HHS postpones final SUNSET rule for one year pending judicial review

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HHS postpones final SUNSET rule for one year pending judicial review

24 March 2021

On 19 March 2021, the U.S. Department of Health and Human Services (the Department or HHS) postponed for one year the effective date of the Final Rule entitled “Securing Updated and Necessary Statutory Evaluations Timely (SUNSET),” which would have required agency regulations, including those issued by the Food and Drug Administration (FDA) to be reviewed every ten years or otherwise expire. The Final Rule was finalized in the last days of the outgoing administration and was due to take effect on 22 March 2021. On 9 March 2021 a lawsuit was filed seeking to overturn the Final Rule on various grounds, including claims that it was not legally authorized, arbitrary, and capricious, and in violation of the Administrative Procedures Act (APA) and HHS’s Tribal Consultation Policy. The HHS postposed the effective date under 5 U.S.C. 705, which allows an agency “to postpone the effective date of action taken by it, pending judicial review,” when “the agency finds that justice so requires.”

Legal basis for postponement

The SUNSET Final Rule was originally published in the Federal Register on 19 January 2021.¹ The Final Rule’s publication came just 78 days after the Proposed Rule was published and the day before the change in administration. The Final Rule would have required agency regulations, including those issued by the FDA to be reviewed every ten years or otherwise sunset and expire. Regulations more than ten years old would be required to be reviewed within the first five years the rule is in effect. On 9 March 2021, a lawsuit was filed by several consumer advocacy groups seeking to overturn the Final Rule on various grounds including claims that it was outside the scope of the Department’s legal authority, arbitrary, and capricious, and in violation of APA procedural requirements and HHS’s Tribal Consultation Policy. Under 5 U.S.C. 705 an agency “may postpone the effective date of action taken by it, pending judicial review,” when the “agency finds that justice so requires.” The HHS has concluded that the interests of justice require that the SUNSET final rule be stayed pending judicial review.² Among other reasons, the HHS concludes that the interests of justice require a postponement in order to preserve the status quo because, if the rule took effect while the HHS was evaluating the rule in light of the claims raised in litigation, it could create significant obligations for HHS, cause confusion for the public, including the plaintiffs, and may lead to compliance costs as entities plan steps necessary to deal with the rule’s implementation.

The HHS is also concerned that the Regulatory Impact Analysis (RIA) may have “significantly underestimated the costs that will be incurred by agencies and overestimate[d] the purported cost savings,” and “may not have fully taken into account all of the resource implications of this rule and therefore misjudged the likely expiration of existing regulations.” Further, “HHS now believes it is likely some regulations would expire without any additional administrative process (contrary to the conclusions reached in the SUNSET final rule).”

Implications of original timeline on FDA-regulated entities

Among other things, the HHS notes that for the FDA in particular over 95 percent of current regulations are more than ten years old or would become more than ten years old during the first five years the rule would be in effect. The HHS posits that if the Final Rule were to become effective as originally scheduled, “in order to meet the new obligations within the specified timeframe to avoid automatic expiration of its regulations, FDA and the Department would need to immediately divert resources toward assessment and review during the ongoing COVID-19 public health emergency,” which would significantly impact the FDA’s ability to “address urgent public health matters such as ongoing COVID-19 pandemic relief efforts, outbreaks of foodborne illness, inspections, [and] recalls.”

Next steps

Based on these and concerns related to other industries, the HHS believes it is appropriate to postpone the effective date to: (a) preserve the status quo and give the Department time to further evaluate the Final Rule before it takes effect; and (b) allow time for judicial review already underway.

Hogan Lovells will continue to closely monitor the progress of the HHS’s evaluation of the SUNSET Final Rule, as well as the pending lawsuit. If you have any questions, please do not hesitate to contact us.