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Politics, Policy & Law 

HHS proposes regulation sunset rule that could create uncertainty for industry, paralyze FDA

November 5, 2020 1:00 AM UTC
Updated on Nov 5, 2020 at 6:07 PM UTC

A proposed rule released Wednesday seeks to make regulations from FDA and other HHS agencies automatically sunset 10 years after they have  gone into effect unless the agencies undertake a cumbersome, time-consuming process to renew them. The rule applies to regulations that have a significant economic impact upon a substantial number of small entities.

The Trump administration is racing against the clock to get the proposal finalized ahead of a potential transfer of power. 

If Joe Biden is elected president he is likely to try to set the proposal aside, and in any case regulated industry and consumer groups are certain to try to derail it in the courts. 

Sunsetting regulations would create tremendous uncertainty for regulated industries, making it impossible for companies to make plans based on the assumption that regulations will be in place over the long term.

In addition, the resource demand would be huge at HHS agencies such as FDA that issue hundreds of regulations per year. FDA staff would have to review every regulation to determine if it impacts small entities, and then draft justifications for retaining the regulations that it believes should be retained. The proposed rule does not contemplate or provide funding to increase hiring, so it would divert staff from other activities. Complying with the proposal would “paralyze” FDA functions related to writing and reviewing new regulations, a former senior agency official told BioCentury. 

The proposal to sunset regulations is part of a broader Trump administration initiative to restrict the capacity and independence of regulatory agencies. In September, HHS Secretary Alex Azar took steps to consolidate power over rulemaking by agencies such as FDA, and did so in a way that could subject thousands of rules to legal challenges. 

HHS proposed exempting a tightly defined set of regulations from the sunset mandate, including regulations that Congress specified in laws, those that involve foreign policy or the military, and regulations created in collaboration with other federal departments.

Trump administration officials did not hesitate to describe the impact of the proposed rule as a major accomplishment. In a briefing for reporters, HHS Chief of Staff Brian Harrison called it “the biggest regulatory reform effort in the history of the world’s biggest regulatory agency, which is us here at HHS.”

Harrison also did not mince words when asked why the Trump administration issued the proposal just a day after the elections. “The reason we're doing this now is because we at the department are trying to go as fast as we can in hopes of finalizing the rule before the end of [Trump’s] first term.”

Finalizing the rule before the Jan. 20 inauguration would “require a lightning-fast turnaround” following legally required notice and comment periods, Dan Bosch, director of regulatory policy at the free market think tank American Action Forum, wrote in a blog post. If the rule is not finalized, a Biden administration would set it aside, he noted.

If the Trump administration finalizes it, a Biden administration could try to invoke the Congressional Review Act, a law that makes it possible to repeal rules created in the last days of an administration. The act, however, requires consent by both houses of Congress. 

Coleen Klasmeier, a partner at Sidley Austin, noted that the announcement was made at a time when the outcome of the presidential election is uncertain, and said it would not achieve the proposal’s stated goals of helping small businesses and improving public health.

“First, it takes a particularly generous amount of tone deafness to do this today,” Klasmeier, who served as an attorney in FDA’s Office of the Chief Counsel in 2002-04, told BioCentury. “Second, it will paradoxically increase regulatory complexity and disrupt settled expectations with uncertain benefits for small entities. Third, it would harm the public health for regulations to automatically sunset, which seems likely given the burdens associated with performing the review.”

The proposed rule would, if put into effect, create an immediate bolus of work for FDA staff.

The rule is retroactive and applies to all regulations that HHS has ever promulgated. It specifies that regulations promulgated more than 10 years ago would expire at the end of two calendar years from the date the rule became effective unless the agency that issued them determined that they did not affect small entities or had completed a review justifying its renewal.

The review would include a public notice and comment period and obligate the agency to conduct extensive analyses.

There are tens of thousands of HHS regulations on the books, and they would all need to be assessed to establish whether they meet the rule’s criteria and many of them would need to be reviewed or allowed to sunset.

FDA issued 3,518 regulations and proposed regulations from 1998 to 2017, according to a PwC analysis.

Battling the ‘deep state’

Sunsetting federal regulations has been advocated by conservatives who want to dismantle the “administrative state” which they believe was created by a “deep state” comprising career government officials who oppose President Donald Trump and like-minded political leaders.

In a preamble to the proposed rule, Azar quoted statements from academic journals consistent with this philosophy. He wrote that federal agencies have a poor record when it comes to reconsidering regulations because of foot dragging by civil servants with political agendas.

Quoting an administrative law journal paper by Yoon-Ho Alex Lee, Azar expressed concern about “political reasons and moral hazard concerns associated with performing retrospective analyses.” He added that while agency heads have “regulatory agendas,” staff tasked with performing retrospective analyses “are best viewed as career members who have a vested interest in seeing their agencies continue to exist and thrive. All else equal, they are not inclined to acknowledge that the work of their agency is inefficient or unnecessary, and even less inclined to conduct analyses that may lead to a curtailing of the agency’s authority.”

While he states in the preamble that the intended rule is intended to sweep away fuzzy thinking and impose intellectual rigor, Azar dissembled on the topic of how much efficiency would be created by the proposal. Rather than provide an estimate, Azar quoted Lee’s paper: “As to how many agency rules currently implemented may be costing more resources than yielding benefits is anyone’s guess.”