I think you’ve all heard the news, but just in case, last week President Trump issued an Executive Order (EO) that requires that at least two regulations are repealed for every new regulation proposed by a Federal department or agency. The news is causing quite a stir (but what DC news isn’t these days) and we thought it would be helpful to break down what this means for future administration action on some of our favorite topics, including the 21st Century Cures Act, biosimilars, next-generation sequencing, infectious disease outbreaks, higher education, and labor rules, to name just a few.
Let’s be clear. Orders to prevent unnecessary regulation cost and duplication are already in place. They were issued by President Clinton in 1993 (Executive Order 12866, Regulatory Planning and Review). However, it is also clear President Trump felt the need to supercharge the process in support of his stance on prudent spending. The Office of Management and Budget (OMB) recently released an interim guidance on the EO, so let’s get into it – 9 fun facts about the EO.
1 . The EO is intended to address expenditures of funds from both public and private sources.
The EO clearly states its goal of managing costs associated with “governmental imposition of private expenditures required to comply with Federal regulations.” It isn’t surprising that President Trump has acted in support of his belief that government is stifling American businesses, but worth pointing out nonetheless. Evaluating the cost on society is an activity that agencies and departments already do as required by Clinton’s 1993 EO, and described in Circular A-4, a document that went into effect in 2004.
2 . Agencies and departments may want to wait until FY 2018 to issue new regulations.
The EO essentially has two main parts: 1) Agencies and departments have to identify at least two existing regulations to be repealed. This applies to FY 2017 and beyond. 2) What differs between FY 2017 and any years thereafter is an agency’s allotted cost allowance. The EO only requires that the total incremental cost of all new regulations for each agency be no greater than zero for FY 2017. After FY 2017, OMB will assign a total cost that an agency is allowed for issuing new regulations each year. It doesn’t have to be zero. In other words, an agency may have more (or less) cost allowance in FY 2018 when issuing new regulations. So, it might be worth figuring out if your favorite agency is also the President’s.
3 . The EO applies only to significant regulations so far.
The OMB interim guidance that says that the EO applies to “significant” regulatory action. That includes a lot, including any regulation that has an effect on the economy of $100 million or more.
4 . Guidance documents count!
The Food and Drug Administration is famous for its use of guidance documents in lieu of rulemaking. The OMB interim guidance makes clear that new significant guidance or interpretative documents may be subject to the EO and will be addressed on a case-by-case basis. This may drastically limit the ability of FDA to finalize guidance on biosimilars, next-generation sequencing, or laboratory tests if it is costly to do so.
5 . Agencies will have to deregulate through rulemaking.
Rulemaking is not an easy lift. It requires public notice and comment, among other things, making it that much more difficult to offset costs of new regulations. It will be easier for agencies to not issue any new regulations. As an example, HHS might not think it is a priority to cut regulations just to fulfill its promises in the Common Rule to issue all those guidance documents related to privacy protections, informed consent templates, and whether biospecimens can be de-identified or not in the futur.
6 . If the regulation is required by law, then don’t sweat it (just kidding).
The EO’s two for every one requirement doesn’t apply if the regulation is required by law. While the OMB guidance says that they won’t stand in the way of agencies complying with an “imminent statutory deadline,” they still expect agencies to identify offsets even if the action is required by law. The 21st Century Cures Act is full of text that directs agencies to issues guidance both with and without a deadline. As an example, FDA was given a time frame for issuing guidance related to the regulation of regenerative advanced therapies. It remains to be seen whether the approximately two years allowed in this example is considered an imminent deadline.
7 . The EO creates some unknowns about how agencies will have to work together to offset costs.
For 2017, the OMB guidance says an agency can ask to transfer savings gained from a deregulatory activity from another agency. Some have surmised that this will lead to cross-agency battles. However, two distinct activities that are not logically connected wouldn’t be allowed to be bundled together, meaning that agencies will be forced to work together to get separate rules finalized if they are hoping to transfer savings.
While I can’t see agencies fighting to the death, I can imagine groups lobbying to cut their least favorite expensive regulations. The Department of Labor’s overtime rule that affects higher education institutions comes to mind. Moreover, OMB’s guidance compares the EO’s intention to those of the spending caps, and from that experience we’ve learned that there is only so much waste to cut. It may help to know that the OMB guidance clarifies that agencies must confirm that they will continue to achieve their regulatory objectives after deregulatory action is undertaken.
8 . Rules associated with Pell grants and Medicare spending might not be counted.
The OMB guidance says that federal spending rules that primarily cause income transfers from taxpayers to program beneficiaries are considered “transfer rules” and are not covered by this EO.
9 . If the rule has to do with an infectious disease outbreak, it may qualify for a waiver.
Summer is coming and so are additional Zika outbreaks. The good news is that emergencies addressing critical health or safety may qualify for a waiver from some or all of the requirements in the EO.