In this episode of Holland & Knight's "The Eyes on Washington" podcast series, attorneys Rachel Gartner, Sara Klock, John Vaughan and Michael Werner discuss the evolving landscape of U.S. Food and Drug Administration (FDA) regulation throughout the early months of the Trump Administration. Key topics include the significant organizational changes at the FDA, ongoing legal battles over compounded GLP-1 drugs and their market access, regulatory uncertainties surrounding laboratory-developed tests (LDTs) and anticipated reforms in food ingredient safety and cosmetic product oversight. The conversation also explores the administration's shifting approach to the regulation of artificial intelligence (AI) in healthcare, predicting a lighter federal touch with increased state-level involvement and industry self-regulation. Additionally, the episode touches on the status of cannabis regulation and the fluid nature of enforcement and policy amid changes in the federal government, offering listeners valuable insights into navigating the current FDA regulatory environment.
Listen to more episodes of The Eyes on Washington Podcast here.
Podcast Transcript
Michael Werner: Hello and welcome to the podcast. This is another in our regular series of FDA podcasts from the FDA team at Holland & Knight. I'm Michael Werner, I am the head of the Life Sciences group. I'm a partner based in Washington, D.C. And I'm here with a few of my colleagues to talk about the latest developments on things in and around FDA as we enter pretty much the third month of the Trump Administration. So first I'm going to have my colleagues introduce themselves, and then we'll talk about some of the hot issues that we've seen and that we heard about from many of our clients. So with that I'll turn to John Vaughan.
John Vaughan: I'm a partner at Holland & Knight's public policy and regulatory group. I work out of Los Angeles, and my areas of specialization are drugs and biologics, medical devices and all things digital health.
Rachel Gartner: Hi, my name's Rachel Gartner. I'm a partner in our New York City office, and my practice focuses on FDA-regulated products such as foods, beverages, dietary supplements and cosmetics. Really excited to talk to you all today.
Sara Klock: And I'm Sara Klock. I work with Michael out of our D.C. office. I am a senior associate. I am generalist in the FDA space, so I cover all things food, drugs, cosmetics, biologics, cell and gene therapy, and am really looking forward to this podcast today and the series to come.
Michael Werner: So we wanted to talk about, as I said, some of the hot topics that we are hearing about or seeing. The first thing that needs to be discussed, of course, is all of the organizational changes at the FDA. And frankly, the fallout from that is still to be determined. Of course, many people who are listening to this probably know that about a week ago, the FDA terminated the employment of about 19 percent of its staff. It was across the agency, covering many different disciplines and many different products. Product reviewers, by and large, were spared from losing their jobs. I think that's an indication that the agency leadership and the administration understands that the bread and butter of the agency is the review of products. So the reviewers who handle drugs, devices, biologics and the like have been spared. But many of the other people who work on product applications — toxicologists, for example, biostatisticians, many of them, or including policy folks who write guidance — many of them seem to have been ripped. Another important reorganization issue that we're seeing is that there's been reports that in fact the administration wants to completely reorganize the agency. For example, there's talk of combining all the product review divisions into one division. There's talk of taking all of the different compliance functions related to different products and centralizing all of those activities. That's just reports that we've heard about and that we'd seen in some of the trade press. So it's unclear the prospects of any of that happening or any of the details. But I think it's fair to say that we can anticipate more organizational changes at FDA in the days to come.
And the last thing I wanted to mention from an organizational perspective is that while FDA is a part of the Department of Health and Human Services, historically, the secretary of HHS has allowed the commissioner of the FDA and the FDA senior staff to have a lot of independence in terms of agency priorities and regulatory policy. It remains to be seen whether that will be true in this administration. We certainly have an HHS secretary who's quite outspoken and has been for some time about issues that typically fall under FDA's jurisdiction about things like ingredients in food or regulation of certain products or vaccines. And so it's an open question about how the two agencies — or the FDA is a subagency of HHS — is going to function and what are the issues that the commissioner, Dr. Makary, really feels are important and is going to personally engage on. And I think all of that bears watching in the days to come. In terms of some specific issues that we wanted to talk about today, I'm going to start by asking Sara about the latest around compounding and GLP-1s, which has been a topic of course for several months, if not longer, dating back to the Biden Administration, and now certainly in the Trump Administration. Sara?
Sara Klock: Thanks, Michael. So I'm sure, if you're listening, you understand how hot of a topic GLP-1s are and how they're currently on the market. So to provide a little background, FDA approves drugs, and FDA has approved both branded drugs for tirzepatide and semaglutide. And most patients who take these products get them through compounded pharmacies. FDA does not approve a compounded drug, but has statutory authority through the DQSA to allow pharmacies, either a 503A or a 503B outsourcer, to dispense these drugs. FDA took off their drug shortage list tirzepatide and then semaglutide a few months ago, which has caused a frenzy in the GLP-1 compounding space because that was how the majority of patients were receiving their products, mostly due to lack of availability and Medicare Medicaid not covering and the cost of compounded products being substantially lower than branded products. So when the drugs went off the shortage list, the Outsourcing Facility Trade Association essentially sued the FDA to stop the drugs coming off the shortage list.
So there's currently two lawsuits going on. They're both in the Northern District of Texas. So the first one is about tirzepatide. The second one is semaglutide. The compounders have requested an injunction so FDA can't actually enforce the tirzepatide coming off the shortage list and the court ruled against the compounders. So tirzepatide is truly off the shortage list, and FDA can enforce under a 503A and a 503B pharmacy for continuing to dispense tirzepatide currently. Semaglutide is still going through the process. It's a little bit further behind, but it's the same Northern District of Texas, so it'll be unlikely if there's, you know, a different resolution there, but both court cases are going on, and essentially the compounders are trying to say wait, hold on, these drugs actually are going to be in shortage once they're fully off the list and patients are only getting branded drugs. This world is really popular right now because there's a lot of folks playing in the pharmacy space, the dispensing space, the telehealth, telemedicine space because patients want these products. And we haven't seen enforcement really from the FDA as it relates to GLP-1 compounding. We have seen initial litigation from one of the manufacturers against [a] telehealth platform, but it was pretty aggressive action that telehealth platform was taking, and the manufacturer was really concerned about an adulterated product getting to the market. So we're still really early on in the stages of enforcement, but this area is risky. It is unknown and super popular right now. And there's going to be more to come, both from, I think, an enforcement perspective, from the FDA, potentially state boards of pharmacy, and potential litigation. Michael, did you want to add anything before I turn it over to John?
Michael Werner: No, I think that's it. That covered it. We're seeing it from all perspectives, as you said, right, from the telehealth, telemedicine platforms, the compounders themselves and, of course, the entities that market the drugs. It will be interesting to see if FDA takes enforcement action, as you said. It will also be interesting to see if Congress steps in at all on this, given the popularity of the drugs. We saw recently that there was a decision by CMS about Medicare coverage of GLP-1s. So 100 percent, we expect a lot of activity from all perspectives on this going forward.
Sara Klock: So, John, we'll turn it over to you to talk about LBTs and what's going on from a litigation perspective there.
John Vaughan: So, last year, the FDA issued a final rule categorizing laboratory-developed tests as an in-vitro diagnostic, which ended a sort of a period of regulatory ambiguity. That move sparked lawsuits from two associations that were consolidated into one case. Those groups, industry groups, argued that the laboratory-developed test rule violated or exceeded FDA's authority under the Administrative Procedure Act. In March of this year, a Texas federal district court ruled in favor of those plaintiffs, stating that FDA lacked statutory jurisdiction to regulate LDTs. The court defined LDTs as proprietary services under the Clinical Laboratory Improvement Act, or CLIA, which is overseen by the Centers for Medicare & Medicaid Services, or CMS, and not FDA. This ruling blocks the LDT final rule from taking effect in May 2025, and prevents the FDA from issuing further LDT regulations unless it's appealed. The court also highlighted that LDTs are service-based methodologies that are unique to each individual laboratory, and not physical products that are transferable under FDA device regulations. Resolving this regulatory ambiguity now falls to Congress, which may need to revive the ballot act or some similar legislation. And in the meantime, manufacturers should ensure that their LDTs meet the CLIA standards and demonstrate clinical reliability, because although the court has issued a determination blocking FDA enforcement, it does not mean that the government won't enforce against CLIA labs, particularly CLIA labs that use those labs to sell additional services or maybe making claims that look more like in vitro diagnostics.
Michael Werner: Thanks, John. Do you anticipate that FDA will, that the government will enforce this rulings in this administration?
John Vaughan: I do not anticipate that the FDA will appeal this particular decision under this administration. What will be interesting to see is how CMS picks this up and carries this to see if CMS is interested in any additional enforcement because the administration is still interested in reducing the amount of fraud, waste or abuse in the industry, and there is some argument that some CLIA labs, particularly some bad actors that have received warning letters in the past, may be sort of manipulating those rules to do more than they should be doing under the CLIA Act and turning these products into something that looks more like medical devices. And I think that CMS would be very interested in making sure that they stop that tendency and made sure the CLIA labs focused on their narrow, their narrow approval as CLIA labs as opposed to advertising those services for other things that, again, look more like FDA-regulated products.
Michael Werner: So I want to turn to Rachel, turn to you. The HHS secretary has talked about the GRAS standard. He's talked a lot about ingredients in food. We've heard Dr. Makary talk about some of those things too. What are you seeing, and what do you anticipate going forward?
Rachel Gartner: Yeah, so March was a pretty active month on this front in terms of announcements from HHS. I think at the very start of this administration, we knew that there was this push to, quote, "Make America Healthy Again." And so some of this communication is par for the course. I think it was anticipated when we saw the elimination or ban of Red #3 a few weeks ago, too. I think that is setting the trend on the scrutiny around some of the ingredients that have historically been permitted for use in food. And so it shouldn't come as too much of a shock to industry that this administration is now taking a closer look at the ingredient approval process for foods, not just dissecting specific ingredients, but taking a look at overhauling the entire process by which companies can attest to whether ingredients in their products are permitted for use in food and are safe for consumption in the amounts that they're used in their product. And I also think it's interesting, all of this was happening around the same time last month as Expo West, which is the largest natural products food show in the country, it happens every year and so walking that show floor and seeing some of the newer products that are going to be introduced into the market this year, it was interesting to see how some of them are already starting to align with some of these concepts. A lot of the brands are pushing these nutrition-conscious concepts, reduction of sugars for alternative sweeteners like Stevia to help keep sugar amounts low to align with the new healthy requirements, which, you know, we saw that final rule come out at the tail end of last year.
So I think with respect to GRAS reform, just to kind of get everybody up to speed, HHS is essentially looking to investigate whether the current ingredient permission process is suitable. And right now there's two different ways that you can legally include certain ingredients in your food products. One, you can do a self-affirmed GRAS opinion, which is the majority of what food companies do. They gather the publicly available scientific evidence on the use of the ingredient and the way that they plan to use it, and they take the position that the use the ingredient in this way is, you know, safe for use in their product and that's why they feel justified in incorporating that ingredient into their product. There's another route where you can essentially take that same set of scientific data and submit a dossier to FDA to obtain not necessarily an approval, but what you would receive if the FDA was OK with it, is a no questions asked statement. Now this is public, and if FDA does have questions that's also going to be public. So historically the better route for companies has been to go through the self-affirmation process. Based on my experience, having done this type of work with clients in the past, it's highly scientific. We usually hire experts in the field. And so the scientists and toxicologists that are reviewing the scientific data are very well versed on the ingredient. They're industry experts. And so, if done the right way, the self-affirmed GRAS process can be great. So I am curious to see what the administration's critiques of the process currently are. I can't tell you what I think that's going to look like. I'm not sure FDA has necessarily the resources right now to be reviewing all sorts of science on all of the various ingredients that food companies are using in their products right now. So it's certainly something that we're monitoring. I think some of our clients right now and having conversations with them are already doing some diligence on their end. They're assessing the ingredients that they're using, they're making sure that the safety data is still up to snuff with modern scientific information. And perhaps some of this activity from HHS is prompting that activity, and that's the intention, is to see some of these larger food companies take initiative on their own. But either way, it's something we're monitoring closely. And I think that all food companies are, you know, trying to stay on top of what that's going to look like moving forward for product development and ingredient sourcing and everything else.
Michael Werner: Rachel, didn't FDA go through a little bit of a reorganization with its food division very recently?
Rachel Gartner: Yes. And so again, you know, activities happening in March, and there's also some talk about new divisions, one of them being this Administration for Healthy America, which seems to align with the Make America Healthy Again concepts. So it'll be interesting to see how this reorg impacts the resources at the agency and some of the proposed activities that should take place if they're really going to tackle any sort of GRAS reform or elimination of current practices and, you know, putting out food products, new food products into the food system.
Michael Werner: And John, I want to come back to you. Use of AI is a topic that we hear from our clients and you hear, you read about. And of course, health products, medical device[s] have actually been using AI in its various forms, perhaps more primitive forms, for a long time. What do you see the future looking like for AI in the context of medical devices in particular? And how do you think this new FDA is going to regulate it?
John Vaughan: That's a great question. Thanks, Michael. I think that there are maybe three top lines out of the administration so far, although it's still early days, and they are that there's going to be more laissez-faire approach to AI oversight under this FDA and HHS. I think the second is we're going to have to think about the rescission of prior AI regulatory frameworks and what that means for future innovation. And the third is that there is going to be an increased role for state-level regulations and industry self-governance. And when you put those three things together, they will give folks, the stakeholders in the industry, and we've been advising our clients, to consider all three of these things as they're developing new products or go-to-market strategies. With respect to the overall approach to AI oversight, we are seeing that this administration has prioritized reducing regulatory barriers to foster innovation in AI technologies. The president's executive order from January 2025, it was titled "Removing Barriers to American Leadership and Artificial Intelligence" that directs agencies to review and potentially rescind existing policies that might be viewed as impeding AI innovation. And I would note that that is not specific to healthcare. That's overall the administration's approach to AI in every industry, but it's important in healthcare to understand, as you're developing a go-to-market strategy, what that enforcement regime will look like in the near future. So I think overall, the approach to AI oversight from the administration in this HSS will be to emphasize minimal government intervention and encourage industry self-regulation and the hope that that will lead to more rapid development of AI applications and healthcare products.
I think the second thing to consider in AI or machine learning space is the rescission of prior AI regulatory frameworks by the administration. In alignment with its deregulatory stance, the Trump Administration has revoked previous executive orders that established guidelines for the responsible development and use of AI, and not suggesting that this administration is less interested in the responsible development of use of AI, but the administration is more interested in taking a hands-off approach and seeing the industry iterate and regulate itself. Notably, President Trump's revocation of President Biden's 2023 executive order on AI removed mandates for HHS to establish AI safety programs and for developers to share those safety test results. So this action definitely signifies a shift away from federally mandated AI safety protocols in healthcare products using AI machine learning and more towards a laissez-faire industry-directed approach.
I think the third thing to keep in mind from a policy perspective is the increased role of state-level regulations and industry self-governance. And this is where things get complicated. With the federal government pulling back, spotlights are going to shift to state-level regulation and to the industry for self-governance. Some states are stepping in to develop their own AI policies for healthcare, which may create a fragmented and uneven regulatory landscape across the country. But at the same time, responsibility for digital health manufacturers still falls on them to develop ethical guidelines and best practices for deploying AI, and in particular, the use of PHI or PII for digital health products. And that is not only just a healthcare issue, it's a national security issue that this administration is focused on. Because those data are sensitive both for individual patients and American citizens, but also there is a concern that state actors might get access to some of these data. You've seen that recently with the bankruptcy of 23andMe where folks are very focused on who will get their genome, what will happen to that? And that debate at a state and federal level is ultimately, I think, going to compel the federal government to step back in because if the regulatory enforcement framework for digital health products becomes more fragmented with a variety of different state or federal agencies trying to develop different guidances, there's going to be more of a need for HHS or FDA to step in and argue sort of federal preemption for these products to make sure that there's a unified approach to AI governance and enforcement. But I think we're in early days, and I think it's going to take another couple of years to play out to see how the administration and industry respond to that, also given the rapid acceleration and adoption of AI technologies and healthcare.
Michael Werner: Thanks, John. I want to turn back to Sara. Last we heard, there were folks who were hoping the DEA would come up with a ruling around the legal status of cannabis, perhaps rescheduling cannabis. There was regulatory action taken by the previous administration, or at least proposed regulatory action. Where do things stand around cannabis and DEA regulation?
Sara Klock: So to be the bearer of bad news, cannabis is still a Schedule I drug, and it remains there until the foreseeable future. So as you said, Michael, there was a proposed rule by DEA about a year ago, it had gone through the notice and comment rulemaking to the point where it was before the DEA administrative law judges. One of the parties had appealed some evidentiary issues, and the DEA ALJ felt like his hands were tied and granted the appeal, so it is outside of the ALJ court at the moment. And that's about it, right? So we haven't really heard much from the president on cannabis. His AG didn't say much during procuring about it. And his proposed, I'm not sure if confirmed, DEA administrator, is opposed to cannabis. So I think the momentum that the industry felt potentially a year ago has quieted. But we also know that the president supported the marijuana bill in Florida. So as we've seen with this administration in the first three months, who knows what tomorrow will bring.
Michael Werner: And Rachel, I just had one other question for you, which is, in the context of the reorganization of the FDA, and I mentioned a lot of the review centers combining and people talking a lot about what's going to happen to drugs and device and cosmetics and, of course, food, it seems like there's not as much discussion about cosmetics. I wonder if you have an explanation for that, or do you feel like that that's just sort of the next issue that's waiting to happen when the new commissioner kind of gets more settled?
Rachel Gartner: I think that's right. First off, I don't think that the lack of information that's been put out about cosmetics necessarily is an indicator that they're not next. I do think that if we think more broadly about the focus points of, you know, reviewing ingredients in the food supply and assessing, or placing a greater level of responsibility on some of these manufacturers, it all comes down to creating more transparency for consumers about the products that they're consuming every day. And so when we think about cosmetics, I mean, some of us use multiple cosmetic products on our bodies multiple times a day. I mean, I'm sure there are some people who use more cosmetic products than they consume food, in fact. And so I don't think that cosmetics are going to be in any way insulated from the scrutiny that we're seeing food under. I just think that they're next. I do think that the reason why we're seeing perhaps a delay in that is just, you know, if we think about when MoCRA came out, right, the Modernization of Cosmetics Act, that was passed back in 2022. And, you know, Congress essentially gave FDA authority to start drafting some regulations on various things that — various regulations that cosmetics have not been held to. So the goal was essentially to start regulating cosmetics, perhaps to the same degree that foods and supplements have been regulated for years. And I think lots of consumers are surprised sometimes to find that that has historically been the case. Now we have, we did see in the last like three years since MoCRA passed, a little bit of activity with respect to facility registration requirements, but we have not seen activity to the extent that speak to, you know, GMP requirements for cosmetic companies, which we're all still kind of waiting to see. There's allegedly going to be some sort of ingredient safety substantiation submission requirement. What does that look like? So all of these proposed things that FDA was essentially supposed to put forth regulations on, all of those items seem to align with the same concepts that we're seeing for food. And so I do think that cosmetics are next in line. And what that's going to look like, given that historically the products have not been regulated to the same degree as food and supplements, it'll be really interesting. And it'll be, I think, a huge adjustment for industry. I think with food, food has always kind of known, like if, you know, you have to have safety data to support the use of ingredients in your products to an extreme degree, right? Cosmetic manufacturers have not necessarily been held to that same standard. And so we may see, you know, proactive formulation modifications before even requirements are in place. I think consumers are driving a lot of the activity we're seeing from consumer product companies generally. So yeah, but I do think cosmetics are next in line for sure.
Michael Werner: Well, so I just wanted to conclude by saying that it's obvious that the situation is remarkably fluid as we start the Trump Administration. The FDA commissioner was just recently confirmed by the Senate, so he's still getting settled and putting his people in place. What's clear is that there will continue to be lots of changes that will impact, you know, regulation, enforcement, legislation and compliance for all FDA-regulated products, whether we're talking about drugs and devices or we're talking about food, cosmetics and the like. One thing that is certain is that we will be following all of these developments and working with lots of clients in the space. So please feel free to reach out to us if you have any questions. Thanks very much for listening.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
