National Marine Fisheries Service (NMFS) rule requiring fishing businesses to pay for government-certified observers on their vessels. Lower courts, adhering to Chevron deference, had upheld the NMFS’s interpretation that the Magnuson-Stevens Fishery Conservation and Management Act (2007)[4] gave the agency authority to require the industry to fund these at-sea monitors. However, the Supreme Court’s decision fundamentally altered this approach.
In overturning Chevron, the Court held that:
- The Chevron Doctrine is inconsistent with the Administrative Procedure Act (APA)[5] and goes against the Constitution’s principle of separating government powers.
- When reviewing agency actions based upon the agency’s interpretation of a statute, courts must use their own judgment—applying the traditional legal tools of statutory construction—in deciding if an agency has stayed within or exceeded the statutory authority Congress granted to the agency. Courts may no longer defer to an agency’s reasonable interpretation because a statute is ambiguous.
- The APA says courts, not agencies, should answer all important legal questions when reviewing agency actions. This includes cases where laws are ambiguous. The APA does not tell courts to favor agency interpretations.
- Article III of the Constitution gives federal courts the responsibility and power to decide “Cases” and “Controversies” – concrete disputes with consequences for the parties involved. This includes interpreting laws independently, especially when those laws are unclear.
- Chevron’s presumption that Congress intends to delegate interpretive authority to federal agencies when statutes are ambiguous is misguided. Unclear laws do not always mean Congress wanted agencies to have this power.
This ruling effectively shifts the power to interpret ambiguous statutes away from agencies and back to the judiciary, opening up new opportunities for challenging agency interpretations and decisions under the APA. Simply put, overturning Chevron eliminates the obligation for courts to accept agency interpretations of ambiguous statutes they administer, thus broadening the scope for healthcare providers, pharmacies, drug manufacturers, and other healthcare entities to contest federal agency directives, standards, and decisions that are based on statutory interpretations.
The New Standard of Review
With the fall of Chevron, the Court is reverting to the standard of agency review established in Skidmore.[6] Under the Skidmore standard, courts may use agency statutory interpretations as “guidance” in determining the meaning of a statute but are not compelled to accept the interpretation. More specifically, the weight given to an agency’s interpretation depends on its persuasiveness, considering factors such as “the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.”[7] Put simply, while courts can still consider an agency’s interpretation of a statute, they will independently evaluate its quality and reliability, along with the interpretation put forth by the other side, before deciding whether or not to follow it. This stands in contrast to Chevron deference, which required courts to defer to reasonable agency interpretations of ambiguous laws.
Implications for Healthcare Providers and Pharmacies
The Loper decision is likely to have significant implications for entities in the healthcare and life sciences space, though the full extent of its impact remains to be seen. Under Chevron, it was virtually impossible to convince a court that an agency’s reasonable interpretation of an ambiguous statute was wrong because the law forced the court to accept that interpretation.
Now, healthcare entities and pharmacies have increased opportunities to challenge agency statutory interpretations under the APA, with courts considering both sides’ interpretation of the statute and deciding on the legally correct answer, rather than automatically deferring to the agency’s interpretation. Overall, this is a powerful new litigation tool against federal agencies.
As we enter this post-Chevron era, healthcare entities may find new opportunities to benefit. In the short term, the Loper decision could lead to more productive engagement with federal agencies, as agencies may be more willing to reconsider their interpretations of statutes to avoid potential lawsuits. This shift should allow healthcare entities to advocate more effectively for statutory interpretations that better serve their interests.
Limitations and Future Implications
It is important to note that the Loper decision applies only to future cases and specifically to agency interpretations of ambiguous statutes; agencies are still given deference for their interpretations of their own rules and regulations. Nonetheless, this shift in judicial approach could significantly impact how providers and pharmacies navigate the complex regulatory landscape.
Potential Impacts on Drug Manufacturers
The Loper decision could also impact drug pricing regulations, particularly affecting pharmaceutical companies. The Inflation Reduction Act recently empowered CMS to negotiate drug prices directly with manufacturers, a move that has already begun with the selection of 10 drugs for initial negotiations in August 2023.[8] This program has already faced constitutional challenges, and Loper may provide drug manufacturers with stronger grounds to contest CMS’s drug pricing initiatives.
Moving Forward: A New Era of Judicial Interpretation
The overturning of Chevron deference marks a new chapter in administrative law. This change could level the playing field when challenging agency decisions.
As we navigate this evolving legal landscape, it will be crucial for healthcare entities to stay informed and proactive in their approach to regulatory challenges. The fall of Chevron opens new possibilities, but it also demands a deeper understanding of statutory interpretation and administrative law.
How Frier Levitt Can Help
At Frier Levitt, we continue to evaluate the impacts of this landmark decision on providers, pharmacies, and other stakeholders in the healthcare and life sciences spaces. From reimbursement disputes to potential changes in regulatory compliance, our attorneys are experienced in navigating the complex healthcare landscape. Contact us today to understand your rights and explore your options in this new era of administrative law.
[1] Chevron, U.S.A., Inc., v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).
[2] Loper Bright Enterprises, et al. v. Gina Raimondo, Secretary of Commerce, et al., No. 22-451 (U.S. 2024).
[3] Chevron, U.S.A., Inc., 467 U.S. 837.
[4] The Magnuson–Stevens Fishery Conservation and Management Act is the primary law that governs marine fisheries management in U.S. federal waters.
[5] The APA (5 U.S.C. §§ 551-559) was enacted in 1946 and governs how administrative agencies and the federal government may propose and establish regulations. It also establishes a process for federal courts to directly review agency decisions by allowing individuals and organizations to challenge agency actions in court.
[6] Skidmore v. Swift & Co., 323 U.S. 134 (1944).
[7] Id. at 140.
[8] Fact Sheet: Biden-Harris Administration Announces First Ten Drugs Selected for Medicare Price Negotiation, The White House (Aug. 29, 2023), https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/29/fact-sheet-biden-harris-administration-announces-first-ten-drugs-selected-for-medicare-price-negotiation/.
