Trump's executive order could upend current regulatory structure, experts say

How an observer views Trump’s initiative depends on how one views the regulatory structure as a whole.  Many within the dietary supplement industry have worked with federal regulatory agencies on the institution of new rules seen as necessary for the rational operation of the industry, such as the adverse events reporting rule.  For those with this kind of viewpoint, Trump’s order throws a wrench into the works. Others, who view the current state of federal regulations as bloated and an example of overreach, have applauded the decision.  The default position would seem to be that less regulation equals more room for businesses to innovate and grow. But industry stakeholders cautioned that big and potentially unpredictable changes are afoot.

Don’t hit the panacea button​

“For anyone reacting to this as if it will be a panacea for the trade, I caution them to be aware of the law of unintended consequences,” ​said Marc Ullman, an attorney at counsel with the firm Rivkin Radler.

The way the executive order is written, two regulations of equal financial impact must be eliminated before a federal regulatory agency can promulgate a new rule. So, in other words, an agency cannot skate by with a new rule by eliminating a couple of superannuated ones, something along the lines of a specification for the size of candles to be used in mines, as a theoretical example. The rules that are identified to be eliminated must be rules in current use that are having an economic impact on a given industrial sector. For rules that are meant to protect human health and safety, the question becomes, which of those could you do without?

“Do we want to get rid of GMPs?”​ Ullman asked.  “Do we want to take a step back from trying to create a sensible NDI regime? Less is not necessarily more.”​

Gumming up the works​

Jason Sapsin, an attorney in the firm Faegre Baker Daniels, said the order is likely to greatly complicate FDA’s task in finishing work that is already started, such as the final roll out of FSMA rules or the final revision of the NDI guidance.  A big complication will be the calculation of economic impact, which has already been a bone of contention between the industry and FDA as regards the cost of the NDI draft guidance. FDA views the cost of filing new notifications as relatively modest, while the industry views it as prohibitive. At the high end United Natural Products Alliance president Loren Israelsen has pegged that cost it in the billions of dollars.

“I think this is going to slow the agency down across a whole number of initiates, not just for dietary supplements,” ​Sapsin said. “The regulations swaps, as I understand them from a reading of the executive order, are economic cost for economic cost. A regulation that is not particularly expensive in calculated burden is not going to count for much in offsetting a new regulation that might have a big burden.”​

Patchwork of laws​

Ivan Wasserman, the manager of the Washington DC office of the law firm Amin Talati Upadhye, cautioned that one of the unintended consequences that could arise from the rule could have to do with the more activist state legislatures such as California and New York, which might step into the breach of eliminated federal regulations by writing new regulations of their own to pertain to dietary supplements sold within their borders. The clarion call of one Federal standard for all that has motivated activists in the push for GMO labeling, for example, could fall by the wayside as a new era of regulatory Balkanization takes hold.

“The concern for industry is that in the absence of Federal regulations and enforcement you could see the activist legislatures in the ‘blue’ states like California, New York and some others stepping in to create their own laws.  You could end up with a patchwork of rules that pertain to foods and supplements,” ​he said.

What are ‘regulations?’​

One point of confusion at the moment is what will be meant by ‘new regulations’ under the executive order. Are these only new rules that go through the formal rule making procedure?  New guidance documents? Or could it be any type of agency communication, including FDA rulings such as the one that effectively removed DMAA from the market?  Would FDA have to calculate the cost to companies to comply with that sort of ruling and then offset those costs somehow?

As written, the executive order would appear to paint a very broad brush: “For purposes of this order the term "regulation" or "rule" means an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency.”​

UNPA, for one, is operating under the assumption that guidance documents will fit under this definition. UNPA’s senior policy advisors, Patricia Knight and Peter Reinecke, issued this statement to members: “It is our preliminary reading that this new order would apply to FDA specifically (as an "agency") and to guidances (as "regulations") and thus to the NDI draft, but we are seeking confirmation from FDA.”​

New sheriff in town​

The executive order has elevated the Director of the Office of Management and Budget as a person of great potential influence within the dietary supplement industry. The Director will oversee how the order is implemented, will determine what constitutes a ‘rule,’ will arbitrate how costs are calculated and will have the power to grant exemptions for rules determined to be necessary where no offset is possible.

Pres. Trump has nominated Rep. Mike Mulvaney, R-SC to fill this role.  The Capitol news publication The Hill​ describes Mulvaney this way: “A proven fiscal hawk”​ who has a record of “leading Republicans and even working with Democrats to cut federal spending”​ and “rein in the debt.”​

Philosophical debate​

In the end, how the order is viewed comes down to an underlying question of philosophical outlook. On the less is more side is Washington DC-based attorney Jonathan Emord, who has a long history of advocating for fewer regulations. Emord is on record as saying that the growth of executive branch regulatory power over the past 70 or 80 years and in particular the past eight has hemmed in civil liberties. Emord said the order could be the harbinger of a new era of business expansion and innovation, and could help undo what he sees as as the regulatory overreach of the Obama administration.

“I’m delighted by this move. I think it will increase market activity to the benefit of consumers by enabling innovation and expanding choice offerings and improving quality,”​ Emord said.

“I think it will also restrain the way guidance documents have been used as a way to circumvent the formal rule making process.  This is a gross violation of the Administrative Procedure Act that became routine in the Obama years,”​ he said.