Healthcare Regulatory Chaos Demands State Solutions

The current regulatory landscape is defined by “chaos,” according to Beth Siemer, partner at Spencer Fane.

In her talk, “Decoding Policy and Legal Watch Outs for Impacts on Markets,” at the recent Trade & Channel Strategies, Siemer delivered a stark warning to industry leaders, urging them to adapt to the rapidly shifting environment. 

“It is a time of chaos, and that’s very real,” Siemer told delegates at the session. “It’s not just a feeling—it’s at the federal level, at the state level, and it’s hitting all at once. If we don’t recognize the chaos, the wave still hits us, and we go under. We just don’t see it coming.”

Beth Siemer, partner, Spencer Fane

States step up

Siemer explained that many healthcare and pharmacy-related issues are increasingly falling under state jurisdiction due to limited federal oversight. Historically, pharmacy practices and insurance have been regulated locally, but federal efforts to address broader market needs—such as supply chain transparency—have often faltered. “We’re 13 years into a 10-year plan, and we’re not going to have it even at the end of the next implementation cycle,” Siemer said, referring to the federal track-and-trace system.

Related:FDA post-market studies and compounding rules create compliance hurdles for pharma

With federal inaction, states have stepped in to address critical issues like pharmacy benefit manager (PBM) reform. “The federal government hasn’t really acted on that, obviously, so now you have states saying, ‘Well, I guess it’s us,’” Siemer said.

“Sometimes the federal government is just not equipped to do it because there, there are things that have been housed at the state level,” she added.

Siemer categorized state-level concerns into five key areas: safety, cost for payers, cost for patients, access to local pharmacies, and funding for safety net healthcare systems. Each of these priorities reflects the unique challenges states face in balancing patient needs, industry demands, and regulatory oversight, she noted.

Safety

Safety remains a top priority of state-level regulation, with boards of pharmacy taking the lead. “They care a lot about ensuring that everything a patient ingests from a pharmacy is what it’s supposed to be and isn’t going to hurt them,” Siemer said. 

“When you’re talking about safety issues and the Board of Pharmacy leading them, they tend to be very clear and very rules-based and tied to that overarching concept that if we’re going to have a pharmacy dispensing something, it has to be at least safe,” she added.

Current safety concerns include compounding practices, mail delivery of temperature-sensitive products, and remote dispensing enabled during the pandemic. Boards are now reviewing pandemic-era rules to determine what should remain in place, Siemer noted.

Related:Experts unveil AI breakthroughs in streamlining regulatory reviews

Financial burdens on payers and patients

States are also addressing the financial burden on payers and patients. Prescription drug affordability boards, spread pricing bans, and pricing transparency measures are gaining traction. However, Siemer pointed out that these efforts often exclude Employee Retirement Income Security Act of 1974 (ERISA) plans, which cover 60% of the workforce. “All of this  typically only applies to state regulated or state funded plans,” she explained. “It’s important, it’s meaningful, but it’s a market segment—not a statewide solution.”

For patients, Siemer believes states are exploring measures like out-of-pocket caps, point-of-sale rebates, and prohibitions on accumulator adjustments. Insulin and glucose monitoring have been focal points due to their political and survival implications. “I don’t think it’s going to end there,” Siemer predicts, suggesting that more state activity in this area is likely.

Access local pharmacies and safety net healthcare

Access to local and independent pharmacies is another critical issue, according to Siemer. Siemer pointed to Arkansas’ Act 630, which prohibits limited distribution models and requires distribution permits for manufacturers. “This is where you see 340B contract pharmacy access laws. This is boards of pharmacy wanting to ensure that the pharmacies in their state can stay in business and stay viable,” she stressed.

Related:Viatris, Septerna, BIO, Takeda name new legal chiefs

“There’s 20 of those that have been passed, and nine that are in process. I don’t see those going away anytime soon from a state level, and this is where there’s a lot of that PBM pricing and access requirement at the pharmacy side,” Siemer further added.

Safety net healthcare funding, largely reliant on 340B margins, is particularly fragile, she stated. Siemer described the system as “bizarre” and “not logical,” but acknowledged its importance. “No state can replace that. They don’t have a bucket they can pull from to fund safety net healthcare with other money,” she explained. As a result, states are working to protect 340B revenue through laws that prohibit payment discrimination and ensure transparency.

A call to adapt

Siemer stressed that understanding the enforcement mechanisms of state laws is essential. “Every lawyer will always say, ‘Comply with the law,’ and every businessperson will always say, ‘What happens if I don’t?’” she said. Enforcement varies depending on the entity responsible, whether it’s a board of pharmacy, department of insurance, or attorney general.

“Understanding what the law is trying to address is important,” she said, adding, “and then understanding its actual scope.”

Siemer concluded her presentation with a call to action for industry leaders to embrace the chaos and adapt to the evolving regulatory environment. “We need to understand the environment we’re working in, name it, and recognize it as something different so we can respond to it,” she urged.

“If we’re going to be the ‘let’s get this deal done’ kind of people, we need to have our eyes open to where the chaos is hitting so we can ride above it.”