This is the sixth in our 2024 Year in Preview series examining important trends in white collar law and investigations in the coming year. We will be posting further installments in the series throughout the next several weeks. Our previous post, "Reflecting on Higher Education Compliance and Investigations Trends in 2023 and Looking Ahead to 2024," can be found here.
In an election year, Congress tends to shift focus away from legislating on Capitol Hill as the approaching elections take center stage. Instead of regular legislative order, companies should be prepared for Congress to focus on and potentially intensify investigations in both chambers.
Below we outline numerous areas of investigative interest where Congress has acted in the previous year, in addition to emerging areas where Congress could seek information and testimony from private sector entities, particularly U.S. companies with connections to China, companies leveraging artificial intelligence, social media companies, the pharmaceutical industry, firms that have publicly announced ESG policies or practices, and fossil fuel companies.
China
On the heels of introducing the BIOSECURE Act in December 2023, the House Select Committee on the Chinese Communist Party (CCP) is working with several other committees to investigate Chinese ties to US-based companies and foreign companies operating in the U.S. Given the rising geopolitical tensions with China, this will continue to be an area of intense focus and sensitivity for U.S. lawmakers.
In January 2024, the House Homeland Security Committee accelerated its joint investigation into cybersecurity vulnerabilities in the U.S. maritime sector and supply chain risks. The Committee requested information from a Swiss company, which works with a Chinese state-owned enterprise accounting for nearly 80 percent of the ship-to-shore cranes at U.S. maritime ports, for information on its commercial relationship with the company and to describe their work with U.S. government agencies involved in defense, intelligence, and other U.S. national security elements. The Committee has been exploring this relationship throughout 2023 to better understand Chinese software capabilities used in cranes, some of which are remotely operated and employ technology that could track container information. Cybersecurity threats to critical infrastructure are a top priority for government officials and are likely to remain a top priority due to heightened concern over China’s cybersecurity activities in the United States.
Also in January, the House Energy & Commerce Committee launched an investigation into federal grants made to an artificial intelligence (AI) scientist at the University of California, Los Angeles (UCLA) with alleged ties to the CCP. The letter sent to UCLA puts the responsibility on higher education entities to prevent foreign adversaries from receiving highly sensitive U.S. research funded in whole or in part by federal government grants. Congressional interest in artificial intelligence picked up rapidly in 2023 and is expected to continue as the federal government operationalizes plans across each federal agency to understand the challenges and opportunities of artificial intelligence.
In February, the House Select Committee on the CCP unveiled findings from a bipartisan investigation of five U.S. venture capital firms, which found that these firms had invested billions in AI and semiconductor companies with ties to China. Given the overlapping issues and national security interests, Congressional investigations into entities with connections to China will likely continue.
ESG Practices
The widespread adoption of environmental, social, and governance (ESG) practices has become an increasingly hot topic on Capitol Hill. House Republicans charge that ESG practices from private companies push non-material social goals that undermine public markets and lead to increased costs for consumers. In addition to introducing several anti-ESG bills, such as a bill aimed at preventing the Securities and Exchange Commissions from requiring companies to disclose their carbon emissions, several House committees have launched investigations into investment firms they accuse of violating antitrust laws. The House Judiciary Committee, led by Rep. Jim Jordan (OH), accuses these companies of potentially violating antitrust laws by deploying ESG policies in their investment portfolios in ways that may restrict investments in coal, oil, and gas.
Energy Infrastructure Projects
In fall 2023, two top Republican lawmakers sent a letter to the Department of Energy’s Loan Programs Office seeking information on its relationship with cleantech businesses. This office is a public financer of high-impact energy projects and manufacturing investments, with a focus on clean energy and supply chain projects. The $400 billion office has been subject to intense focus from Congress in the past but has received new interest since passage of the Inflation Reduction Act, which expanded the types of projects eligible for financing. If this inquiry intensifies, it could lead to a slowdown in approving projects, or it could risk exposure for companies seeking to engage with this office. The letter sent in October 2023 seeks information on the Loan Programs Office correspondence with cleantech business leaders.
Medicare Advantage
In September 2023, the U.S. Senate Committee on Finance Chair Ron Wyden (D-OR) and the House Committee on Energy & Commerce Ranking Member Frank Pallone (D-NJ) announced a bicameral investigation into managed care plans’ prior authorization practices. The Committee action follows a U.S. Department of Health and Human Services (HHS) Office of the Inspector General report on Medicaid Managed Care Organizations (MCOs) utilization of prior authorization. Letters were sent to numerous health plans and insurers requesting information on prior authorization practices.
Congress has taken a direct interest in health insurers and a variety of business practices that impact access, costs, and outcomes. Congress’ interest in artificial intelligence will also keep attention on stakeholders leveraging artificial intelligence systems across the health care industry.
Pharmaceutical Pricing
Drug pricing has been a consistent focus for lawmakers that has consisted of Congressional hearings, investigations, and legislation like the Inflation Reduction Act, which authorized HHS for the first time to engage in negotiations for certain prescription drugs. The Senate Committee on Health, Education, Labor and Pensions (HELP), led by Sen. Bernie Sanders (I-VT), has focused on prescription drug costs this Congress, holding numerous hearings on the cost of insulin and inhalers, and released two committee reports related to pharmaceutical pricing and compensation. The Committee recently held a hearing in January, after inviting four companies to testify and requesting information and documents on internal decisions regarding inhaler pricing and access.
While these investigations have thus far been partisan, aspects of the work are undoubtedly of interest to both parties.
Drug Shortages & Supply Chain
Throughout 2023, Congress debated how to address drug shortages for cancer drugs and other common medications like Adderall, which received national news. In September 2023, the House Energy & Commerce Committee held a hearing on drug shortages, exploring ways to strengthen the supply chain to prevent such disruptions. Legislation to confront this crisis is still pending, but Congress’ interest in the issue will continue due to the intensity of coverage for certain products, like cancer drugs in shortage that can lead to worse outcomes for patients who cannot access needed medicine. In January, the Senate Finance Committee released a white paper on a plan to prevent generic drug shortages, which explores several issues and entities across the supply chain that could be subject to future reforms.
In February 2024, Democrats on the House Oversight Committee launched an investigation into drug shortages, requesting information from companies to better understand the root causes and practical solutions to addressing persistent drug shortages. While this investigation seems to be more focused on collecting information, the collection of documents and other information could raise new questions or lead to further action. The Federal Trade Commission (FTC) and HHS are also soliciting public comments on the root causes of and potential solutions to drug shortages and may launch their own investigations soon.
Private Equity and Health Care
Private equity companies’ activities stretch across several sectors, so it is notable that the Senate Budget Committee launched an investigation into the impact of private equity ownership in America’s hospitals. In December 2023, the Committee launched a bipartisan investigation into the effects of private equity ownership on U.S. hospitals. The inquiry explores whether various financial transactions may have impacted the quality of care for patients in hospitals under such ownership. Other committees have highlighted private equity ownership of health care facilities, which could spell further action in the future.
Higher Education
Universities will continue to draw Congressional inquiries this year given the bipartisan outrage at several prominent universities handling of antisemitism on their respective campuses last year. Rep. Virginia Foxx (R-NC), Chair of the Committee on Education and the Workforce, requested follow-up information from Harvard University in January 2024 regarding Harvard’s response to antisemitism on campus. The House Ways and Means Committee launched a similar inquiry, noting many higher education institutions' 501(c)(3) tax-exempt status, and whether these institutions are complying with antidiscrimination laws. This high-stakes inquiry and the potential tax treatment implications make this one to closely watch in the coming year.
Social Media
Congressional interest in social media companies cuts across several issues, specifically the impact on youth mental health, as well as privacy and censorship concerns. The House Judiciary Committee has an open investigation into concerns over censorship by social medical companies, and whether there has been any coordination with the federal government to censor speech. The Senate Judiciary Committee recently held a hearing on online child sexual exploitation. There are several bills in both chambers to address challenges posed by social media, a sign that Congressional interest is growing.
In election years, expect lawmakers on both sides of the aisle to closely scrutinize social media companies for how they police disinformation and artificial intelligence that could sway voters in key states or districts. Both parties have shown interest in understanding how social media companies can prepare, prevent, and police such information. Following the last election, Facebook was asked to turn over thousands of politically themed advertisements to the Senate Intelligence Committee bought through Russian accounts during the 2016 presidential election.
Closing Thoughts
Foley Hoag is closely tracking the dynamic landscape of Congressional investigations as we get into the second session of the 118th Congress. As these issues play out and new issues emerge, we emphasize leveraging our best practices for navigating these inquiries. For companies wary of potential Congressional scrutiny or aware of the risks operating in these industries, it is important to consider the evolving political landscape, the priorities of the Biden Administration, and those lawmakers poised to ascend into new roles with investigative authority in the 119th Congress.
For the full series, please see: White Collar Year in Preview
