In a move that likely was welcomed by Federal contractors, earlier this month, the House of Representatives passed a joint resolution under the Congressional Review Act (CRA) disapproving the Fair Pay and Safe Workplaces Final Rule (the Rule) that unless overturned will, among other things, institute new disclosure requirements and standards for reporting labor law violations. The Rule has been particularly controversial from the start – earning the title of the “blacklisting” rule – as it had the potential to prevent Federal contractors from receiving government contracts based on allegations of labor law violations that had not been finally resolved. The Senate is considering a similar resolution to invalidate the Rule, though there are certain procedural hurdles that may prevent it from passing its version of the joint resolution. Importantly, if the joint resolution passes the Senate and is signed into law, it will not only invalidate the previous Rule, but it will inhibit agencies from reissuing rules that are “substantially the same form” in the future. Continue Reading
The future of the Border Adjustment Tax (BAT) proposal, a critical element of the House Republican tax reform plan, is in doubt after signs of Republican opposition in the Senate emerged last week. Senator David Perdue (R-GA) became the most prominent Republican to overtly criticize the BAT, expressed in a Dear Colleague letter to his fellow Senators. Under the “Better Way” tax reform proposal advanced by House Speaker Paul Ryan and Ways & Means Committee Chairman Kevin Brady , US business taxpayers would pay no tax on exports, and would not be able to deduct imports (ie the “Border Adjustment Tax”). This “destination-based cash flow tax” is designed to tax consumption in the US, and remove tax-motivated incentives for businesses to locate outside the US. The BAT would also provide significant revenue to the Treasury, allowing Congress to in turn lower corporate and individual tax rates.
In the letter to his colleagues, Sen. Perdue criticized the BAT as a “bad idea” on the grounds that it is “regressive, hammers consumers, and shuts down economic growth.” He argues that, as a result of U.S. imports being taxed, the “clear effect of the proposed border adjustment tax is an increase in consumer prices,” which would “hammer consumer confidence and lower overall demand, thus putting a downward pressure on jobs.” Sen. Perdue noted that proponents of the BAT believe that currency revaluation would strengthen the purchasing power of the dollar, thereby offsetting its burdens on taxpayers. However, he contends that a currency revaluation would “trigger a multi-trillion dollar reduction in the value of foreign investments held by U.S. investors including many pension funds and retirees,” having a massively negative impact on the retirements savings of seniors.
Sen. Perdue’s criticism of the BAT concept may mark a turning point in the debate. Although Speaker Ryan and Chairman Brady remain deeply committed to the BAT—possibly bringing with them enough votes to pass the concept through the House—the concept appears far less popular among Senate Republicans. For example, Sen. Orrin Hatch, the Chairman of the Finance Committee, has already raised questions about the wisdom of the BAT, such as whether it is consistent with America’s international trade obligations. Sen. Perdue’s renunciation of the BAT may cause a ripple effect among other Republicans, who have been hearing from major business interests who are opposed.
Meanwhile, President Trump – who has indicated plans to release his own detailed tax plan in the coming weeks — has also expressed skepticism about the BAT, which some have advanced as an alternative method of carrying out Trump’s stated preference for imposing tariffs on imports from foreign countries like Mexico and China. It remains to be seen whether more Republicans will express opposition to the BAT. If the BAT does not survive, we expect to see Republicans look for other offsets to pay for tax reform and other options to encourage businesses to locate their operations in the US.
On February 9, 2017, the U.S. Court of Appeals for the Ninth Circuit issued an order denying the Federal Government’s emergency motion for a stay of the district court order temporarily pausing enforcement of the travel restrictions imposed by Executive Order 13769, “Protecting the Nation from Foreign Terrorist Entry into the United States.” As we reported in our January 30 and February 6 alerts, this Executive Order (1) blocks the entry to the U.S. of aliens from seven countries (Iran, Iraq, Libya, Somalia, Sudan, Syria, and Yemen) for 90 days, (2) suspends the United States Refugee Admissions Program for 120 days, and (3) halts indefinitely the entry of all Syrian refugees. Given the Ninth Circuit’s decision, enforcement of the Order is suspended while litigation continues.
Yesterday’s ruling was unconventional in that oral arguments were held over the phone only two days before. These arguments attracted an exceptionally large live audience via cable news networks and websites like YouTube. The YouTube livestream alone received over 135,000 listeners as Judges Richard R. Clifton, William Canby, and Michelle T. Friedland heard oral arguments by August Flentje, Special Counsel to the U.S. Attorney General, and Noah Purcell, Washington State’s Solicitor General.
A change in government policy can sometimes have a profoundly adverse effect on businesses, particularly if that change is unexpected or sudden. Businesses, particularly those in highly regulated sectors, often rely on “clear assurances” from Government in relation to its policy objectives and areas of focus (and funding) as a basis for operating or investing in a particular sector.
There is a manifest public interest in Government, as the custodian of the public purse, being allowed to change its mind and not being bound to fulfil every policy statement it makes. However, reasonably relying on a clear statement from Government can, in certain circumstances, give rise to a legitimate expectation on the part of citizens and businesses that Government will stay true to its word.
So when is it safe for businesses to rely on statements of government policy when making investment decisions? Two recent judgments of the Court of Appeal, in the context of recent changes to the Government’s renewable energy policy and the subsequent impact on businesses in the renewable energy sector, should act as a warning for businesses whose operations may be exposed to unexpected shifts in Government policy.
Solar Century Holdings Ltd v Secretary of State for Energy and Climate Change  EWCA Civ 117
In 2013, the Government proposed to replace its renewables obligation scheme (the “RO Scheme“), through which the Government provided financial support for large scale renewable electricity generation projects, with a new scheme based on contracts for difference. As part of this transition and to minimise the risk of disruption for developers, the Government’s proposal was to close the old RO Scheme to new capacity on 31 March 2017.
Following the Government’s announcement, there was a higher than expected rate of uptake of solar photovoltaics (“PV“) generation under the RO Scheme. Concerns that the higher uptake would cause the financial cap on government support for the RO Scheme to be exceeded led the Government to decide to close the RO Scheme two years earlier than planned, on 1 April 2015. This decision was given effect by a renewables obligation closure order issued by the Secretary of State pursuant a statutory power granted under the Energy Act 2013.
The Government’s decision was challenged in the High Court by certain companies involved in the installation of so-called large-scale PV systems (also known as “solar farms”). The claim reached the Court of Appeal when the companies appealed against the High Court’s dismissal of their application for judicial review.
The solar farm companies argued that the decision was contrary to their legitimate expectation arising from the Government’s “clear and unequivocal representations” that the RO Scheme would not close before 2017. As such, the companies argued that the statutory power to issue a renewables obligation closure order could only be exercised in accordance with the binding pre-legislative statements about the 2017 closure date.
The Court of Appeal concluded that there was no legitimate expectation that the RO Scheme would remain open until 2017. The Government’s statements were merely statements of policy: they did not say that there would be no circumstances in which the RO Scheme would be closed earlier, only that closure was planned for March 2017.
Even where an end date was given, the Court said that “there can be no immutable presumption on that ground alone that the policy will continue without change until that date, whatever changes in circumstances may arise“. The Court stated that this was because Government is “entitled to formulate and re-formulate policy when rational grounds exist for doing so, unless to do so would amount to an abuse of power by reason of the manner in which it has previously conducted itself“.
The companies argued that the operation of the RO Scheme was also subject to a clear proviso that the Government would keep its promises it had made in relation to maintaining support for existing investments until 2017.
The Court rejected the companies’ reliance on witness statements made in the course of proceedings as evidence of the Government’s intention because they “would not be available even to the best informed of readers“. Instead, the Court focussed on what the Government had said publicly about maintaining support levels, in consultation and other policy documents.
The Court concluded that, while the companies were correct to say that ensuring a stable investment environment was an important aspect of the policy, this was not the only objective and that “it must have been apparent to all concerned that, if uptake of solar PV threatened [the financial cap], the Government might, and probably would, bring forward the closure date“.
Ultimately, given that the case concerned the apportionment of public funds to a range of deserving renewable energy technologies via the Government’s various financial schemes, the Court questioned the realism of the companies’ expectations, stating that there would inevitably be compromises involved and that “solar PV operators could not possibly entertain a secure expectation that their particular scheme would be protected at the expense of others“.
Infinis Energy Holdings Ltd v HM Treasury  EWCA Civ 1036
In the July 2015 Budget, the Government announced its decision to remove an exemption from the Climate Change Levy, a tax on energy supplied to non-domestic consumers, for renewable-source electricity (the “RSE Exemption“). The removal of the RSE Exemption took effect from 1 August 2015, giving businesses only 24 days’ notice of the change in policy.
The Government’s decision was challenged by two renewable energy generating companies in September 2015. The RSE Exemption was an important source of income for renewable energy generators, so the companies argued that the Government’s decision gave them an unreasonably short notice period of the RES Exemption removal, which had been completely unexpected. They claimed that they had a legitimate expectation that any removal of the RSE Exemption was subject to a minimum two-year lead time. They also claimed that, given the significant adverse impact of the removal of the RSE Exemption on renewable energy generators and that the policy was within the scope of EU law, the decision was also in breach of the EU law principle of proportionality and contrary to rights under the Article 1 of Protocol 1 of the European Convention of Human Rights (the “ECHR“) to the peaceful enjoyment of their possessions (“A1P1“).
The High Court dismissed the case and Infinis appealed to the Court of Appeal.
Counsel for Infinis argued that the very existence of the relevant legislation providing for the RSE Exemption, especially as it had been maintained for many years, had led businesses to expect that reasonable notice would be given before the RSE Exemption was removed. They argued that the Government must have expected renewable energy generators to plan their business and make investment decisions based on the expectation that the RSE Exemption would continue and that this was enough to bring the claim within the scope of the principles of legal certainty and foreseeability. However, at the outset, the Court of Appeal instead agreed with the Government that there was a clear and consistent line of EU law that, in order to give rise to a legitimate expectation enforceable in the courts in the context of a change to the national tax code, the public authority must give a “precise, unconditional and unambiguous assurance, whether by words or conduct, of an expectation as to how it will behave in future“. This approach also applied to the related EU law principles of legal certainty and foreseeability, as the various principles must be interpreted in a coherent manner.
Infinis also tried to argue that the applicable test differed depending on whether the decision concerned an administrative act or a change in a rule of law. The Court rejected this distinction – a uniform set of rules applied regardless of whether acts fell into the administrative sphere or the legislative sphere.
In the present case, the Court of Appeal held that the Government had made no promise or assurance that the RSE Exemption would be maintained indefinitely, nor that it would be subject a period of notice before being removed. In the absence of a clear, precise and unconditional assurance given to the contrary, it was always inherently foreseeable that there was a possibility of immediate withdrawal, not least because the Government and Parliament had a general discretion to alter the tax regime as they saw fit. The Court went further, stating that:
In the context of establishing and changing the rules of a national tax regime, a prudent and circumspect economic operator would appreciate that the tax authorities and national legislature might change the tax code without notice. They are entitled to do so, as it is their function in a democratic society to manage the public finances….
Proportionality and A1P1
It was common ground that, even though the precise approach of the Court to the issue of proportionality may not be identical in the context of EU law and the ECHR, for present purposes if Infinis failed under one it could not succeed under the other.
Infinis argued that the Government’s decision to remove the RSE Exemption detrimentally affected the commercial viability of Infinis’ contracts to supply electricity to customers and was therefore an interference with its protected interests under Article 17 of the EU Charter of Fundamental Rights and its right to peaceful enjoyment of its possessions under A1P1. As such, Infinis argued, any interference must be proportionate means to achieving a legitimate aim. Infinis did not dispute that the Government could lawfully decide to remove the RSE Exemption, but challenged the method for implementing that decision, because it was done with almost no notice.
The Court quickly established that the decision to remove the RSE Exemption was pursuant to a legitimate objective, namely the appropriate apportionment of public revenue. It then went on to consider the implementation of the decision.
According to Infinis, the Government should have given a minimum of one fiscal year’s notice before withdrawing the RSE Exemption, which amounted to a delay of 20 months. However, as the Court stated, any delay in withdrawal of the RSE Exemption would have represented loss of revenue that the Government and Parliament considered was urgently required. Therefore, in the Court of Appeal’s view, Infinis was inviting the Court, by invocation of the principle of proportionality, to alter a fiscal measure by Parliament, which required weighing up a number of macro-economic considerations that it was primarily for the Government and Parliament to undertake.
The Court concluded that it “should be very slow to second guess the decision of Parliament in relation to such an assessment“, as there was “no simple, objective standard which the court can apply” to conclude that the withdrawal of the RSE Exemption was disproportionate to achieve the multiple policy objectives that Parliament and the Government sought to promote by doing so. The Court went on to note a number of other factors that suggested the withdrawal was proportionate, including that:
(a) the withdrawal left a large and valuable series of other financial incentives for the production of renewable energy;
(b) although the withdrawal was practically immediate, it was only prospective, in the sense that exemption certificates (which were capable of being sold commercially by renewable energy generators under the scheme) already generated remained valid after the RSE Exemption was withdrawn; and
(c) the evidence suggested that the impact to renewable energy generators had been specifically considered and that it was decided that it was outweighed by other considerations.
In the end, the Court took a dim view of the fact that Infinis’ evidence suggested that the loss of income that resulted from the withdrawal, although substantial, could not, and would not, have been avoided if Infinis had been given notice in the way it claimed was necessary. In light of this, the Court concluded that there was no real detrimental reliance by Infinis on any expectation that there would be a notice period of around two years before withdrawal of the RSE Exemption.
In other words, Infinis was in fact challenging the decision to withdraw the RSE Exemption itself, which had resulted in a sudden, substantial and unexpected increase in its tax liability, not the method of implementation of that decision. The Court was very clear that challenging such a decision on proportionality grounds before the courts was effectively a “no-hoper”, because it amounted to a challenge to the merits of the policy itself, in respect of which Parliament, as the democratically elected legislative body for the UK, had a wide margin of discretion:
In the context of proportionality, and in the absence of any legitimate expectation, however, a reduced income of this kind has little, if any, weight when set against the public interest as judged by Parliament. A mere change of income for individuals or companies because of a change in tax regime cannot be regarded as something which indicates disproportionality in a tax measure adopted by a state.
In September 2016, the European Commission granted a 30% fine discount to Altstoff Recycling Austria for cooperating with an investigation into its alleged abuse of a dominant position in the Austria waste management market (see our previous post here).
The discount was granted on the basis of Paragraph 37 of the 2006 Fining guidelines, which allows for a departure from the general fining methodology due to “the particularities of a given case”. It may seem unusual that this paragraph, which also suggests increasing a fine for deterrence effect, would be used in this way, as the Commission’s regular practice to settle abuse of dominance cases is by accepting commitments pursuant to Article 9 Regulation 1/2003. That provision allows companies to offer commitments that are intended to address the competition concerns identified by the Commission. If the Commission accepts these commitments it adopts a commitment decision making them binding on the parties without establishing an infringement.
Recently, at the 12th Annual Global Competition Law Center conference in Brussels, Kris Dekeyser, Director of Policy and Strategy at the Commission’s competition department, indicated that the Commission could grant discounts of greater than 30% in certain circumstances and in particular, if the firms cooperate early, acknowledge liability and suggest possible solutions or remedies. Dekeyser noted that ARA’s cooperation came “relatively late” in the investigation and that “fuller cooperation” could justify larger discounts.
These recent statements are a clear indication that the Commission intends to make use of this new form of cooperation “bonus scheme” more regularly. While it appears that the Commission wants to gain experience with the practice before issuing more formal guidance, it has at least opened the door to discounts of greater than 30% in certain circumstances. Nevertheless, it remains to be seen whether companies under investigation for alleged abuses under Article 102 TFEU will ultimately agree to acknowledge liability in exchange for this financial incentive.
As we have mentioned in a previous article, the 21st Century Cures Act (enacted December 13, 2016) gave companies 60 calendar days to make their expanded access policies for certain investigational drugs publicly available. That deadline—Saturday, February 11, 2017—arrives in a matter of days.
On 27 December 2016, the Belgian Law of 18 December 2016 concerning various health-related matters (“the Sunshine Act “) was adopted by the Belgian Ministry for Public Health. The Sunshine Act introduces several substantial changes to the current Belgian legal and regulatory framework for medicinal products and medical devices.
The Sunshine Act imposes a new transparency obligation on the pharmaceutical and medical devices industries. The Sunshine Act provides that medical device and pharmaceutical companies must provide the Federal Agency for Medicines and Health Products (“FAMHP”) with information concerning all pecuniary advantages or benefits in kind granted, directly or indirectly from Belgium or elsewhere, to a number of defined beneficiaries. These include healthcare professionals or healthcare professional organisations established in Belgium.
Obligation to disclose benefits to the FAMHP
The transparency obligation laid down in the Sunshine Act applies to all entities engaged in an economic activity, regardless of their legal status and the way in which they are financed. The obligation applies:
- to marketing authorisation holders for medicinal products for human or veterinary use;
- to importers, manufacturers and distributors of medicinal products for human or veterinary use;
- to persons or entities trading or brokering medicinal products for human or veterinary use;
- to distributors, retailers and manufacturers of medical devices.
As regards beneficiaries, the transparency obligation laid down in the Sunshine Act covers benefits provided to all healthcare professionals (“HCPs”), healthcare organisations (“HCOs”) and patient associations having their principal activity or registered seat in Belgium. In practice, this includes wholesalers, brokers, persons qualified to prescribe, issue or administer medicinal products, institutions involved in prescribing, dispensing or administering medicinal products and all patient associations which have their principal activity or registered seat in Belgium.
The Sunshine Act provides that any transfer of value in money or in kind must be notified to the FAMHP. The Law also lists a number of exceptions to this transparency requirement:
- meals and drinks offered in the context of scientific events that are of an exclusively scientific nature, provided that:
- the provision of meals and drinks is in connection to the scientific event;
- the location, date and length of the scientific event do not create confusion as regards the scientific nature of the event;
- the provision of meals and drinks is strictly limited to the official length of the event;
- the provision of meals and drinks is limited to HCPs and HCOs.
- advantages and benefits of negligible value that relate to the exercise of the medical, dental or pharmaceutical profession or that relate to veterinary medicinal products;
- the economic margins and price discounts which are part of usual purchase and sales transactions for medicinal products and medical devices conducted by a company subject to the notification obligation or between such a company and beneficiaries;
- free samples.
Content of the notification to the FAMHP
The Sunshine Act provides that the notification to the FAMHP must include the following elements:
- the business name and company VAT number of the pharmaceutical or medical device company;
- the name and VAT number or RIZIV number of the beneficiaries;
- the total sum of the benefits provided throughout the relevant reporting period.
It is expected that Mdeon will be appointed by the authorities in the course of 2017 to perform the functions and tasks relating to the new disclosure obligation on behalf of the FAMHP. Mdeon is an ethical platform made up of associations of physicians, pharmacists, veterinarians, dentists, nurses, and of the pharmaceutical and medical devices industry. The role of Mdeon is to assess whether the hospitality and sponsorship offered by pharmaceutical and medical device companies to Belgian HCPs at scientific and educational events is acceptable on the basis of Article 10 of the Sunshine Act on medicinal products.
In light of the above, companies will be required to submit to Mdeon information concerning transfers of value granted to Belgian HCPs, HCOs and patient organisations. A report of all transfers of value provided by a company to individual HCPs or HCOs must be submitted to the Mdeon on an annual basis, at the latest on 31 May of the year following that of the relevant reporting period. The Sunshine Act specifies that where transfers of value in money or in kind are provided to a HCP or a HCO for work which falls within the category of clinical or non-clinical research and development, the transfers of value must exceptionally be disclosed as an aggregated sum.
Publication of disclosed information
The Sunshine Act provides that transfers of value will be made public on a Belgian transparency website accessible by the public. It is understood that publication of transfer of value will be made on Mdeon’s BeTransparent.be website. Publication will occur in French, Dutch and German.
This publication will occur at the latest on 30 June of the year following that of the relevant reporting period.
Entry into force of the disclosure obligation
Before the law can enter into force, several implementing Decrees must be published. Two Royal Decrees are reported in preparation, for adoption in late March 2017. One Royal Decree will specify:
- the types of transfers of value that are subject to the disclosure obligation;
- the practical and technical arrangements for both the notification and publication of transfers of value;
- the date of entry into force of the Sunshine Act.
The second Royal Decree is expected to appoint Mdeon, as an accredited organisation, to perform the functions and tasks relating to the new disclosure obligation on behalf of the FAMHP.
The date of adoption of the above Royal Decrees will determine the date of entry into force of the Sunshine Act. It has been reported that the Sunshine Act will enter into force at the latest in April 2017. It has also been reported that the disclosure obligation will apply to transfers of value granted to Belgian HCPs, HCOs and patient organisations in the course of 2017.
In light of the above, the first reference period prior to disclosure is likely to be from 1 January 2017 to 31 December 2017, with the first related publication required by 31 May 2018 at the latest.
Consequences for medical devices and pharmaceutical companies
The new disclosure obligation will have several practical consequences for pharmaceutical and medical device companies.
- All pharmaceutical and medical device companies are now subject to the disclosure requirements: Pharmaceutical companies that are members of pharma.be, the General Association for the Pharmaceutical Industry, are already required to collect and disclose information, including personal data, concerning transfers of value granted to Belgian HCPs, HCOs and patient organisations. Disclosure is based on the consent of the beneficiaries. Similarly, medical devices companies that are members of beMedtech.be, the Association for the Medical Technology Industry, and members of FeBelGen, the Association that represents companies that market generic medicinal products and biosimilars, must collect and disclose this information. Again disclosure is based on the consent of the beneficiaries. From the date of application of the Sunshine Act, however, all pharmaceutical and medical device companies, whether or not member of the above organisations, would be subject to the disclosure requirements.
- Informed consent from healthcare professionals for disclosure is no longer required: In accordance with the transparency rules established by pharma.be, BeMedtech.be and FeBelGen, member companies of these organisations must comply with data protection requirements related to the collection, processing and disclosure of transfers of value. As a result, HCPs can refuse to have their personal data publically disclosed on the website betransparent.be. As a result of the new Sunshine Act, companies would no longer be required to seek the informed consent of HCPs before disclosing information concerning transfer of value. HCPs would also no longer be able to refuse the publication of their personal data. In accordance with the EU Data Protection Directive and the related national Belgian implementing provisions, processing of personal data without the need for additional safeguards such as an informed consent is permitted where such processing activities is necessary for compliance with a legal obligation. In light of the fact that the Sunshine Act now imposes a legal obligation of collection, processing and disclosure of personal data concerning transfers of value, this data may be collected without the related informed consent of HCPS. From the date of entry into force of the Sunshine Act, companies will no longer be required to seek the consent of the concerned HCPs, HCOs and patient organisations for the collection and disclosure information concerning the transfers of value granted to them.
- Collection of information is required now: The Sunshine Act imposes on companies an obligation to trace and report transfers of value provided to HCPs, HCOs and patient organisations established in Belgium. This disclosure obligation already applies to all transfers of value provided from 1 January 2017 to 31 December 2017. Related notification of these transfers of value, anticipated to be to Mdeon, must be made by 31 May 2018 at the latest. A record of the information submitted for notification and all relevant supporting documents must be kept by companies for a period of ten (10) years from the date of publication.
The Sunshine Act provides that non-compliance with the disclosure obligation will be punished by fines ranging from €1,200 to €90,000.
On February 7, 2017, the Food and Drug Administration (FDA) delayed implementation of its January 9, 2017, final rule addressing the regulation of tobacco products as drugs, devices, or combination products. That rule, which also amended the intended use regulations for drugs and devices, was to go into effect today, February 8, 2017; however, implementation has been delayed until March 21, 2017, pursuant to a January 20, 2017 memorandum from the Assistant to the President and Chief of Staff, Reince Priebus. The January 20 memorandum, entitled “Regulatory Freeze Pending Review” (82 FR 8346), directed the heads of Executive Departments and Agencies to temporarily postpone the effective dates of all regulations that had been published but had not yet taken effect in order to allow for review of the “questions of fact, law, and policy” raised by these regulations.
As noted in our prior alert, the final rule amends the last sentence of 21 C.F.R. § 801.4 (for devices) and 21 C.F.R. § 201.128 (for drugs) to clarify that a manufacturer’s knowledge, alone, that its legally marketed product is prescribed or used by physicians for an uncleared/unapproved use is not proof in and of itself that the manufacturer intends such use, nor is it sufficient to trigger the obligation to provide adequate labeling for that unapproved use. The amended language clarifies that a new intended use is created only if the totality of the evidence shows that the manufacturer objectively intends for a drug/device to be used for uncleared/unapproved conditions or purposes. In other words, the amended language clarifies that knowledge alone is not enough, but at the same time, preserves the ability of FDA to rely on knowledge of unapproved uses as part of an assessment of the totality of evidence.
On January 18, 2017, as one of the last actions of the outgoing Obama administration, the U.S. Department of Health and Human Services (HHS) and fifteen other federal agencies (the “Agencies”) issued a final rule overhauling the regulations (82 Fed. Reg. 7149, Jan. 19, 2017) intended to safeguard individuals participating in research, often referred to as the “Common Rule.” The rule aims to enhance protections to participants and to modernize the oversight system. This rule has been a long time coming, as the current regulations have been in place since 1991, an advance notice of proposed rulemaking (ANPRM) issued in July 2011, and a notice of proposed rulemaking (NPRM) issued in September 2015. We have written about changes to the Common Rule in previous client alerts (here) and (here).
The Common Rule applies to all human subjects research that is funded, conducted, or supported by the Agencies. Notably, FDA has its own set of human subject protections. The final rule attempts to harmonize guidance by requiring consultation among the Agencies before issuing guidance on the Common Rule, unless such consultation is not feasible. To this end, the 21st Century Cures Act approved by Congress in December 2016, requires harmonizing human subject research protections and informed consent requirements across the Agencies, so that FDA’s human subject regulations are more in line with those issued by HHS.
Over the past two decades, the volume and landscape of human subjects research has changed significantly, including 1) expansion in the number and types of clinical trials, observational studies, and cohort studies, 2) diversification of the types of social and behavioral studies used in research, 3) increased use of sophisticated analytic techniques to study human biospecimens, and 4) growing use of electronic health data and other digital records. These and other developments prompted the Agencies to modernize and strengthen the Common Rule.
Researchers, patient advocates, scientists, and investigators submitted more than 2,100 public comments in response to the NPRM, and many of them raised strong objection to several controversial policies, asserting unnecessary regulatory burdens on research institutions and sponsors. These included, among others, objections to the cumbersome informed consent requirements and new rules for research using biospecimens. The final rule includes several new requirements for conducting human subject research, but differs significantly from what was first proposed, based on the groundswell of public feedback. Important distinctions from the NPRM and the critical changes to the Common Rule are discussed below.
These new regulations are scheduled to become effective on January 19, 2018, except for the single-IRB review requirement, which will take effect on January 20, 2020. While it is critical for stakeholders to plan for implementation well before the effective date, at the same time current laws and legislation that recently passed the House (i.e., the Congressional Review Act, the Midnight Rules Act, and the Regulations from the Executive in Need of Scrutiny (REINS) Act) could affect implementation depending on the policies and priorities of the new Presidential Administration. That said, the final rule does not appear to be impacted by any Executive Orders or policy statements issued from the Administration to date relating to the effectiveness of recent regulatory action. It is essential for stakeholders to stay tuned. Continue Reading
On Friday, February 3, the U.S. Nuclear Regulatory Commission (NRC) published in the Federal Register draft “Guidance for Developing Principal Design Criteria for Non-Light Water Reactors.” This draft new regulatory guide (identified as DG-1330) helps explain how the NRC’s “general design criteria” for traditional light-water nuclear power plants could be applied to non-light water (a.k.a. “advanced”) nuclear reactor design submissions, enabling applicants to develop principal design criteria as part of their regulatory filings. Comments are due on the guidance by April 4, 2017.
The draft regulatory guide is a significant publication of over a 100 pages. It provides a background of the NRC’s policy on advanced nuclear reactors, the role of general design criteria in reactor licensing, and joint NRC-U.S. Department of Energy (DOE) efforts to tailor the agency’s general design criteria to advanced reactors. The general design criteria for traditional nuclear power plants are found at Appendix A to 10 C.F.R. Part 50, the chapter of the Code of Federal Regulations that contains the NRC’s primary regulations on nuclear power plant design.
But most interesting are the three appendices, which propose (A) technology-neutral design criteria for advanced reactors generally, (B) technology-specific design criteria for sodium-cooled fast reactors (SFRs), and (C) technology-specific design criteria for modular high temperature gas-cooled reactors (mHTGRs). The appendices contain not only the design criteria, but the “NRC Rationale” explaining why/how they were adapted from the general design criteria. In addition, pages 13 to 20 of the draft guide compare the three design criteria to the current set tailored to light-water reactors.
This is an important document that deserves close attention by the advanced reactor community. It provides one of the first detailed insights into how the NRC views advanced reactors, how far it is willing to step away from the general design criteria framework, and what it finds of importance from a safety perspective for advanced reactors.
Notably, the basic approach taken by the NRC appears to mimic what the DOE suggested in its 2014 report, “Guidance for Developing Principal Design Criteria for Advanced (Non-Light Water) Reactors.” There, the DOE likewise “proposed a set of advanced reactor design criteria” to serve in lieu of the general design criteria, but also proposed separate design criteria for SFRs and mHTGRs. As explained by the NRC here, the DOE’s rationale was “that the safety objectives for some of the current [general design criteria] did not address design features specific to SFR and mHTGR technologies (e.g., sodium or helium coolant, passive heat removal systems, etc.). Additional design criteria were developed to address unique features of those designs.”
It should be mentioned that this guide is just that—guidance. As made clear in the draft guide, the proposed design criteria “are intended to provide stakeholders with insight into the staff’s views on how the [general design criteria] could be interpreted to address non-LWR design features,” but they are not binding. It is still on the applicant to develop principal design criteria for her application, “considering public safety matters and fundamental concepts, such as defense in depth, in the design of their specific facility and for identifying and satisfying necessary safety requirements.”
Moreover, the regulatory framework for advanced reactors is still in flux. As noted in a prior blog entry, this January legislation was introduced in Congress “to spur technology development related to advanced reactors.” Recently, on January 23, separate legislation “to provide regulatory certainty for the development of advanced nuclear energy technologies” passed the House of Representatives. This latter bill, entitled the “Advanced Nuclear Technology Development Act of 2017” is related to a prior bill that passed the House of Representatives in 2016, and was examined by our team here.
The advanced reactor industry is certainly picking up steam. Terrestrial Energy earlier this month informed the NRC that it plans to file a license application for its molten salt reactor in 2019. LeadCold around the same time announced a $200 million deal to develop its lead-cooled reactor. We hope the NRC’s actions here evidence continued support for the advanced reactor community, and a willingness to recognize the unique safety and security benefits these new designs bring.
Please feel free to contact the authors with any questions.