- The Supreme Court issued a number of groundbreaking decisions over the course of the last year, many of which impact the healthcare and life science industries.
- While the Supreme Court’s rulings on vaccine mandates and abortion have dominated headlines and captured public attention, other important opinions affecting specific industry sub-sectors have flown under the radar.
- The Supreme Court's rulings over the course of the term cast doubt on the ability of government agencies to use the rulemaking process to accomplish major, arguably novel, public policy goals without express Congressional authorization. These opinions likely will inspire challenges to future rulemaking that impacts the healthcare and life science industries.
The Supreme Court issued a number of groundbreaking decisions impacting healthcare
companies and their stakeholders in its 2021–2022 term. With Justice Amy Coney
Barrett replacing Ruth Bader Ginsberg (resulting in a 6-3 conservative majority), the
Supreme Court not only held in Dobbs v. Jackson that there is no longer a Constitutional
right to abortion (overruling nearly 50 years of precedent) but also issued a number of
decisions impacting vaccine mandates, Medicare, Medicaid, administrative agency
deference, and a host of other critical issues confronting the healthcare ecosystem.
We summarize below some of the most important Supreme Court decisions impacting
the healthcare industry in the 2021–2022 term. Despite the swearing in of Ketanji
Brown Jackson on June 30, 2022, replacing Justice Breyer, we do not anticipate any
major changes in the functioning or trajectory of the Supreme Court and anticipate an
eventful 2022–2023 term.
Whole Woman’s Health v. Jackson (12/10/2021). Abortion providers sought pre-
enforcement review of the Texas Heartbeat Act, which bans abortions after six weeks of
pregnancy and allows for enforcement via private civil actions against anyone who
performs an abortion or assists someone in gaining access to one. The Supreme Court
held 5-4 that providers challenging the constitutionality of the statute could not bring
suit against judges, clerks, or the state Attorney General to prevent them from enforcing
the law. The Court reasoned that while Ex parte Young, 209 U.S. 123, established a
narrow exception allowing an action to prevent state officials from enforcing state laws
that are contrary to federal law, federal courts are nevertheless not normally permitted
to issue injunctions against state court judges or clerks. In addition, the petitioners could
not sue the Attorney General, because the Attorney General does not have enforcement
authority under the statute. The Court did, however, in an 8-1 decision with Justice
Thomas as the lone dissenter, allow a portion of the case to proceed against the Texas
Medical Board and licensing authorities, because licensing officials “may or must take
enforcement actions” against abortion providers if such providers violate the Texas
Takeaway: Without ruling on abortion itself, the Supreme Court effectively made
challenges to certain types of abortion laws and any other potentially unconstitutional
state laws harder to bring—ruling that the “chilling effect” of such a law merely being
on the books is an insufficient basis to bring a suit before the statute is actually
enforced. This ruling likely will make it more difficult for parties to bring suits in federal
court challenging the constitutionality of certain types of state laws at an early stage.
Biden v. Missouri (01/13/2022). After the Secretary of Health and Human Services
(“HHS”) imposed the COVID vaccine requirement on all healthcare facilities
participating in the Medicare and Medicaid programs, groups of states led by Louisiana
and Missouri challenged the rule, leading to preliminary injunctions against its
enforcement. The Supreme Court held 5-4 that HHS was authorized to issue the vaccine
mandates because it was similar to other safety requirements that HHS was authorized
to impose on participants in federal healthcare programs.
Takeaway: This opinion affirms the Supreme Court’s deference to regulations that are
within the traditional scope of the agency’s regulatory authority. However, the
dissenting Justices’ position—that if Congress wanted to give HHS power to impose
vaccine mandates it should have specifically authorized it to do so—may have
foreshadowed West Virginia v. EPA (below) and the Court’s eventual application of the
major questions doctrine.
NFIB v. OSHA (01/13/2022). On the same day it upheld the HHS vaccine requirement,
the Supreme Court struck down a vaccine mandate enacted by the Secretary of Labor
and the Occupational Safety and Health Administration (“OSHA”) in what was
effectively a 6-3 decision. The mandate would have required approximately 84 million
workers to receive COVID vaccines (or obtain a weekly COVID test and wear a mask at
work). The Supreme Court held that while OSHA is empowered to set workplace safety
standards, the vaccine mandate is a broad public health measure and therefore not
within OSHA’s jurisdiction. The Court explained that COVID is not specifically an
occupational hazard since it poses a universal risk regardless of where people gather and the mandate was not specifically tailored toward workplace environments with elevated COVID risks.
Takeaway: This opinion reflects the Supreme Court’s increasing skepticism of
regulations it perceives as outside of the scope of an agency’s jurisdiction/traditional
sphere of influence. The Supreme Court was willing to uphold CMS’s vaccine mandate in the context of traditional regulatory oversight over healthcare providers but was
unwilling to affirm OSHA’s mandate as it was (in the Supreme Court’s view)
overstepping its role by issuing a regulation that was not tailored to workplace safety.
Gallardo v. Marstiller (06/06/2022). This 7-2 opinion addressed a state’s authority to recover certain expenditures made by its Medicaid program. The petitioner, a Medicaid
beneficiary, suffered catastrophic injuries after being hit by a car and eventually
recovered $800,000 in a court-approved settlement. The state of Florida sought to
recover from the settlement the cost of future Medicaid expenditures on this
beneficiary’s behalf (who remained in a persistent vegetative state) under the Florida’s
Medicaid Third-Party Liability Act. The Supreme Court ruled in favor of Florida,
holding that, while the Medicaid Act prohibits states from recovering medical payments
from a beneficiary’s property, that provision does not apply to state laws that are
authorized pursuant to, and in compliance with, the Medicaid Act.
Takeaway: This decision is unlikely to have a significant impact on private industry, but may encourage states to authorize their Medicaid programs to act in a similar manner as Florida in this case.
AHA v. Becerra (06/15/2022). By way of background, HHS’s reimbursement rates for
Medicare Part B drugs provided by hospitals for outpatient care are subject to judicial
review, and HHS cannot vary the reimbursement rates only for low-income/rural
hospitals (known as Section 340B hospitals) absent a survey of hospitals’ costs in
acquiring the drugs. The Medicare statute provides two options that HHS can follow to
set reimbursement rates for certain outpatient drugs provided to Medicare patients by
hospitals. If HHS conducts a survey of hospitals’ acquisition costs for each covered
outpatient drug, then the agency may set reimbursement rates based on the hospitals’
average acquisition cost per drug. This option allows for the rates to vary by hospital
groups. Alternatively, HHS must set reimbursement rates based on the average price of
the drug charged by manufacturers as calculated and adjusted by the Secretary of HHS.
This option does not authorize HHS to vary reimbursement rates for different groups.
For 2018 and 2019, HHS did not conduct a survey, yet it established separate
reimbursement rates for 340B hospitals. The American Hospital Association challenged
the reimbursement rates, and, in response, HHS claimed that judicial review of the
reimbursement rates is precluded and that HHS had authority to “adjust” the rates
under the second option described above. In a unanimous decision, the Supreme Court
rejected HHS’s reasoning and found that judicial review was not precluded. As a result,
because HHS did not conduct the requisite survey, its decision to vary reimbursement
rates only for 340B hospitals was deemed unlawful.
Takeaway: This case is most notable for what it does not do. Some industry groups and
conservative legal organizations had urged the court to use this case as an opportunity
to undermine the Chevron Doctrine, which requires courts to grant deference to federal
agency statutory interpretation—but even though the Supreme Court refused to defer
to the agency in this case, it ignored Chevron deference issues entirely.
Marietta Memorial Hospital Employee Health Benefit Plan v. DaVita, Inc. (06/21/22).
The Supreme Court held 7-2 that the Marietta Memorial Hospital Employee Health
Benefit Plan does not violate the Medicare Secondary Payer Act, which prohibits health
plans from differentiating in benefits between individuals with and without end-stage
renal disease. The Marietta Memorial Hospital Employee Health Benefit Plan has three
tiers of reimbursement, and dialysis providers like DaVita fall within the lowest tier of
reimbursement. As such, dialysis services are subject to relatively limited
reimbursement rates. DaVita argued that the Plan’s limited coverage for dialysis violated the Medicare Secondary Payer statute. The Court determined that the Plan did not differentiate in the benefits it provides for individuals with and without end-stage renal disease, because the Plan’s terms applied uniformly to all Plan participants.
Takeaway: This opinion is favorable for insurers, because the Supreme Court
interpreted the Medicare Secondary Payor Act in a manner that provides them greater
flexibility in crafting benefit plans.
Dobbs v. Jackson Women’s Health Organization (06/24/2022). In a momentous and
controversial decision, the Supreme Court held 5-4 that the Constitution does not
confer a right to abortion—overruling Roe v. Wade and Planned Parenthood v. Casey. The Court reasoned that the Constitution does not expressly mention a right to
abortion, and the question at issue was whether that right is implied by the language of
the Constitution. The Court’s substantive due process analysis examined whether the
right is “deeply rooted in our history and tradition” and essential to our nation’s “scheme of ordered liberty.” After reviewing historical evidence of the criminalization of abortion, among other things, the Court concluded that a right to abortion is not deeply rooted in the nation’s history and traditions and thus cannot be recognized as a
component of the liberty protected in the Due Process Clause. The minority issued a
forceful dissent, arguing—among other things—that principles of stare decisis and the
liberty interests protected by the Fourteenth Amendment required the court to uphold
Roe and Casey.
In the aftermath of Dobbs, the abortion debate has shifted to the states, where litigation is ongoing in certain states regarding the viability of certain abortion-related statutes, and state lawmakers are debating whether to enact laws that either expand or restrict the availability of abortions.
Takeaway: The full impact of this decision cannot be summed up and simplified: the
consequences are broad and the legal issues myriad. We note that one of the first lines of conflict is likely to be federal preemption of state laws in connection with the
administration of stabilizing emergency treatment. A wide range of additional issues are
also implicated, including state travel restrictions, telemedicine, drug importation, and provider liability. Further, the potential ultimate impact of the decision on gay marriage, contraception, and a host of legal precedents concerning so-called “individual privacy” remains unclear as of this writing. Watch this space for further updates on the potential challenges healthcare organizations face in a post-Roe world and how to navigate them.
Becerra v. Empire Health Foundation (06/24/2022). The Supreme Court held 5-4 that
HHS followed the correct procedures when it promulgated a rule changing the way it
calculates Medicare Part A reimbursement rates for disproportionate share hospitals
(“DSH”)—which are qualifying hospitals that treat low-income patients. The HHS
regulation reduced the proportion of patients considered low-income, resulting in
decreased payments for most DSH hospitals. The Empire Health Foundation argued
that the regulation was inconsistent with the calculation methods outlined in the
Medicare statute. However, the Supreme Court found that the HHS regulation
correctly construed the statutory language at issue and was therefore a valid rule.
Takeaway: An increasingly rare victory for administrative agencies, court confirmed
the agency’s interpretation of the statute. As in AHA v. Becerra, this decision is notable because it ignores entirely the Chevron Doctrine—which remains valid precedent at least for the time being.
Xiulu Ruan v. U.S. (06/27/2022). The Supreme Court unanimously held that a physician
may be convicted of unlawful distribution of a controlled substance under 21 U.S.C.
§ 841(a)(1) only if the physician knowingly or intentionally prescribed a controlled
substance without authorization. The Supreme Court emphasized that there is a strong
presumption in criminal law that the government must prove mens rea, i.e., that the
defendant intended to violate the law. Proof of mens rea is critical to distinguishing
between doctors engaging in socially-beneficial prescribing and unauthorized
prescribing for improper purposes.
Takeaway: This Supreme Court opinion will likely make it more difficult for the
government to bring prosecutions predicated on allegedly improper opioid prescribing
due to the need to establish criminal intent. More generally, Ruan will make it more
challenging for federal prosecutors to bypass the need to prove that the defendant
purposely intended to violate the law. In addition, although Ruan is applicable only to federal criminal statutes, the principles it outlines may be viewed as persuasive in state courts in analogous circumstances, which potentially may include both opioid
prescribing and, in some states, medical practices that may run afoul of abortion
West Virginia v. EPA (06/30/2022). In this momentous decision, the Supreme Court
held 6-3 that Congress had not granted the EPA the authority to promulgate emissions
restrictions to combat climate change under the Clean Power Plan. The Court found
that so-called “major questions” like the EPA’s authority to issue “generation-shifting”
regulations to address climate change were reserved for Congress absent clear
delegation of authority—which it concluded the EPA did not have. The minority issued
a forceful dissent, arguing—among other things—that the Supreme Court was overriding legislative choice and abandoning principles of statutory interpretation by establishing a new and ambiguous “major questions” doctrine that permits courts to overturn agency regulations. As we will discuss in a forthcoming client alert, it seems likely that stakeholders in the healthcare and life sciences industry may invoke the “major questions” doctrine as a means of seeking to invalidate regulations issued by the
Food and Drug Administration, HHS, or other regulators.
Takeaway: This decision may be a sign of a more activist Supreme Court willing to
curtail major administrative agency decisions, unless authority has been expressly
delegated to the agency by Congress. Based upon this decision, we expect significant
future litigation challenging administrative agency action based upon application of the
“major questions” doctrine.