The Supreme Court’s decision in Loper Bright Enterprises v. Raimondo may “thaw” 40 years of the “chilling” effects of the Chevron-era regulatory environment, which would make it a transformative moment for a variety of industries, including healthcare innovation for the unmet needs of rare disease patients. 

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Healthcare regulations are necessary for a functioning market and for the well-being of patients. Unreasonable or excessive regulations, however, can impose constraints and costs that can handicap innovation.[1] These compliance costs are especially burdensome on smaller firms and can be barriers to entry for new firms. Regulators must carefully make the proper tradeoffs to ensure that the net result is for the public good.[2] 

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Health regulatory compliance costs are passed on to patients in the form of higher prices or reductions in goods and services.[3] In 2019 the total average capitalized pre-launch research and development costs for healthcare firms ranged from $161 million to $4.54 billion, with some therapeutic area-specific estimates reaching between $944 million and $4.54 billion.[4] The registration process and regulatory testing mandated by the FDA and other agencies accounted for approximately 26 percent of these costs.[5] Over the same period, the time for innovations to reach the market has risen from 13 years to 16.5 years, largely as a result of an increased regulatory burden.[6] 

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Some critics argue that Chevron deference enabled the FDA to downplay compliance costs in their regulations on innovation. Over four decades, this has had an enormous impact on patients, and especially on the 30 million Americans with rare and ultra-rare diseases, most of them children.[7]

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Many companies simply cannot bear these high compliance costs and go out of business. Despite promising results from early trials, companies have been forced to shut their business and stop their clinical studies partly due to rising regulatory compliance costs. One example is Massachusetts company, Allievex, which was working toward cutting-edge therapies to treat Sanfilippo syndrome, a disease that afflicts 15,000 American children.[8] The costs associated with completing clinical trials and obtaining FDA approval forced the company and its technology out of business. But this is not exclusive to rare diseases, as nearly every U.S. firm seeking FDA approval for a new antibiotic in recent years has also filed for bankruptcy. 

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The overturning of Chevron may lead to courts more regularly interpreting statutes in favor of the innovator,  including in the development of drugs for rare diseases, where costly innovative approaches are essential. This shift could lead to judicial interpretations more closely aligned with current scientific advancements and the specific needs of patients. 

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While some larger stakeholders may have favored the certainty Chevron provided, smaller, innovative players see the Loper decision as an opportunity to navigate regulatory challenges more effectively. The new avenues opened by Loper Bright have the potential to create a dynamic environment that benefits all stakeholders. 

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While the end of Chevron does not automatically undo existing regulations or prevent all future regulations, it does mean that industry stakeholders are now more empowered to challenge agency interpretations of federal law that exceed what Congress authorized. 

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The overturning of Chevron creates a new opportunity for patient support groups and advocates of those with rare diseases to challenge unlawful regulatory requirements.[9] It is highly likely that the FDA’s authority and flexibility in regulating aspects of novel products may become the subject of increased legal challenges in the short term.[10]  

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During the lawsuit of the American Clinical Laboratory Association (ACLA), against the FDA's regulatory authority over laboratory-developed tests (LDTs), experts and lawyers for the ACLA argued that Congress never granted the FDA authority to publish the Final Rule, which gave the agency extensive oversight of LDTs.[11] After having heard these arguments, the House Committee on Appropriations directed the FDA, through funding legislation, to halt their final rule on LDT.[12] The end of Chevron reflects Congress's renewed ability to take action in preventing regulatory disruptions, and in this case, disruptions that could impact the availability and reliability of vital diagnostic tests.[13] 

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Loper Bright offers a new opportunity for innovative healthcare technologies, as companies previously constrained by questionable regulatory barriers may now find less resistance in delivering new treatments to patients.

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To learn more about the Balancing Act Project and join the conversation, email info@balancingactproject.org 

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Paul Stromme is a student pursuing his joint MA (Hons) degree in Economics and International Relations at the University of St Andrews, he is a former Royal Norwegian Navy Conscript and current BAP contributor.