Healthcare and Pharmaceutical Sector

The FDA opened a public comment period on a discussion paper outlining how it might regulate generative AI-enabled medical devices, seeking feedback from manufacturers, clinicians, and researchers by October 19. The agency's Digital Health Center of Excellence proposes a two-axis risk framework and a "competency-based" premarket evaluation modeled on how physicians are trained and credentialed, rather than how traditional software is tested. Under this approach, the FDA would assess the final user-facing device—not foundational models or subcomponents—through non-clinical benchmarking (testing clinical knowledge, safety behavior, and generalizability, potentially using synthetic data and virtual patient avatars) and clinical confirmation (prospective studies, retrospective patient data analysis, shadow deployment in live workflows, or patient actors). The agency acknowledged that generative AI devices pose unique regulatory challenges: they accept open-ended inputs, produce variable outputs, can "hallucinate" convincingly, and may evolve after launch in ways that degrade performance unpredictably. The paper also explores whether the FDA should accept greater premarket uncertainty in exchange for stronger postmarket monitoring—a shift from traditional device regulation. The framework is not new policy but an invitation for early input; the FDA has authorized numerous AI-enabled devices to date, though most do not use generative AI. Acting Commissioner Kyle Diamantas framed the effort as aligning with the Trump administration's priority to accelerate AI-powered medical products to market while maintaining safety.

The FDA's Digital Health Center of Excellence is developing formal regulatory guidance on generative AI in medical devices, according to STAT. Rick Abramson, the center's director, told the outlet the agency will release policy documents addressing both broad AI regulation and narrowly tailored guidance on specific use cases or technical complexities. The FDA has not set a timeline for release. Abramson said the agency is considering a "competency-based approach" to the rules. The move responds to industry pressure for clarity: device makers, software vendors, and health systems have been operating in regulatory ambiguity as generative AI applications proliferate in clinical workflows, from diagnostic support to documentation. Without published standards, companies have had to infer FDA expectations through informal guidance, advisory meetings, and enforcement discretion. Formal policy documents would establish baseline requirements for validation, safety testing, and transparency that manufacturers could plan around. The guidance is unlikely to be a single document; Abramson's language suggests a tiered framework addressing general principles alongside sector-specific rules for areas like radiology AI, clinical decision support, or drug discovery tools.

The Trump administration's Centers for Medicare and Medicaid Services issued a final rule this month barring federal Medicaid and CHIP funding for pediatric gender-affirming medications and surgery, effective Oct. 13. According to STAT+, Medicaid experts warn the precedent could extend far beyond transgender care: it establishes a mechanism to deny coverage of other drugs by circumventing the general requirement that Medicaid cover most FDA-approved outpatient drugs for medically accepted indications, provided manufacturers pay rebates. Normally, Medicaid's coverage obligation is nearly automatic once a drug clears FDA review and the company agrees to rebate terms. This rule breaks that pattern by using federal authority to carve out entire categories of approved medications regardless of individual medical judgment. The mechanism matters because it does not rely on cost-effectiveness or safety disputes—the traditional grounds for coverage denial—but on categorical policy exclusion. If upheld, states could face pressure to follow suit, fragmenting coverage across the country. The rule signals the administration's willingness to use Medicaid's federal funding lever to override the drug approval process itself, a power Medicaid experts say has rarely been deployed this way.