On the heels of a January 20, 2017 memorandum freezing the release of any new or pending regulations until they have been reviewed and approved by Trump Administration appointees, the White House issued an executive order on January 30, 2017 requiring agencies and executive departments to “identify at least two existing regulations to be repealed” whenever they propose or promulgate a new regulation. As described in the broader Arent Fox alert, it is not uncommon for a new administration to temporarily suspend regulatory activity pending review by the new President’s designees. However, the new Executive Order, colloquially known as the “2-for-1” rule, is by no means a common approach when administrations change, and it has introduced considerable uncertainty into virtually all markets regulated by the Federal government, including in the medical device, pharmaceutical, and food industries.

Take Away

Given the FDA’s mission to protect the public health, the Executive Order presents unique challenges for the FDA, because future proposed rules would need to be considered alongside two current regulations that were also issued to promote the public health. The Executive Order provides that any new cost associated with new regulations should “to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations.” It is therefore likely that both existing regulations being “traded in” for a new regulation would need to have a comparable economic impact as the proposal. What this means is that when triaging current regulations that could be swapped for new regulations, FDA will need to consider not only the public health impact of the current rule as a matter of policy but also its relative economic impact as a matter of law.

In addition to the potential for repealing rules with significant public health benefit, this new paradigm is also expected to cause delay in the issuance of new regulations due to the requirement to identify and presumably propose the repeal of two current regulations. Consequently, because the issuance of a new rule is tethered to the repeal of two current rules, it could take significantly longer than the already protracted time frame to issue any new rule. Moreover, if after public comment the agency decides it is not in the interest of the public health to finalize the repeal of one or both of the current regulations, this could delay the finalization of the proposed new regulation even further. This may be particularly relevant when it comes to FDA’s statutory obligations, like those imposed by the recently-enacted 21st Century Cures Act. In an effort to accelerate the drug and device approval process, the Cures Act, among other things, directs the FDA to develop new pathways to approve medical devices and to evaluate biomarkers and other drug development tools. Requiring the FDA to “trade in” existing regulations and guidance documents to implement the Cures Act is likely to cause delay in the agency’s implementation.

As an agency frequently criticized for issuing rulemaking through guidance documents, the FDA may face additional complications as a result of this Executive Order. The Executive Order’s definition of “regulation”—“an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency"—arguably extends beyond notice-and-comment rulemaking to encompass guidance documents as well. FDA relies heavily on guidance documents to communicate its recommendations and “current thinking on a topic” to stakeholders; however, many stakeholders have taken the public position that the agency tends to go beyond communicating recommendations in guidance documents and in fact asserts additional authority and expectations that are enforced. Against this backdrop, FDA will not be able to retreat to issuing guidance documents in lieu of regulations when instituting policy.

Given the expected delays in rulemaking, state governments may fill the void by issuing their own conditions for marketing FDA-regulated products that will not necessarily coincide with other states and can therefore create varying requirements across jurisdictions. Not only would this create an enormous challenge for manufacturers and distributors to navigate, but state legislatures may also periodically propose updates to these requirements of which members of the supply chain will need to remain apprised in order to lobby in support of their views.

The Executive Order directs the Office of Management and Budget to provide guidance on its implementation, including addressing concepts such as standardizing the estimation of regulatory costs, determining what qualifies as new and offsetting regulations, and circumstances that might justify individual waivers from requirements under the Executive Order. Arent Fox will continue to monitor and report on this highly-anticipated guidance and other developments involving the January 20 Memorandum, January 30 Executive Order, and future policies from the Trump Administration that impact the medical device, pharmaceutical and food industries.