Category: Health Care Law

DOJ Announces Modest Increase in FCA Recoveries, Fueled Largely by Whistleblower Lawsuits

The Department of Justice (“DOJ”) recently announced a modest increase in monetary recoveries for 2024 from investigations and lawsuits under the False Claims Act (“FCA”), which is the Government’s primary tool for combating fraud, waste, and abuse. In fiscal year 2024, the DOJ recovered over $2.9 billion from FCA settlements and judgments, marking a 5% increase over 2023’s total and the highest amount in three years. Recoveries were fueled largely by qui tam lawsuits previously filed by whistleblowers, which contributed to $2.4 billion of the $2.9 billion recovered. The number of qui tams filed last year was also the highest ever in a single year at 979 cases. While health care fraud continues to be the primary source of enforcement activity, the rise in lawsuits stemmed from non-health care related cases. This underscores the Government’s and private citizens’ intensified enforcement efforts through FCA investigations and litigation in both the health care sector and beyond.

FCA Recoveries by the Numbers

While the nearly $3 billion recovered last year resulted from a record-breaking number of 566 settlements and judgments, last year’s haul remains well below peak year recoveries, such as 2014’s $6.2 billion and 2021’s $5.7 billion. The following chart illustrates the FCA recoveries by fiscal year, showcasing monetary trends over the past decade.

Key Enforcement Areas

In announcing 2024’s recoveries, the Government highlighted several key enforcement areas, such as:

  • The opioid epidemic. The Government continues to pursue health care industry participants that allegedly contributed to the opioid crisis, focusing primarily on schemes to market opioids and schemes to prescribe or dispense medically unnecessary or illegitimate opioid prescriptions.
  • Medicare Advantage Program (Medicare Part C). As the Medicare Advantage Program is the largest component of Medicare in terms of reimbursement and beneficiaries impacted, the Government stressed this remains a critical area of importance for FCA enforcement.
  • COVID-19 related fraud. Given the historic levels of government funding provided as a result of the COVID-19 pandemic, the Government also continues to pursue cases involving improper payment under the Paycheck Protection Program as well as false claims for COVID-19 testing and treatment. Close to half of 2024’s settlements and judgments resolved allegations related to COVID-19.
  • Anti-Kickback Statute and Stark Law violations. Cases premised on alleged violations of the AKS and Stark Law remain a driving force in FCA litigation for health care providers. In the last several years, there seems to be renewed interest in Stark Law enforcement, in particular.
  • Medically unnecessary services. The provision of medically unnecessary health care services also remains a widely-used theory of FCA liability, despite this being a historically challenging enforcement area often involving disputes over subjective clinical decisions.
© Polsinelli PC, Polsinelli LLP in California
For more on the DOJ, visit the NLR Criminal Law Business Crimes section

A Primer on Executive Orders and a Preview of the Road Ahead

On January 20, 2025, a new administration took control of the Executive Branch of the federal government, and it has signaled that it will make aggressive use of executive orders.

This would be a good time to review the scope of executive orders and how they may affect employers and health care organizations.

Executive orders are not mentioned in the Constitution, but they have been around since the time of George Washington. Executive orders are signed, written, and published orders from the President of the United States that manage and direct the Executive Branch and are binding on Executive Branch agencies. Executive orders can be used to implement or clarify existing federal law or policies and can direct and manage the way federal agencies interact with private entities. However, executive orders are not a substitute for either statutes or regulations.

The current procedure for implementing executive orders was set out in a 1962 executive order that requires that all such orders must be published in the Federal Register, the same publication where executive agencies publish proposed and final rules. Once published, any executive order can be revoked or modified simply by issuing a new executive order. In addition, Congress can ratify an existing executive order in cases where the authority may be ambiguous.

Although the President has extensive powers under Article II of the Constitution, that does not necessarily mean that executive orders can be issued and enforced on a whim. Over time, federal courts have reviewed executive orders and typically base their decisions on three questions: (1) has Congress delegated any authority to the President to act through an executive order?; (2) if so, what is the scope of any delegation?; and (3) did the President act within the scope of that delegation?

In a seminal case, Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952), the Supreme Court reviewed an executive order signed by President Truman directing the Secretary of Commerce to take possession of and operate most of the nation’s steel mills to prevent a strike from disrupting steel production during the Korean War. On appeal, the Court ruled that the executive order was not authorized under the Constitution or any statute, and that the President lacked any legislative power. It also rejected the argument that the President had an implied authority to issue the executive order under the military powers delegated to the President, as that did not extend to labor disputes.

More recently, during the COVID-19 pandemic, an executive order used the authority delegated in the Defense Production Act to address potential national defense and food supply disruptions. Nevertheless, deference to an executive order should not be presumed. Yet, even at the height of the pandemic, the Sixth Circuit ruled that the President lacked the authority to issue an executive order mandating that federal contractors be vaccinated against the COVID virus. In Kentucky v. Biden, 23 F.4th 585 (6th Cir. 2022), the Sixth Circuit ruled that the President’s reliance on the Federal Property and Administrative Services Act of 1949 (“FPASA”) was misplaced and did not authorize issuing an executive order binding on federal contractors; it determined that the act’s goal of improving economy and efficiency in federal procurement of property and services applied to the government itself and did not extend to issuing directives that may “improve the efficiency of contractors and subcontractors.”

The question of a delegation of authority to a President is not necessarily solved with an executive order directing an agency to issue regulations. For example, President Biden signed an executive order directing the Secretary of Labor to publish regulations setting a minimum wage of $15 per hour for federal contractors, based on his reading of FPASA. The regulations were challenged, and two Courts of Appeal reached opposite conclusions. In Bradford v. U.S. Dep’t of Labor, 101 F.4th 707 (10th Cir. 2024) the Tenth Circuit ruled that Congress had delegated broad authority under FPASA to the President in the language setting out the act’s purpose, and that he was justified in determining that a $15 minimum wage was consistent with the act’s goals. Nevertheless, in State of Nebraska v. Su, 121 F.4th 1 (9th Cir. 2024), the Ninth Circuit determined that the minimum wage mandate did exceed the authority granted to the President and the Department of Labor. That decision relied on a narrow reading of FPASA, and concluded that the intent of the statute was limited to ensuring that the federal government received value in contracts with private entities, and that setting a minimum wage for the employees of those contractors fell outside the reach of FPASA. Although there was a clear split among the circuits, the Supreme Court declined to resolve the matter. For now, disputes involving executive orders may have to be resolved on a case-by-case basis.

In the future, employers and health care organizations that supply goods or services to federal agencies or federally-funded programs should be concerned that if there are executive orders that affect their business, those orders should be examined carefully to evaluate not only the content of those orders, but whether they are authorized by law. EBG intends to monitor these developments along with any relevant rulemaking by federal agencies.

©2025 Epstein Becker & Green, P.C. All rights reserved.
For more on Executive Orders, visit the NLR Administrative Regulatory section

Telehealth Update: DEA/HHS Temporary Rule, Medicare Coverage of Telehealth Services, Potential for Increased Oversight, and What to Watch For in 2025

Telehealth companies and other industry stakeholders have had a watchful eye towards the end of 2024 and the impending “telehealth cliff” as COVID-era Drug Enforcement Agency (DEA) flexibilities and Medicare expanded telehealth coverage are set to expire. Although a recent temporary joint rule from the DEA and the Department of Health and Human Services (HHS) along with the 2025 Medicare Physician Fee Schedule final rule has provided some hope, questions regarding telehealth access in 2025 and under a new Administration remain unclear. Further, calls continue for increased oversight of telehealth services. Below, we breakdown recent updates for the telehealth industry.

DEA Telehealth Flexibilities

Providing some good news, late last month the DEA and HHS jointly issued a temporary rule (the Temporary Rule) extending the COVID-era flexibilities for prescribing controlled substances via telehealth through the end of 2025. The flexibilities, which previously were twice extended and set to expire December 31, 2024, temporarily waive the in-person requirements for prescribing under the Controlled Substances Act.

The DEA and HHS issued the Temporary Rule to ensure that providers and patients who have come to rely on telehealth services are able to smoothly transition to the new requirements, which as previously covered, are likely to significantly limit providers’ ability to prescribe controlled substances without an in-person interaction. The Temporary Rule also acknowledges that the DEA and HHS continue to work with relevant stakeholders and will use the additional time to promulgate proposed and final regulations that “effectively expand access to telemedicine” in a manner that is consistent with public health and safety, while mitigating the risk of diversion. The agencies also note that the limited time period of the extension is aimed at avoiding investment in new telemedicine companies that may encourage or enable problematic prescribing practices.

The Temporary Rule effectively allows all DEA-registered providers to prescribe Schedule II-V controlled substances via telehealth through the end of 2025, regardless of when the provider-patient relationship was formed. Consistent with the prior temporary rules, the following requirements continue to apply:

  • The prescription must be issued for a legitimate medical purpose by a practitioner acting in the usual course of professional practice.
  • The prescription must be issued pursuant to a telehealth interaction using two-way, real-time audio-visual technology, or for prescriptions to treat a mental health disorder, a two-way, real-time audio-only communication if the patient is not capable of, or does not consent to, the use of video technology.
  • The practitioner must be authorized under their DEA registration to prescribe the basic class of controlled medication specified on the prescription or be exempt from obtaining a registration to dispense controlled substances.
  • The prescription must meet all other requirements of the DEA regulations.

Providers should also be cognizant of applicable state laws that may place additional restrictions on the ability to prescribe certain medications or otherwise provide treatment via telehealth.

Medicare Coverage of Telehealth Services 

Unlike the DEA flexibilities, many of the COVID-era flexibilities for traditional Medicare coverage of telehealth services will end on December 31, 2024. Despite bipartisan support, congressional action is required to extend broad coverage for certain telehealth services existing since March 2020. Most notably, unless Congress acts, beginning January 1, 2025 expiring flexibilities include waiving the originating site requirements to allow beneficiaries to receive services in their homes and expanding the list of Medicare-enrolled providers who can furnish telehealth services.

Further, beginning January 1, 2025, Medicare coverage of telehealth services for beneficiaries outside of rural health care settings will be limited to:

  • Monthly End-Stage Renal Disease visits for home dialysis;
  • Services for diagnosis, evaluation, or treatment of symptoms of an acute stroke;
  • Treatment of substance use disorder or a co-occurring mental health disorder, or for the diagnosis, evaluation or treatment of a mental health disorder;
  • Behavioral health services;
  • Diabetes self-management training; and
  • Nutrition therapy.

For its part, the Centers for Medicare & Medicaid Services (CMS) recently issued its 2025 Medicare Physician Fee Schedule Final Rule (the MPFS Final Rule) extending and making permanent certain telehealth flexibilities within its authority. In particular, through December 31, 2025, practitioners may continue to utilize live video to meet certain Medicare direct supervision requirements and reference their currently enrolled practice when providing telehealth services from their home. The MPFS Final Rule continues to remove frequency limitations for certain hospital inpatient/observation care, skilled nursing facility visits, and critical care consultation services furnished via telehealth. Additionally, the MPFS Final Rule makes permanent the utilization of audio-only telehealth for any Medicare-covered telehealth service.

Increased Telehealth Oversight 

Recent months also have seen renewed calls for increased oversight of telehealth services. In September, the HHS Office for Inspector General (OIG) issued a report (the OIG Report) recommending increased oversight of Medicare coverage of remote patient monitoring. As a basis for its findings, the OIG Report cites the dramatic increased utilization of and payments for remote patient monitoring from 2019 to 2022, the fact that over 40% of Medicare beneficiaries receiving remote patient monitoring did not receive all three components of the service (i.e., education and setup, device supply, and treatment management), and the observation that Medicare lacks key information regarding the data being collected and the types of monitoring devices utilized. Notably, OIG conducted its review in part because of the potential for significant expansion of remote patient monitoring in the Medicare population.

Given these factors, the OIG Report recommends that CMS:

  1. Implement additional safeguards to ensure that remote patient monitoring is used and billed appropriately in Medicare.
  2. Require that remote patient monitoring be ordered and that information about the ordering provider be included on claims and encounter data for remote patient monitoring.
  3. Develop methods to identify what health data are being monitored.
  4. Conduct provider education about billing of remote patient monitoring.
  5. Identify and monitor companies that bill for remote patient monitoring.

Separately, concerns also have been raised regarding the recent emergence of direct-to-consumer telehealth platforms sponsored by pharmaceutical companies. In this model, patients seeking specific medications are linked to a health care provider who can virtually prescribe the requested medication. In October, U.S. Senate Majority Whip Dick Durbin (D-IL), joined by Senators Bernie Sanders (I-VT), Peter Welch (D-VT), and Elizabeth Warren (D-MA) sent letters to several pharmaceutical companies requesting written response to questions regarding these platforms including the cost of direct-to-consumer advertising, the arrangements between the telehealth providers and the pharmaceutical companies, and whether the virtual consultation comply with the standard of care.

Conclusion

Despite attempts to preserve and expand telehealth access and affordability, effective January 1, 2025, many Medicare beneficiaries will be cut off from certain telehealth services unless one of the bills currently pending in Congress is passed. Crucially, bipartisan support for increased access to telehealth services is likely to continue in both chambers of Congress. Although the incoming Administration has not detailed its plans regarding telehealth access on a permanent, or even temporary basis, telehealth will continue to play an important role in the United States health care system through 2025 and beyond. As telehealth continues to play an important role in increasing access to care, increased oversight and enforcement is almost certain, even if future oversight priorities are unclear. As always, we will continue to monitor and report on important telehealth developments.

©1994-2024 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.
For more on Telehealth, visit the NLR Health Law Managed Care section

New Fact Sheet Highlights ASTP’s Concerns About Certified API Practices

On October 29, 2024, the US Department of Health and Human Services (HHS) Assistant Secretary for Technology Policy (ASTP) released a fact sheet titled “Information Blocking Reminders Related to API Technology.” The fact sheet reminds developers of application programming interfaces (APIs) certified under the ASTP’s Health Information Technology (IT) Certification Program and their health care provider customers of practices that constitute information blocking under ASTP’s information blocking regulations and information blocking condition of certification applicable to certified health IT developers.

In Depth

The fact sheet is noteworthy because it follows ASTP’s recent blog post expressing concern about reports that certified API developers are potentially violating Certification Program requirements and engaging in information blocking. ASTP also recently strengthened its feedback channels by adding a section specifically for API-linked complaints and inquiries to the Health IT Feedback and Inquiry Portal. It appears increasingly likely that initial investigations and enforcement of the information blocking prohibition by the HHS Office of Inspector General will focus on practices that may interfere with access, exchange, or use of electronic health information (EHI) through certified API technology.

The fact sheet focuses on three categories of API-related practices that could be information blocking under ASTP’s information blocking regulations and Certification Program condition of certification:

  • ASTP cautions against practices that limit or restrict the interoperability of health IT. For example, the fact sheet states that health care providers who locally manage their fast healthcare interoperability resources (FHIR) servers without certified API developer assistance may engage in information blocking when they refuse to provide to certified API developers the FHIR service base URL necessary for patients to access their EHI.
  • ASTP states that impeding innovations and advancements in access, exchange, or use of EHI or health-IT-enabled care delivery may be information blocking. For example, the fact sheet indicates that a certified API developer may engage in information blocking by refusing to register and enable an application for production use within five business days of completing its verification of an API user’s authenticity as required by ASTP’s API maintenance of certification requirements.
  • ASTP states that burdensome or discouraging terms, delays, or influence over customers and users may be information blocking. For example, ASTP states that a certified electronic health record (EHR) developer may engage in information blocking by conditioning the disclosure of interoperability elements to third-party developers on the third-party developer entering into business associate agreements with all of the EHR developer’s covered entity customers, even if the work being done is not for the benefit of the customers and HIPAA does not require the business associate agreements.

The fact sheet does not address circumstances under which any of the above practices of certified API developers may meet an information blocking exception (established for reasonable practices that interfere with access, exchange, or use of EHI). Regulated actors should consider whether exceptions apply to individual circumstances.

© 2024 McDermott Will & Emery
For more on API Practices, visit the NLR Health Law Managed Care section

HIPAA Gets a Potential Counterpart in HISAA

Americans hear about cybersecurity incidents on a frequent basis. As the adage goes, it is not a matter of “if” a breach or security hack occurs; it is a matter of “when.” At no time was that more evident earlier this year when the healthcare industry was hit with the widespread ransomware attack on Change Healthcare, a subsidiary of the United Health Group. Because of the nature of the Change Healthcare shutdown and its impact across the industry, the U.S. Department of Health & Human Services (HHS) and its HIPAA enforcement arm, the Office for Civil Rights (OCR), conducted investigations and issued FAQ responses for those impacted by the cybersecurity event.

In further response, Senators Ron Wyden (D-OR) and Mark Warner (R-VA) introduced the Health Infrastructure Security and Accountability Act (HISAA) on September 26, 2024. Like HIPAA and HITECH before it, which established minimum levels of protection for healthcare information, HISAA looks to reshape how healthcare organizations address cybersecurity by enacting mandatory minimum security standards to protect healthcare information and by providing initial financial support to facilitate compliance. A copy of the legislative text can be found here, and a one-page summary of the bill can be found here.

To date, HIPAA and HITECH require covered entities and business associates to develop, implement, and maintain reasonable and appropriate “administrative, technical, physical” safeguards to protect electronic Protected Health Information or e-PHI. However, the safeguards do not specify minimum requirements; instead, they prescribe standards intended to be scalable, depending on the specific needs, resources, and capabilities of the respective organization. What this means is that e-PHI stored or exchanged among interconnected networks are subject to systems with often different levels of sophistication or protection.

Given the considerable time, effort, and resources dedicated to HIPAA/HITECH compliance, many consider the current state of voluntary safeguards as inadequate. This is especially the case since regulations under the HIPAA Security Rule have not been updated since 2013. As a result, Senators Wyden and Warner introduced HISAA in an effort to bring the patchwork of healthcare data security standards under one minimum umbrella and to require healthcare organizations to remain on top of software systems and cybersecurity standards.

Key pieces of HISAA, as proposed, include:

  1. Mandatory Cybersecurity Standards—If enacted, the Secretary of HHS, together with the Director of the Cybersecurity and Infrastructure Security Agency (CISA) and the Director of National Intelligence (DNI), will oversee the development and implementation of required standards and the standards will be subject to review and update every two years to counter evolving threats.
  2. Annual Audits and Stress Tests—Like current Security Risk Assessment (SRA) requirements, HISAA will require healthcare organizations to conduct annual cybersecurity audits and document the results. Unlike current requirements, these audits will need to be conducted by independent organizations to assess compliance, evaluate restoration abilities, and conduct stress tests in real-world simulations. While smaller organizations may be eligible for waivers from certain requirements because of undue burden, all healthcare organizations will have to publicly disclose compliance status as determined by these audits.
  3. Increased Accountability and Penalties—HISAA would implement significant penalties for non-compliance and would require healthcare executives to certify compliance on an annual basis. False information in such certifications could result in criminal charges, including fines of up to $1 million and prison time for up to 10 years. HISAA would also eliminate fine caps to allow HHS to impose penalties commiserate with the level needed to deter lax behaviors, especially among larger healthcare organizations.
  4. Financial Support for Enhancements—Because the costs for new standards could be substantial, especially for smaller organizations, HISAA would allocate $1.3 billion to support hospitals for infrastructure enhancements. Of this $1.3 billion, $800 million would be for rural and safety net hospitals over the first two years, and an additional $500 million would be available for all hospitals in succeeding years.
  5. Medicare Payment Adjustments—Finally, HISAA enables the Secretary of HHS to provide accelerated Medicare payments to organizations impacted by cybersecurity events. HHS offered similar accelerated payments during the Change Healthcare event, and HISAA would codify similar authority to HHS for recovery periods related to future cyberattacks.

While HISAA will establish a baseline of cybersecurity requirements, compliance with those requirements will require a significant investment of time and resources in devices and operating systems/software, training, and personnel. Even with the proposed funding, this could result in substantial challenges for smaller and rural facilities to comply. Moreover, healthcare providers will need to prioritize items such as encryption, multi-factor authentication, real-time monitoring, comprehensive response and remediation plans, and robust training and exercises to support compliance efforts.

Finally, at this juncture, the more important issue is for healthcare organizations to recognize their responsibilities in maintaining effective cybersecurity practices and to stay updated on any potential changes to these requirements. Since HISAA was introduced in the latter days of a hectic (and historic) election season, we will monitor its progress as the current Congress winds down in 2024 and the new Congress readies for action with a new administration in 2025.

© 2024 Winstead PC.
For more on HIPAA, visit the NLR Health Law Managed Care section

8 Things to Know About AFFF Lawsuits

Thousands of individual lawsuits have been consolidated into multidistrict litigation (MDL) against the corporations that make aqueous film forming foam (AFFF), a type of firefighting foam that was filled with per- and poly-fluoroalkyl substances (PFAS), synthetic chemicals that are now known to be dangerous to human health.

Here are 8 things that you should know about the AFFF firefighting foam lawsuits, according to mass tort lawyer Dr. Nick Oberheiden.

1. AFFF Caused Lots of Chemical Contamination

AFFF is one of the types of foam that firefighters use to put out flames. There are two classes of AFFF firefighting foam:

  1. Class A, which is used for combustible fires, like for wood or paper
  2. Class B, which is used for ignitable liquids like oil, gas, or jet fuel

Class A firefighting foams rely primarily on the water in the foam to put out the flames, though they are still substantially more effective than just using straight water. They have far fewer chemicals in them and are used more often than Class B foams.

Of Class B foams, there are two types:

  1. Foams that have fluorine in them
  2. Foams that do not have fluorine in them

Both foams work the same basic way: By blanketing flammable liquids, they prevent the fuel from catching fire and extinguish any lit fuels by suffocating the flames of the oxygen that they need in order to keep burning. This works far better than water for these types of fires, as the flaming liquids are lighter than water and would float on its surface and continue to burn.

AFFF, however, is a fluorinated type of foam. That fluorine comes in the form of a PFAS compound. There are hundreds of types of these compounds, but they are all based on one of the strongest chemical bonds in organic chemistry; the one between fluorine and carbon.

2. PFAS Chemicals are Everywhere

While PFAS chemicals have been used in firefighting foam since the 1970s, when the U.S. Navy worked in collaboration with the giant chemical corporation 3M to produce a foam that could quickly put out fires on vessels, PFAS compounds have been used in a wide variety of other capacities since the 1940s. A very versatile chemical compound, PFAS chemicals were used to:

  • Prevent or remove stains
  • Suppress or resist heat
  • Waterproof materials or make them water resistant
  • Contain grease or oil

As a result, PFAS chemicals have been added to a huge array of consumer products that span nearly every industry, including:

  • Food packaging and wrapping
  • Pizza boxes
  • Raincoats
  • Water resistant clothing and shoes
  • Non-stick cookware
  • Carpeting
  • Paint
  • Wood stain, varnish, and lacquer

In recent decades, though, researchers have noticed that the sheer ubiquity of these chemicals could pose a threat: The carbon-fluorine bond that these synthetic compounds are based on does not break down naturally, leading to PFAS being dubbed “forever chemicals.” Every piece of PFAS that is produced will continue to be a PFAS until something is done to break it down artificially, like putting the chemical into water and then superheating the water well past its boiling point.

3. PFAS Chemicals are Dangerous

It was not until relatively recently that the public learned two things about these PFAS chemicals:

  1. They had contaminated soil and groundwater across the country, and
  2. They were connected to numerous different medical conditions, including several types of cancers.

The strong chemical bond between carbon and fluorine that was fundamental to PFAS meant that, as it was used or disposed of, it would not break down. Instead, PFAS chemicals would just build up in the soil where they were dumped or would contaminate the groundwater in that soil. Eventually, PFAS chemicals found their way into drinking water and water for crops and animals. From there, it got into the food system.

It was not until the 2000s that this became apparent to the public. By then, there had been nearly 60 years of PFAS buildup.

Around this time, medical researchers also discovered that exposure to PFAS chemicals could lead to PFAS contamination in the bloodstream, which could cause a host of serious medical conditions. While research is still being done to find out what, exactly, PFAS chemicals does in the human body and which medical conditions it can cause, PFAS contamination has been linked to increased risks for:

  • Pregnancy issues, including:
    • Fetal death
    • Birth deformities
    • Hypertension
    • Preeclampsia
    • Low birth weight
    • Developmental delays in young children
  • Liver damage
  • Liver cancer
  • Testicular cancer
  • Thyroid cancer
  • Kidney cancer
  • Prostate cancer
  • Fertility problems
  • A dysfunctional immune system, including decreased effectiveness of vaccines
  • Hormonal imbalances
  • Obesity
  • High cholesterol

These are some serious medical conditions that could end up being fatal. Anyone who was exposed to PFAS chemicals, including those in AFFF, are at risk of developing them and can talk to an AFFF lawyer about filing an AFFF firefighting foam lawsuit.

4. These Cases Involve Yet Another Corporate Cover-Up

As lawsuits over PFAS exposure started to get filed in the 2000s, it quickly became clear that the large corporations who had filled our world with PFAS-heavy products had long known the risks associated with them.

PFAS manufacturer DuPont, one of the largest chemical producers on the planet, instructed its workers to only handle PFAS chemicals with extreme care as early as 1961. PFAS manufacturer 3M had discovered that the company’s PFAS chemicals were inside fish that swam in the water near one of its plants in the 1970s. In the 1980s, DuPont suddenly moved all of its female employees out of the production facility that handled PFAS chemicals – several female DuPont employees in the facility had given birth to children with serious deformities.

In spite of these warning signs, these major corporations continued to dispose of PFAS materials however they wanted to – whether that meant dumping it into the water, burying it in the ground, or burning it into the air. They also continued making new products with PFAS chemicals in them, including AFFF firefighting foam in the 1970s, which was then used by military and civilian firefighters both to put out real fuel fires and to train in putting them out. This continued for three decades, with firefighters pumping PFAS-heavy foam onto airport tarmacs and training areas on military bases across the country, deeply contaminating the soil and nearby waterways and exposing the firefighters to dangerous amounts of PFAS chemicals.

The corporate cover-up would have continued, if it were not for two things. First, in 1998, the U.S. Environmental Protection Agency (EPA) learning of an internal study at one of the major PFAS manufacturers that had found that the offspring of pregnant lab rats who had been exposed to PFAS chemicals were almost guaranteed to die within days. Second, the first class action against the PFAS manufacturer Chemours reached a temporary settlement for $71 million and funding for the C8 Science Panel to research the dangers posed by PFAS chemicals. When the Panel started to publish its findings, Chemours quickly settled the case permanently for $671 million.

5. Other PFAS Lawsuits Have Recovered Billions, and That is Just for Clean Up 

Since that first class action settled, many, many more lawsuits have been filed over PFAS contamination. These lawsuits have targeted the major corporations that have manufactured PFAS products, including:

  • 3M
  • DuPont
  • Chemours
  • BAFS

All told, these MDLs and class actions have settled for over $11 billion. There are two things about these PFAS lawsuits are important to know:

  1. They are confined to compensating for cleanup and decontamination costs, and
  2. They apply to general PFAS products, not specifically to AFFF.

This first point is crucial. The plaintiffs in these huge lawsuits have been water districts that have demanded compensation for the costs of upgrading their filtration equipment and the decontamination of their water and soil. None of the $11 billion is earmarked for the inevitable medical conditions that all of that prior PFAS contamination will cause.

6. AFFF Firefighting Foam: Class Action or MDL? AFFF Lawsuits the First to Allege Personal Injuries and Losses

Now, though, an AFFF firefighting foam MDL includes personal injury claims for medical and financial losses by victims of AFFF exposure for the first time. So you have time to file an AFFF lawsuit and join the MDL.

MDL No. 2873 consolidated hundreds of these AFFF firefighting foam cases in the U.S. District Court for South Carolina in January, 2019. This MDL covers individual victims who have suffered from one of the medical conditions associated with PFAS exposure, who need medical monitoring after being exposed to the chemicals, or who have suffered a financial loss for the diminution in the value of their property due to PFAS contamination. The cases are limited to PFAS exposure from contaminated groundwater near military bases, airports, and other industrial sites due to the use of AFFF that contain either of the two main types of PFAS chemicals used in AFFF:

  1. Perfluorooctanoic acid (PFOA)
  2. Perfluorooctane sulfonate (PFOS)

When it was first consolidated into an MDL, there were around 500 cases. Since then, it has exploded to over 9,000 claims by July, 2024, with much of the growth coming in recent months.

7. Status and Future of the AFFF MDL

MDLs like this one have become the preferred way to handle mass tort situations: Cases where the misconduct of one or a small handful of companies have led to hundreds or thousands of people suffering in similar or identical ways. By consolidating all of the cases together for pre-trial procedures, like the gathering of evidence and summary judgment motions, the cases can move forward far more efficiently than if they were all on their own.

Even though the MDL was formed over two years ago now, the AFFF litigation is still in its early stages. The defendant corporations, all of whom manufactured and sold AFFF firefighting foams, will advance numerous legal defenses to avoid accountability for their conduct or to at least mitigate the damage of a judgment or the amount of a settlement. Some of the defenses that we will likely hear are:

  • The medical condition a particular person suffered was caused by something else
  • Some other AFFF manufacturer was responsible for a particular area of contamination
  • Plaintiffs waited too long to file their claims and the statute of limitations has expired
  • The company’s version of AFFF has less PFAS chemicals in it than others

In the meantime, a growing body of medical literature is connecting PFAS exposure and contamination to serious medical issues. We may even see new medical conditions getting linked to AFFF and the toxic chemicals in it.

As evidence is gathered, settlement talks will begin. If these prove to be fruitless, the court will schedule bellwether trials. These are individual cases that are representative of the rest of the cases in the MDL that are brought through a jury trial. The outcome of those trials are then used to inform further settlement discussions, which nearly always resolve the MDL outside of the courtroom.

8. How This Will Likely End

PFAS lawsuits have been equated to the Big Tobacco Settlement, when cigarette companies settled a class action against them for huge sums. In both cases, the large corporations knew that the products that they were selling were likely to cause life-threatening medical conditions, but continued to sell them and took affirmative actions to cover up evidence that there was any risk.

In the end, though, the most important factor will be the solvency of the defendant corporations that make AFFF. Some of them are substantially larger than others and will be better able to pay the huge settlements that we are likely to see. According to mass tort lawyer Dr. Nick Oberheiden, founding partner of the national law firm Oberheiden P.C. and leading attorney on AFFF cases, “As evidence is gathered, it will become more and more clear what the defendant corporations owe. If they are not able to pay it, they are more likely to extend this MDL to the bellwether trial stage in a risky attempt to avoid settling and try to beat it, altogether. Another option that they would have in this situation is to file for bankruptcy and create a victim’s trust fund, much like asbestos companies did in order to resolve the class action against them for causing mesothelioma.”

Oberheiden P.C. © 2024
For more news on Aqueous Film Forming Foam Litigation, visit the NLR Health Law & Managed Care  section.

Affordable Care Act Proposed Rule Would Broaden Access to Over-the-Counter Contraception Without Cost Sharing

Employer-sponsored health plans would be required to cover over-the-counter contraception, including condoms and emergency contraception, without a prescription and without cost sharing under newly proposed Affordable Care Act (ACA) regulations

Quick Hits

  • Proposed rules issued by the DOL, HHS, and Treasury are designed to increase coverage for over-the-counter contraceptives, such as condoms, spermicides, and emergency contraception, without a prescription.
  • If finalized, the proposed rules would be the first time that male contraceptives will be covered under the ACA preventive care requirements.
  • The public has until December 27, 2024, to submit comments on the proposed rules.

Fully insured and self-insured health plans would have to cover every Food and Drug Administration (FDA)-approved contraceptive drug or drug-led combination product without cost sharing, unless the plan or insurer covers a therapeutic equivalent without cost sharing, under rules proposed by the U.S. Departments of Health and Human Services, Labor, and Treasury.

Employer-sponsored health plans and insurers also would have to tell participants that over-the-counter contraception without a prescription is covered at no cost, under the proposed rules published October 28, 2024, in the Federal Register.

The ACA requires most group health plans to cover preventive care at no cost to patients. Preventive care under the ACA includes FDA-approved contraceptives for women, such as birth control pills, injectable contraceptives, contraceptive patches, implantable rods, intrauterine devices, diaphragms, sponges, vaginal rings, emergency contraception medication, and sterilization procedures for women. In 2022, the Health Resources and Services Administration (HRSA) issued updated guidelines that define which healthcare services are considered preventive for women.

Without a prescription, over-the-counter products were not included in the ACA’s coverage requirement. The proposed rule would change that.

In guidance issued earlier this year, the departments noted that they are still identifying plans that are out of compliance with the contraceptive care requirements. Employers that violate the ACA mandate can be fined $100 for each day in the noncompliance period for each affected employee. At first, the ACA granted exemptions to churches and other religious organizations that hold instilling religious values as their purpose and primarily employ people who share their religious beliefs. The criteria to qualify for an exemption were broadened later. Without an exemption, nongovernmental employers can use a self-certification form to instruct their health insurer to exclude contraceptive coverage from the group health plan and provide payments to patients for contraceptive services separate from the health plan.

In July 2020, the Supreme Court of the United States ruled that private employers with religious or moral objections can be exempt from the contraceptive mandate.

Seven states—California, Colorado, Maryland, New Jersey, New Mexico, New York, and Washington—already have laws requiring state-regulated health insurance policies to cover certain over-the-counter contraceptives without a prescription and without cost sharing.

Next Steps

Employers may want to review the coverage of contraceptives under their medical plans both to ensure that no improper restrictions are put on them currently and also to clarify how their coverage would need to expand if these proposed rules became final in a substantially similar form.

This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.

© 2024, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., All Rights Reserved.
For more news on ACA OTC Contraception Regulations, visit the NLR Health Law & Managed Care section.

Supreme Court Declines to Hear “Willfulness” Case

On Monday, October 7, 2024, the U.S. Supreme Court declined to consider a petition for certiorari in United States ex rel. Hart v. McKesson Corp., Case No. 23-1293, where relator, Adam Hart (“Relator”), sought review of a Second Circuit decision upholding the dismissal of Relator’s complaint against pharmaceutical distributor, McKesson Corporation (“McKesson”).

The case involved allegations that McKesson violated the Anti-Kickback Statute (“AKS”), which prohibits offering, paying, soliciting, or receiving remuneration to induce the purchase of goods and services paid for by a federal health program. Relator, a former McKesson employee, filed a qui tam action, claiming McKesson provided valuable business management tools—valued at over $150,000—to oncology practices at no cost, in order to induce them to purchase oncology pharmaceuticals from McKesson.

The Second Circuit dismissed Relator’s federal claims, reasoning that the allegations failed to meet the mens rea (intent) element under the AKS. The Court held that, to act willfully under the AKS, a defendant must know that its conduct is unlawful, either under the AKS or other law. Since Relator’s allegations did not plausibly suggest McKesson acted with knowledge of illegality, his federal False Claims Act claims based on the federal AKS were dismissed.

The Supreme Court’s refusal to hear Relator’s case preserves the existing circuit split regarding the interpretation of “willfulness” under the AKS. The Second Circuit, along with the Eleventh Circuit, has adopted the view that the AKS is violated when a defendant intends to violate a legal standard. This contrasts with the Fifth Circuit, which interprets the mens rea element to prohibit acts done knowingly and willfully, as opposed to by mistake or accident, and the Eight Circuit, which requires intent to commit an act known to be wrongful, but not necessarily known to be unlawful.

As it stands, the unresolved split among the circuits on this critical issue remains, and providers should be mindful that, at least in the Second and Eleventh Circuits, the stricter interpretation of “willfulness” under the AKS will continue to apply.

© Polsinelli PC, Polsinelli LLP in California
For more news on Anti-Kickback Litigation, visit the NLR Health Law & Managed Care section.

Application of New Mental Health Parity Rules to Provider Network Composition and Reimbursement: Perspective and Analysis

On September 23, 2024, the U.S. Departments of Labor, the Treasury, and Health and Human Services (collectively, the “Departments”) released final rules (the “Final Rules”) that implement requirements under the Mental Health Parity and Addiction Equity Act (MHPAEA).

The primary focus of the Final Rules is to implement new statutory requirements under the Consolidated Appropriations Act of 2021, which amended MHPAEA to require health plans and issuers to develop comparative analyses to determine whether nonquantitative treatment limitations (NQTLs)—which are non-financial restrictions on health care benefits that can limit the length or scope of treatment—for mental health and substance use disorder (MH/SUD) benefits are comparable to and applied no more stringently than NQTLs for medical/surgical (M/S) benefits.

Last month, Epstein Becker Green published an Insight entitled “Mental Health Parity: Federal Departments of Labor, Treasury, and Health Release Landmark Regulations,” which provides an overview of the Final Rules. This Insight takes a closer look at the application of the Final Rules to NQTLs related to provider network composition and reimbursement rates.

Provider Network Composition and Reimbursement NQTL Types

A key focus of the Final Rules is to ensure that NQTLs related to provider network composition and reimbursement rates do not impose greater restrictions on access to MH/SUD benefits than they do for M/S benefits.

In the Final Rules, the Departments decline to specify which strategies and functions they expect to be analyzed as separate NQTL types, instead requiring health plans and issuers to identify, define, and analyze the NQTL types that they apply to MH/SUD benefits. However, the Final Rules set out that the general category of “provider network composition” NQTL types includes, but is not limited to, “standards for provider and facility admission to participate in a network or for continued network participation, including methods for determining reimbursement rates, credentialing standards, and procedures for ensuring the network includes an adequate number of each category of provider and facility to provide services under the plan or coverage.”[1]

For NQTLs related to out-of-network rates, the Departments note that NQTLs would include “[p]lan or issuer methods for determining out-of-network rates, such as allowed amounts; usual, customary, and reasonable charges; or application of other external benchmarks for out-of-network rates.”[2]

Requirements for Comparative Analyses and Outcomes Data Evaluation

For each NQTL type, plans must perform and document a six-step comparative analysis that must be provided to federal and state regulators, members, and authorized representatives upon request. The Final Rules divide the NQTL test into two parts: (1) the “design and application” requirement and (2) the “relevant data evaluation” requirement.

The “design and application” requirement, which builds directly on existing guidance, requires the “processes, strategies, evidentiary standards, or other factors” used in designing and applying an NQTL to MH/SUD benefits to be comparable to, and applied no more stringently than, those used for M/S benefits. Although these aspects of the comparative analysis should be generally familiar, the Final Rules and accompanying preamble provide extensive new guidance about how to interpret and implement these requirements.

The Final Rules also set out a second prong to the analysis: the requirement to collect and evaluate “relevant data” for each NQTL. If such analysis shows a “material difference” in access, then the Final Rules also require the plan to take “reasonable” action to remedy the disparity.

The Final Rules provide that relevant data measures for network composition NQTLs may include, but are not limited to:

  • in-network and out-of-network utilization rates, including data related to provider claim submissions;
  • network adequacy metrics, including time and distance data, data on providers accepting new patients, and the proportions of available MH/SUD and M/S providers that participate in the plan’s network; and
  • provider reimbursement rates for comparable services and as benchmarked to a reference standard, such as Medicare fee schedules.

Although the Final Rules do not describe relevant data for out-of-network rates, these data measures may parallel measures to evaluate in-network rates, including measures that benchmark MH/SUD and M/S rates against a common standard, such as Medicare fee schedule rates.

Under the current guidance, plans have broad flexibility to determine what measures must be used, though the plan must ensure that the metrics that are selected reasonably measure the actual stringency of design and application of the NQTL with regard to the impact on member access to MH/SUD and M/S benefits. However, additional guidance is expected to further clarify the data evaluation requirements that may require the use of specific measures, likely in the form of additional frequently asked questions as well as updates to the Self-Compliance Tool published by the Departments to help plans and issuers assess whether their NQTLs satisfy parity requirements.

The Final Rules require plans to look at relevant data for network composition NQTLs in the aggregate—meaning that the same relevant data must be used for all NQTL types (however defined). As such, the in-operation data component of the comparative analysis for network composition NQTLs will be aggregated.

If the relevant data indicates a “material difference,” the threshold for which the plan must establish and define reasonably, the plan must take “reasonable actions” to address the difference in access and document those actions.

Examples of a “reasonable action” that plans can take to comply with network composition requirements “include, but are not limited to:

  1. Strengthening efforts to recruit and encourage a broad range of available mental health and substance use disorder providers and facilities to join the plan’s or issuer’s network of providers, including taking actions to increase compensation or other inducements, streamline credentialing processes, or contact providers reimbursed for items and services provided on an out-of-network basis to offer participation in the network;
  2. Expanding the availability of telehealth arrangements to mitigate any overall mental health and substance use disorder provider shortages in a geographic area;
  3. Providing additional outreach and assistance to participants and beneficiaries enrolled in the plan or coverage to assist them in finding available in-network mental health and substance use disorder providers and facilities; and
  4. Ensuring that provider directories are accurate and reliable.”

These examples of potential corrective actions and related discussion in the Final Rules provide an ambitious vision for a robust suite of strategies that the Departments believe that plans should undertake to address material disparities in access as defined in the relevant data. However, the Final Rules put the onus on the plan to design the strategy that it will use to define “material differences” and remedy any identified disparity in access. Future guidance and enforcement may provide examples of how this qualitative assessment will play out in practice and establish both what the Departments will expect with regard to the definition of “material differences” and what remedial actions they consider to be sufficient. In the interim, it is highly uncertain what the practical impact of these new requirements will be.

Examples of Network Analyses Included in the Final Rules

The Final Rules include several examples to clarify the application of the new requirements to provider network composition NQTLs. Unfortunately, the value of these examples for understanding how the Final Rules will impact MH/SUD provider networks in practice may be limited. As a result, given the lack of detail regarding the complexity of analyzing these requirements for actual provider networks, as well as the fact that the examples fail to engage in any meaningful discussion of where to identify the threshold for compliance with these requirements, it remains to be seen how regulators will interpret and enforce these requirements in practice.

  • Example 1 demonstrates that it would violate the NQTL requirements to apply a percentage discount to physician fee schedule rates for non-physician MH/SUD providers if the same reduction is not applied for non-physician M/S providers. Our takeaways from this example include the following:
    • This example is comparable to the facts that were alleged by the U.S. Department of Labor in Walsh v. United Behavioral Health, E.D.N.Y., No. 1:21-cv-04519 (8/11/21).
    • Example 1 is useful to the extent that it clarifies that a reimbursement strategy that specifically reduces MH/SUD provider rates in ways that do not apply to M/S provider rates would violate MHPAEA. However, such cut-and-dried examples may be rare in practice, and a full review of the strategies for developing provider reimbursement rates is necessary.
  • Example 4 demonstrates that plans may not simply rely on periodic historic fee schedules as the sole basis for their current fee schedules. Here are some key takeaways from this example:
    • Even though this methodology may be neutral and non-discriminatory on its face, given that the historic fee schedules are not themselves a non-biased source of evidence, to meet the new requirements for evidentiary standards and sources, the plan would have to demonstrate that these historic fee schedules were based on sources that were objective and not biased against MH/SUD providers.
    • If the plan cannot demonstrate that the evidentiary standard used to develop its fee schedule does not systematically disfavor access to MH/SUD benefits, it can still pass the NQTL test if it takes steps to cure the discriminatory factor.
    • Example 4 loosely describes a scenario where a plan supplements a historic fee schedule that is found to discriminate against MH/SUD access by accounting for the current demand for MH/SUD services and attracting “sufficient” MH/SUD providers to the network. Unfortunately, however, the facts provided do not clarify what steps were taken to achieve this enhanced access or how the plan or regulator determined that access had become “sufficient” following the implementation of the corrective actions.
  • Example 10 provides that if a plan’s data measures indicate a “material difference” in access to MH/SUD benefits relative to M/S benefits that are attributable to these NQTLs, the plan can still achieve compliance by taking corrective actions. Our takeaways from this example include the following:
    • The facts in this example stipulate that the plan evaluates all of the measure types that are identified above as examples. Example 10 also states that a “material difference” exists but does not identify the measure or measures for which a difference exists or what facts lead to the conclusion that the difference was “material.” To remedy the material difference, this example states that the plan undertakes all of the corrective actions to strengthen its MH/SUD provider network that are identified above as examples and, therefore, achieves compliance. However, this example fails to clarify how potentially inconsistent outcomes across the robust suite of identified measures were balanced to determine that the “material difference” standard was ultimately met. Example 10 also does not provide any details about what specific corrective actions the plan takes or what changes result from these actions.

Epstein Becker Green’s Perspective

The new requirements of the Final Rules will significantly increase the focus of the comparative analyses on the outcomes of the provider network NQTLs. For many years, the focus of the comparative analyses was primarily on determining whether any definable aspect of the plan’s provider contracting and reimbursement rate-setting strategies could be demonstrated to discriminate against MH/SUD providers. The Final Rules retain those requirements but now put greater emphasis on the results of network composition activities with regard to member access and require plans to pursue corrective actions to remediate any material disparities in that data. This focus on a robust “disparate impact” form of anti-discrimination analysis may lead to a meaningful increase in reimbursement for MH/SUD providers or other actions to more aggressively recruit them to participate in commercial health plan networks.

However, at present, it remains unclear which measures the Departments will ultimately require for reporting. Concurrent with the release of their Notice of Proposed Rulemaking on July 23, 2023, the Departments published Technical Release 2023-01P to solicit comments on key approaches to evaluating comparability and stringency for provider network access and reimbursement rates (including some that are referenced as examples in the Final Rules). Comments to the Technical Release highlighted significant concerns with nearly all of the proposed measures. For example, proposals to require analysis of MH/SUD and M/S provider reimbursement rates for commercial markets that are benchmarked to Medicare fee schedules in a simplistic way may fail to account for differences in population health and utilization, value-based reimbursement strategies, and a range of other factors with significant implications for financial and clinical models for both M/S and MH/SUD providers. Requirements to analyze the numbers or proportions of MH/SUD and M/S providers that are accepting new patients may be onerous for providers to report on and for plans to collect and may obscure significant nuances with regard to wait times, the urgency of the service, and the match between the provider’s training and service offerings to the patient’s need. Time and mileage standards highlighted by the Departments not only often fail to capture important access challenges experienced by patients who need MH/SUD care from sub-specialty providers or facilities but also fail to account for evolving service delivery models that may include options such as mobile units, school-based services, home visits, and telehealth. Among the measures identified in the Technical Release, minor differences in measure definitions and specifications can have significant impacts on the data outcomes, and few (if any) of the proposed measures have undergone any form of testing for reliability and validity.

Also, it is still not clear where the Departments will draw the lines for making final determinations of noncompliance with the Final Rules. For example, where a range of different data measures is evaluated, how will the Departments resolve data outcomes that are noisy, conflicting, or inconclusive? Similarly, where regulators do conclude that the data that are provided suggest a disparity in access, the Final Rules identify a highly robust set of potential corrective actions. However, it remains to be seen what scope of actions the Departments will determine to be “good enough” in practice.

Finally, we are interested in seeing what role private litigation will play in driving health plan compliance efforts and practical impacts for providers. To date, plaintiffs have found it challenging to pursue litigation on the basis of claims under MHPAEA, due in part to the highly complex arguments that must be made to evaluate MHPAEA compliance and in part to the challenge for plaintiffs to have adequate insight into plan policies, operations, and data across MH/SUD and M/S benefits to adequately assert a complaint under MHPAEA. Very few class action lawsuits or large settlements have occurred to date. These challenges for potential litigants may continue to limit the volume of litigation. However, to the extent that the additional guidance in the Final Rules does give rise to an uptick in successful litigation, it is possible that the courts may end up having a greater impact on health plan compliance strategies than regulators.

ENDNOTES

[1] 26 CFR 54.9812- 1(c)(4)(ii)(D), 29 CFR 2590.712(c)(4)(ii)(D), and 45 CFR 146.136(c)(4)(ii)(D).

[2] 26 CFR 54.9812- 1(c)(4)(ii)(E), 29 CFR 2590.712(c)(4)(ii)(E), and 45 CFR 146.136(c)(4)(ii)(E).

©2024 Epstein Becker & Green, P.C. All rights reserved.
For more on Mental Health, visit the NLR Health Law Managed Care section

USTR Finalizes New Section 301 Tariffs

The United States Trade Representative (USTR) published a Federal Register notice detailing its final modifications to the Section 301 tariffs on China-origin products. USTR has largely retained the proposed list of products subject to Section 301 tariffs announced in the May 2024 Federal Register notice (see our previous alert here) with a few modifications, including adjusting the rates and implementation dates for a number of tariff categories and expanding or limiting certain machinery and solar manufacturing equipment exclusions. USTR also proposes to impose new Section 301 tariff increases on certain tungsten products, polysilicon, and doped wafers.

The notice, published on September 18, 2024, clarifies that tariff increases will take effect on September 27, 2024, and subsequently on January 1, 2025 and January 1, 2026 (Annex A). The final modifications to Section 301 tariffs will apply across the following strategic sectors:

  • Steel and aluminum products – increase from 0-7.5% to 25%
  • Electric vehicles (EVs) – increase from 25% to 100%
  • Batteries
    • Lithium-ion EV batteries – increase from 7.5% to 25%
    • Battery parts (non-lithium-ion batteries) – increase from 7.5% to 25%
    • Certain critical minerals – increase from 0% to 25%
    • Lithium-ion non-EV batteries – increase from 7.5% to 25% on January 1, 2026
    • Natural graphite – increase from 0% to 25% on January 1, 2026
  • Permanent magnets – increase from 0% to 25% on January 1, 2026,
  • Solar cells (whether or not assembled into modules) – increase from 25% to 50%
  • Ship-to-shore cranes – increase from 0% to 25% (with certain exclusions)
  • Medical products
    • Syringes and needles (excluding enteral syringes) – increase from 0% to 100%
    • Enteral syringes – increase from 0% to 100% on January 1, 2026
    • Surgical and non-surgical respirators and facemasks (other than disposable):
      • increase from 0-7.5% to 25%; increase from 25% to 50% on January 1, 2026
    • Disposable textile facemasks
      • January 1, 2025, increase from 5% to 25%; increase from 25% to 50% on January 1, 2026
    • Rubber medical or surgical gloves:
      • increase from 7.5% to 50% on January 1, 2025; increase from 50% to 100% on January 1, 2026
    • Semiconductors – increase from 25% to 50% on January 1, 2025

USTR adopted 14 exclusions to temporarily exclude solar wafer and cell manufacturing equipment from Section 301 tariffs (Annex B), while rejecting five exclusions for solar module manufacturing equipment proposed in the May 2024 notice. The exclusions are retroactive and applicable to products entered for consumption or withdrawn from warehouse for consumption on or after January 1, 2024, and through May 31, 2025. USTR also granted a temporary exclusion for ship-to-shore gantry cranes imported under contracts executed before May 14, 2024, and delivered prior to May 14, 2026. To use this exclusion, the applicable importers must complete and file the certification (Annex D).

With respect to machinery exclusion, USTR added five additional subheadings to the proposed 312 subheadings to be eligible for consideration of temporary exclusions. USTR did not add subheadings outside of Chapters 84 and 85 or subheadings that include only parts, accessories, consumables, or general equipment that cannot physically change a good. USTR will likely issue additional guidance to seek exclusions of products under these eligible subheadings.

Importers should assess the (i) table of the tariff increases for the specified product groups (Annex A), (ii) temporary exclusions for solar manufacturing equipment (Annex B), (iii) the Harmonized Tariff Schedule of the United States (HTSUS) modifications to impose additional duties, to increase rates of additional duties, and to exclude certain solar manufacturing equipment from additional duties (Annex C), (iv) Importer Certification for ship-to-shore cranes entering under the exclusion (Annex D), and (v) HTSUS subheadings eligible for consideration of temporary exclusion under the machinery exclusion process (Annex E). The descriptions set forth in Annex A are informal summary descriptions, and importers should refer to the HTSUS modifications contained in Annex C for the purposes of assessing Section 301 duties and exclusions.

Importers should also carefully review the final list of products subject to the increased Section 301 tariff, with their supply chains, to identify products subject to increases in tariff rates as a result of the recent of USTR and consider appropriate mitigation strategies.

© 2024 Miller, Canfield, Paddock and Stone PLC
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