Governance by Consent in Health Policy?

Health lawyers are accustomed to thinking about statutes, regulations, and agency action. Increasingly, however, major health policy initiatives are being announced in the vocabulary of negotiation, consent, and agreement.

The Trump administration recently announced that it had reached “voluntary” agreements with pharmaceutical manufacturers on drug pricing. Major health insurers similarly pledged to reform prior authorization after negotiations with the Department of Health and Human Services. And under pressure from the executive branch, many hospitals chose to withdraw gender-affirming care, although the HHS threats to withdraw funding that spurred this choice appear to have been shelved for now.

When the executive branch secures policy changes through “agreement” rather than regulation, two questions follow. Did the regulated party actually consent? And even if it did, why should that consent substitute for the statutory authority, public procedures, and accountability that ordinarily legitimate government action?

To be fair, negotiated governance is not exactly new. Agencies have long relied on settlements, consent decrees, and other forms of agreement. Nor is the phenomenon confined to health care. Universities and law firms have recently entered into highly publicized agreements with the federal government. But health policy offers an important window into this broader shift.

Traditionally, debates over executive authority in health law have focused on a single question: Does the agency have the legal authority to do what it proposes? We imagine government power in binary terms. Either an agency has statutory authority to regulate, or it does not. If it does, it can promulgate rules or enforce legal requirements. If it does not, the policy objective is ordinarily thought to lie beyond the executive’s reach unless Congress acts.

That binary picture feels increasingly incomplete. Agencies sometimes negotiate even when they likely possess ample regulatory authority; negotiation may simply be faster, more flexible, less politically costly, or less vulnerable to litigation. In other cases, negotiation may be attractive precisely because the agency’s authority is uncertain. And in still others, agreement seems to accomplish through consent what regulation could not accomplish through law alone.

Did the Regulated Party Actually Consent?

Some supposed “agreements” may reflect genuine negotiation; others may amount to little more than a pledge to self-regulate in order to avoid something more restrictive. The distinction matters. The government should make clear what the private party actually committed to, what it received in return, whether either side could walk away, and what would happen if the private party refused to comply. Without that information, it is difficult even to evaluate the claim these arrangements were voluntary.

Depending on the answers, these arrangements may not be legally enforceable contracts, and contract doctrine may not formally govern them. The administration invokes the language of agreement, negotiation, and voluntary assent — concepts that have a developed legal structure in contract law. If these were ordinary contracts, we would ask whether the parties mutually assented to sufficiently definite terms, whether there was a bargained-for exchange, and whether some defect in the bargaining process undermined the validity of that assent. Contract law therefore offers a useful starting point for testing the government’s claim that the regulated party genuinely chose the result.

Importantly, contract law does not require equal bargaining power or an equally advantageous bargain. One party may have far more leverage, drive a hard bargain, and secure most of the benefits. But there are limits. Under the doctrine of economic duress, an agreement may be voidable when a wrongful or improper threat leaves the other party with no reasonable alternative but to assent. Contract law thus distinguishes hard bargaining from circumstances in which pressure becomes sufficiently coercive to undermine consent itself.

So a pharmaceutical manufacturer, insurer, or hospital might agree because cooperation is preferable to regulation or because the government offered something valuable in return. The government’s greater leverage does not, standing alone, make that choice involuntary. But the picture changes if the government threatens loss of essential funding, exclusion from a critical government program, aggressive enforcement unrelated to the underlying legal violation, or another severe consequence that leaves the private party no realistic choice but to capitulate. A theoretical ability to refuse — or to sue after the threatened harm occurs — does not necessarily amount to a reasonable alternative.

And economic duress is not the only contract doctrine that looks behind formal assent. Unconscionability, for example, permits courts in some circumstances to refuse enforcement where serious defects in the bargaining process combine with unusually one-sided terms. The doctrine is not a perfect fit here, and neither it nor economic duress necessarily applies directly to these government arrangements. But both embody a broader principle: the fact that a party formally agreed does not always establish that its consent should be given full legitimating force.

That principle deserves more serious attention in public law than the narrow treatment it has received to date. If the executive branch increasingly relies on negotiated commitments to accomplish policy goals, courts and scholars should consider whether contract law’s distinctions between bargaining and coercion can help evaluate those arrangements even where contract doctrine does not formally govern. When the regulated party ultimately said yes, we need to know what choices it actually faced, what leverage the government exercised, and how its assent was obtained. Government should not be able to describe a concession as “voluntary” while leaving undisclosed the threats, inducements, and alternatives that produced it.

But even genuinely voluntary consent in which the regulated party freely agreed to a policy does not itself establish that bilateral agreement is appropriate.

Should Consent Substitute for Ordinary Public Law?

Even assuming these agreements survive a meaningful test of voluntariness, that does not justify using that arrangement as a vehicle for making public policy.

That is because government agreements are not merely private bargains. The executive branch exercises powers conferred by law, and the policies it negotiates can affect people who had no role in the bargain. Patients and clinicians do not participate in the negotiation leading to a pharmaceutical manufacturer agreeing to new pricing terms, an insurer agreeing to change its prior-authorization practices or a hospital agreeing to discontinue a service.  But they are affected by those agreements.

Ordinary administrative law imposes constraints that bilateral bargaining does not. Agencies must act within the authority Congress has given them. They may have to explain and publicly justify their decisions, and regulatory processes can give affected groups an opportunity to participate. Judicial review provides another check on the exercise of government power.

Negotiated agreements can sometimes achieve policy goals more quickly and flexibly than formal regulation. But speed and flexibility come with a tradeoff if the executive branch avoids the safeguards that ordinarily accompany regulation. The fact that a regulated party agreed cannot, by itself, cure that problem.

The question, then, is not whether government should ever make policy through agreement. It is what should be required when it does. The government should be transparent about the legal basis for its actions and why it chose negotiation rather than a conventional regulatory process. It should also explain why an agreement between the government and a regulated entity is an appropriate way to make policy when others will bear its consequences.

None of this means negotiated governance is necessarily illegitimate. Agreements may be more efficient or durable than regulation, and in some settings they may produce better policy. But genuine consent matters. So does whether the government has exercised its power in a way that is lawful and accountable to those beyond the bargaining table. Calling an arrangement “voluntary” cannot do all the legitimating work.