Health Headlines: October 2025

The U.S. Senate Committee on Health, Education, Labor and Pensions (HELP Committee) held a hearing on October 23, 2025, as a continuation of the ongoing discussion regarding reform to the 340B program. This follows the HELP Committee’s report, which we reported on in our April 2025 newsletter. The hearing revealed bipartisan support for the need for reform, but both Republican and Democratic senators expressed concern that sweeping reforms may harm rural hospitals and health centers, which rely on 340B to remain operational. The HELP Committee was generally in consensus on the need for increased oversight of the 340B program, which includes increased funding for the Health Resources and Services Administration, in part to allow for a more robust auditing function, increased monitoring and reporting obligations for 340B covered entities, and transparency into how 340B covered entities utilize the savings realized from the 340B program.

When any proposed legislation will be introduced to Congress is currently unclear. Sen. Roger Marshall (R-KS) pushed for a bill to be drafted by the end of the year, alluding that the HELP Committee may be close to a draft bill. However, other senators seemed reticent during the hearing, and industry stakeholders, including hospital systems and drug companies, are sure to pressure Congress on any proposed reforms.

On October 11, 2025, California Governor Gavin Newsom approved Senate Bill (SB) 41, remaking the regulatory landscape for pharmacy benefit managers (PBMs) operating in the state and aiming to reduce healthcare costs. SB 41 creates one of the country’s most aggressive regimes for regulating PBMs, which negotiate drug prices between drug manufacturers, health insurers, and pharmacies.

SB 41 focuses on ensuring PBMs deal fairly with both affiliated and nonaffiliated pharmacies. To that end, PBMs:

• Must allow all nonaffiliated pharmacies to participate in their provider networks if such pharmacies are willing to accept the terms and conditions of participation applicable to affiliated pharmacies.
• May not impose restrictions prohibiting patients from utilizing nonaffiliated pharmacies or inducing the transfer of prescriptions to affiliated pharmacies.
• May not refuse to contract with, impose discriminatory terms and conditions on, or lower reimbursement rates with pharmacies based on their nonaffiliated status.

SB 41 also aims to curb rent seeking by imposing certain requirements affecting drug prices, including the following:

• PBMs may not engage in spread pricing (i.e., charging health plans more for drugs than they pay to pharmacies).
• PBMs must pass all drug costs and dispensing fees that health plans or payment programs pay through to the pharmacies or providers dispensing such drugs.
• PBMs are prohibited from imposing retroactive reductions of pharmacy payments, including through “reconciliation” mechanisms.

Last, SB 41 imposes significant disclosure obligations on PBMs. PBMs are required to submit quarterly and annual financial disclosures to the California Department of Managed Health Care. They must also, if requested by contracted health insurers, make quarterly disclosures of aggregate acquisition costs, rebates, payments to affiliated and nonaffiliated pharmacies, manufacturer administrative fees, and drug utilization information.

The law authorizes the state attorney general to recover civil penalties and receive equitable relief for violations of the law.

Effective October 1, 2025, two COVID-19-era Medicare programs — flexible telehealth benefits and in-home hospital care — were abruptly halted. Both programs were implemented to increase access to care during the public health emergency and have since been extended on numerous short-term bases. Funding for each program has expired, however, as Congress failed to come to an agreement on federal funding by September 30, 2025.

Before the COVID-19 pandemic, Medicare coverage for telehealth services was limited. Generally, telehealth services were covered only for patients that lived in rural areas and traveled to an approved clinic to receive remote care. During the pandemic, Congress waived these restrictions and made telehealth services generally available to seniors from their homes. In 2020, Congress also launched the Acute Hospital Care at Home (Hospital-at-Home) initiative, which allowed more than 400 hospitals in 39 states to deliver acute, hospital-level care to patients in their homes. Each of these flexibilities has survived previous threats of expiration and has been renewed, albeit on numerous short-term bases, since its respective implementation. Now, despite bipartisan support for extending both programs, each has lapsed because of a broader political fight over government funding.

With the expiration of the Medicare programs, providers are now faced with a difficult decision: Continue normal operations with the hope that the flexibilities will be reinstated and services will be reimbursed retroactively to October 1 or cease services that were conducted under these flexibilities altogether.

While there is widespread belief that Congress will reinstate the Medicare telehealth flexibilities and retroactively reimburse services provided during the shutdown, not all providers are willing or able to take that risk. As a result, some providers are refusing to schedule virtual visits for Medicare beneficiaries, while others are informing beneficiaries that they may receive a bill for the services if governmental funding does not come through.

There is less certainty as to the fate of the Hospital-at-Home initiative. For the first time, the Centers for Medicare & Medicaid Services (CMS) provided a notice directing participating hospitals to discharge all inpatients or return them to the hospital on January 30, 2026. The notice specifically states that any noncompliance with the previously waived requirements would be addressed through a plan of correction. CMS also notes that as of January 1, it is no longer accepting requests for participation in the Hospital-at-Home initiative.

Goodwin is continuing to monitor the state of these programs during ongoing government funding negotiations.

Senate Democrats are seeking to reduce the expanded carve-out for orphan drugs created under the budget reconciliation bill. Prior to the budget reconciliation bill, drugs with a single orphan drug designation were exempt from the Medicare Drug Price Negotiation Program. This carve-out applied only to drugs that treated patient populations of fewer than 200,000 people. Under the budget reconciliation bill, drugs with multiple orphan designations (e.g., through addressing multiple diseases) would also be exempt from price negotiations.

The Congressional Budget Office (CBO) originally estimated the cost of the expanded carve-out as $4.9 billion between 2025 and 2034. This original estimate did not include three drugs targeting cancer, which, when factored into the CBO’s analysis, increased the estimate to $8.8 billion. The CBO estimates that the financial impact could be even higher depending on which formulations of the three drugs are exempt from the negotiation program.

Democrats have responded to the CBO’s revised analysis by proposing limits on drugs eligible for the expanded carve-out. Under the proposed bill, drugs that receive more than $400 million per year in Medicare spending are ineligible for the carve-out and are subject to negotiation. The proposed legislation, named the “No Big Blockbuster Bailouts Act,” may result in some orphan drugs that were previously exempt from negotiation prior to the budget reconciliation bill becoming subject to the program if they fall within the proposed threshold.

Ballad Health, a nonprofit health system that operates 19 hospitals in Northeast Tennessee and Southwest Virginia, filed a lawsuit against UnitedHealth Group (UHG) in the U.S. District Court for the Eastern District of Tennessee on October 21, 2025. In a press release, Ballad Health asserts that UHG “has systematically denied, delayed or underpaid for care that physicians determined to be medically necessary, while also overstating to the federal government how sick its members are to collect higher taxpayer-funded payments through the Medicare Advantage program.”

Approximately 75% of Ballad Health’s patients are beneficiaries of Medicare or Medicaid or are uninsured, and 72% of its Medicare patients are covered by Medicare Advantage plans. In its complaint, Ballad Health alleges that UHG’s actions caused more than $65 million in damages to Ballad Health over the last five years.

UHG has previously been the subject of scrutiny related to its denials of coverage for care provided to Medicare Advantage patients. A lawsuit was filed in 2023 against UHG related to allegations that it used an algorithm to deny coverage for post-acute care for Medicare Advantage patients, and the Senate Permanent Subcommittee on Investigations issued a report in 2024 finding that UHG — along with Humana and CVS — denied prior authorization requests for post-acute care at significantly higher rates than other types of care.

Ballad Health stated that it will not renew its Medicare Advantage contract with UHG when it expires in 2027, but it will continue to work with UHG on its commercial, Medicaid, and exchange insurance plans when those agreements are up for renewal.

On October 15, 2025, the governors of 14 states and one US territory announced that they had established a new, public health–focused initiative. The Governors Public Health Alliance includes the governors of California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Massachusetts, New Jersey, New York, North Carolina, Oregon, Rhode Island, Washington, and the territory of Guam, and it is described on its website as a “coalition of governors working together to protect public health.”

The initiative is supported by the Governors Action Alliance (GovAct), “a nonpartisan nonprofit initiative that supports coordinated governor action to protect essential freedoms.” This is the third of GovAct’s alliances; it has previously formed the Reproductive Freedom Alliance and Governors Safeguarding Democracy. According to the GovAct press release, the Governors Public Health Alliance is “guided by a bipartisan set of public health advisors,” such as former Centers for Disease Control and Prevention Director Dr. Mandy Cohen. The new alliance “will serve as a unified, cross-state liaison with the global health community and will facilitate cross-state collaboration by bringing together regional and other groups to share best practices and surface common challenges, elevating national considerations for vaccine policy and regulatory solutions to keep science front and center.”

In announcing the new alliance, Washington Governor Bob Ferguson stated: “We can no longer rely on the information coming out of Washington, D.C., but our states are coming together to unequivocally state that science still matters. […] Diseases don’t stop at state borders — and preparedness shouldn’t either. By joining forces, we will act faster and communicate better to ensure our communities stay healthy.” New York Governor Kathy Hochul described the role of the alliance as follows: “From undermining vaccine access and abortion rights to slashing billions in Medicaid funding from those in need, the federal government is wreaking havoc on public health and the institutions we rely on. […] The Governors Public Health Alliance will allow our states to share resources, coordinate with global partners, and deploy the tools and information needed to meet public health threats and protect the American people.”

This follows the formation of two regional public health alliances, the Northeast Public Health Collaborative and the West Coast Health Alliance, which the Governors Public Health Alliance plans to coordinate with.

In our January 2025 newsletter, we reported on the Texas attorney general filing a suit against a New York physician, accusing the physician of unlawfully providing a Texas resident with abortion-inducing drugs, and we provided updates on the case in February 2025 and July 2025. Our July update came after a default judgment was entered against the New York physician when the acting county clerk in Ulster County, New York, repeatedly rejected the Texas attorney general’s attempts to impose summary judgment.

In a further development in the case, the state of Texas sued the acting county clerk and filed a petition for a writ of mandamus in New York state court on July 25, 2025, seeking a motion to compel the clerk to file the motion for summary judgment. On September 8, 2025, New York Attorney General Letitia James moved to intervene.

In a September 8, 2025, press release, the Office of the New York State Attorney General wrote that it intervened to defend the constitutionality of New York’s shield law. Attorney General James stated: “Our shield law exists to protect New Yorkers from out-of-state extremists, and New York will always stand strong as a safe haven for health care and freedom of choice. I will fight every last attempt to roll back our rights and turn back the clock on reproductive freedom.”

This is not the only update out of Texas — Attorney General Ken Paxton’s office has taken other recent action to enforce Texas’ abortion ban, which is one of the strictest in the country. On August 14, 2025, the office sent cease-and-desist letters to Plan C, Her Safe Harbor, and California physician Dr. Remy Coeytaux of Aid Access. The letters claim that the organizations are “in violation of multiple state and federal laws” and demand that they cease and desist from “mailing abortion-inducing drugs into the State of Texas.” These letters follow the initiation of a wrongful death lawsuit filed in the District Court for the Southern District of Texas against Dr. Coeytaux. This lawsuit was filed by an individual who alleged that Dr. Coeytaux mailed his girlfriend abortion-inducing drugs, which she used to terminate her pregnancy.