Overview
This issue of McDermott’s Healthcare Regulatory Check-Up highlights regulatory activity for May 2025, including the rollout of a new Centers for Medicare & Medicaid Services (CMS) strategy to expand and enhance Medicare Advantage (MA) audits. We discuss several enforcement actions focusing on allegations under the Anti-Kickback Statute (AKS), the Stark Law, the False Claims Act (FCA), and other fraud and abuse laws, including allegations related to the submission of fraudulent claims to Medicare for reimbursement of over-the-counter COVID-19 test kits and billing federal healthcare programs for medically unnecessary services. This issue also discusses developments related to the One Big Beautiful Bill Act, the Make America Healthy Again Commission, and a jointly issued request for information on how to improve prescription drug price transparency.
Read below an overview of this month’s regulatory and enforcement activity roundup. For a deeper dive, subscribe to the newsletter to get our detailed analysis of all updates.
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Notable Enforcement Resolutions and Activities
PHARMA COMPANY SETTLES ANTITRUST CLASS ACTION FOR $50 MILLION
A pharmaceutical company agreed to pay $50 million to settle a class action lawsuit accusing the company of scheming with another drug manufacturer to delay the release of a generic version of a narcolepsy drug, causing health plans to pay higher prices, in violation of US antitrust law.
$3.6 MILLION SETTLEMENT RESOLVES FENTANYL FALSE CLAIMS ALLEGATIONS
A pharmaceutical company agreed to pay $3.6 million to resolve claims that it violated the FCA by causing the submission of false claims for a transmucosal immediate-release fentanyl (TIRF) drug for individuals who did not have breakthrough cancer pain.
TWO CHARGED IN $227 MILLION MEDICARE FRAUD SCHEME RELATED TO COVID-19 TEST KITS
An Illinois man and a foreign national were arrested on criminal charges related to their alleged submission of more than $227 million in fraudulent claims to Medicare.
HEALTH SYSTEM RESOLVES ALLEGATIONS OF STARK LAW VIOLATIONS FOR MORE THAN $3 MILLION
A health system agreed to pay $3.29 million to resolve allegations that it knowingly submitted or caused to be submitted false claims to Medicare that were the result of Stark Law violations.
THIRD CIRCUIT REJECTS CHALLENGE TO DRUG PRICE NEGOTIATION PROGRAM
On May 8, 2025, the US Court of Appeals for the Third Circuit ruled against a pharmaceutical company’s challenge to the Drug Price Negotiation Program.
JUDGE DISMISSES SUIT ON GROUNDS THAT FCA QUI TAM PROVISIONS ARE UNCONSTITUTIONAL
On May 29, 2025, Judge Kathryn Kimball Mizelle of the District Court for the Middle District of Florida dismissed an un-intervened FCA qui tam lawsuit against a construction company and an insurance company, holding that the FCA’s qui tam provisions are unconstitutional because they violate the Appointments Clause under Article II of the US Constitution.
MAGISTRATE JUDGE HOLDS THAT FCA QUI TAM PROVISIONS ARE CONSTITUTIONAL
A magistrate judge in the District Court for the Western District of New York rejected an FCA defendant’s challenge to the FCA’s whistleblower provisions as unconstitutional.
COURT ALLOWS FCA QUI TAM SUIT AGAINST EMERGENCY MEDICAL SERVICES CONTRACTOR TO PROCEED
The District Court for the Northern District of California denied an FCA defendant’s motion to dismiss for failure to state a claim and rejected its argument that the FCA’s qui tam provisions are unconstitutional.
CMS Regulatory Updates
CMS ROLLS OUT AGGRESSIVE STRATEGY TO ENHANCE, ACCELERATE MA AUDITS
On May 21, 2025, CMS announced that it will expand its auditing of MA plans by auditing all eligible MA contracts for each payment year and by investing additional resources to expedite the completion of audits for payment years 2018 through 2024.
CMS RELEASES DRAFT GUIDANCE FOR THIRD CYCLE OF MEDICARE DRUG PRICE NEGOTIATION
On May 12, 2025, CMS released draft guidance for public comment regarding the third cycle of negotiations under the Medicare Drug Price Negotiation Program.
Other Notable Developments
HHS SUED OVER REMOVAL OF HEALTH DATA
Nine organizations representing physicians, nurses, medical researchers, hospitals, and public health practitioners sued HHS, alleging that it violated the APA by illegally purging websites containing critical public health information related to transgender individuals, HIV care, vaccines, and prevention of communicable disease outbreaks.
BILLING DISPUTE CONSULTING COMPANY SUED OVER ALLEGED NO SURPRISES ACT VIOLATIONS
An insurance company sued a billing dispute consulting company and two hospital-based providers, alleging that they conspired to exploit the No Surprises Act (NSA) when they won higher reimbursements through the act’s independent dispute resolution system.
HHS, LABOR, AND TREASURY AIM TO BOOST HEALTHCARE PRICE TRANSPARENCY
On May 22, 2025, HHS and the US Departments of Labor and the Treasury (collectively, the departments) issued a joint request for information on how to improve prescription drug price transparency, specifically prescription drug price disclosure requirements, including information on existing prescription drug file data elements and information on implementation generally.
MAHA COMMISSION ISSUES MAKE OUR CHILDREN HEALTHY AGAIN REPORT
On May 22, 2025, the Make America Healthy Again (MAHA) Commission released its Make Our Children Healthy Again Assessment (also referred to as the MAHA report) as directed by EO 14212, released on February 13, 2025.
HHS ISSUES PROPOSED FY2026 BUDGET
On May 2, 2025, the Trump administration, through the Office of Management and Budget (OMB), released its proposed fiscal year (FY) 2026 discretionary budget request, which seeks to cut $163 billion in nondefense discretionary funding across the federal government, including cuts to programs administered by HHS.
ONE BIG BEAUTIFUL BILL ACT PROCEEDS TO SENATE
On May 22, 2025, the US House of Representatives passed the One Big Beautiful Bill Act, which now is under US Senate review. The act seeks to cut billions of dollars in Medicaid spending by, for example, introducing new work requirements for otherwise eligible Medicaid recipients, requiring states to impose mandatory cost-sharing for certain services provided to individuals enrolled through the Medicaid expansion with incomes above the federal poverty line (and allowing providers to deny services to any individual who cannot pay the required co-payment), and blocking implementation of rules finalized by CMS in September 2023 and April 2024 intended to improve Medicaid and Children’s Health Insurance Program eligibility and enrollment systems.
NO SURPRISES ACT UPDATE: CMS PUBLISHES IDR PUBLIC USE FILES, SUPPLEMENTAL TABLES FOR Q3, Q4 2024
On May 28, 2025, the departments released NSA independent dispute resolution (IDR) public use files (PUFs) and federal IDR supplemental tables for the third and fourth quarters of 2024.
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