Top Legal Considerations for the GCs and CFOs in the Life Sciences Industry in 2024

1. Drug Price Negotiations

The implementation of the Medicare Drug Price Negotiation Program under the Inflation Reduction Act (IRA) is a significant legal trend for the healthcare and life sciences industry in 2024. This program is designed to lower drug prices by allowing the government to negotiate prices with drug manufacturers. Specifically, the IRA allows for the Centers for Medicare and Medicaid Services (CMS) to directly negotiate reimbursement to be paid for a subset of drugs covered by Medicare Part D plans. Its implementation has led to legal challenges and debates about the role of government in setting drug prices, with at least eight cases filed by manufacturers and industry groups in multiple federal courts across the country challenging the negotiation provisions of the IRA as unconstitutional.

2. Lawsuits Impacting the Healthcare Industry

Legal observers are closely monitoring lawsuits surrounding Xavier Becerra, secretary of the US Department of Health and Human Services (HHS), many of which threaten key aspects of the Affordable Care Act. These cases could have massive ramifications on the healthcare industry and set new precedents. The outcome of these lawsuits could impact the accessibility and affordability of healthcare for millions of Americans.

3. Regulatory Changes and Intellectual Property Protection

Regulatory changes, intellectual property protection, and out-of-pocket costs for consumers are also anticipated to significantly impact life sciences companies in 2024. Medical device companies must maneuver through the regulatory environment on the state and federal levels, as well as the international marketplace, and work closely with regulators and industry leaders to ensure compliance. In addition, companies must continue to protect their intellectual property rights to maintain their competitive edge and profitability.

4. Legal Considerations for Startups

For life science and healthcare startups, important legal considerations include intellectual property protection, regulatory compliance, data privacy, and long-term legal strategy. Startups must also consider potential legal issues related to funding, partnerships, and business operations.

5. Digital Transformation and AI Impact

Digital transformation, including the adoption of digital tools and generative artificial intelligence (GenAI), is expected to have a substantial impact on the life sciences industry, particularly in areas such as drug development and healthcare delivery. Companies must traverse the legal and regulatory implications of these technologies, including issues related to data privacy, security, and intellectual property. Notably, a Bipartisan Framework was introduced in September 2023, establishing five key recommendations for regulating artificial intelligence (AI) models. The Biden Administration additionally issued an Executive Order in October 2023, which addressed the use of AI in healthcare and the safety and integrity of data stored and generated by AI healthcare systems. Among other things, the Executive Order directed HHS to establish an AI Task Force to develop a strategic plan that includes policies and frameworks on responsible deployment and use of AI and AI-enabled technologies in the health and human services sector, including research and discovery, drug and device safety, healthcare delivery and financing, and public health.

6. Technology Integration and Innovation

The use of AI in life sciences has led to a boom in AI-related patent applications, and the legal and regulatory landscape is evolving to keep pace with these developments. The rapid integration of AI technology and 3D printing into medical devices presents both opportunities and challenges for manufacturers. This includes the complexity of product development and the need to adapt manufacturing processes to technological advancements.

7. Market Growth and Diversification

While the medical device industry is expected to experience significant growth, manufacturers may face challenges in diversifying their product offerings to meet the growing demand in areas such as digital therapeutics, at-home diagnostics, and biometric devices. Among other new developments, the US Food and Drug Administration (FDA) issued a proposed rule in October 2023 which, if finalized, would drastically change how laboratory developed tests — or “home brews” — are regulated. Companies must handle the legal and regulatory implications of these new product areas.

8. Data Privacy and Security

With the increasing use of digital technologies in the life sciences industry, issues related to data privacy and security are becoming more prominent. Companies must address the laws and regulations related to the collection, use, and protection of personal and health information. This includes complying with laws such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

9. Product Liability

Life sciences companies face potential legal issues related to product liability, including lawsuits related to adverse events, product recalls, and more. Companies must have robust risk management strategies in place to mitigate these risks and comply with legal and regulatory requirements.

10. Chevron Deference in Question

Chevron deference refers to the legal principle established in Chevron, USA., Inc. v. Nat. Res. Def. Council, Inc., 467 US 837 (1984), in which the US Supreme Court found that courts should defer to an agency’s reasonable interpretation of an ambiguous statute. In January 2024, the Supreme Court heard oral arguments in two cases that will require the Court to revisit Chevron deference and determine whether it should be upheld. The outcome of these cases may significantly alter the deference agency decisions are afforded, resulting in tremendous uncertainty for future legal challenges brought involving heavily regulated sectors, such as the life sciences industry.