TrustWorks On Call: Destination Regulation

Behind the Headlines

Unpacking the forces driving healthcare's biggest stories.

1. FDA developing gen AI regulatory guidance.

The Food and Drug Administration (FDA) released a discussion paper on “Considerations for the Regulation of Generative AI-Enabled Medical Devices,” which an agency official confirmed is an early step toward formal policy guidance on GenAI-enabled medical devices.
The discussion paper lays out a competency-based approach (similar to how a clinician is credentialed) under consideration to assess a device’s risk, how risk may increase in proportion to a device’s autonomy, and ways to strike a balance between premarket evaluation and postmarket monitoring.
The FDA invites device manufacturers, clinicians, researchers, the public, and others to submit feedback on its regulatory frameworks by October 19.

TrustWorks Take: Existing regulatory models are not suited to govern GenAI-enabled medical devices because these devices work with a broader variety of inputs and produce more variable outputs than traditional medical devices and software. Instead, the FDA is trying to work with industry to design a “least burdensome” regulatory approach that minimizes patient harm while maximizing GenAI’s innovative potential. GenAI-enabled devices will be subject to benchmarking against standardized tests like other non-clinical devices, but they may also face a competency-based clinical confirmation step, in the spirit of a physician licensing exam, that assesses how these devices would interact in unstructured encounters with real-world patients.

The FDA is still a long way from finalizing any regulation, and the agency may conclude that some regulations are better left to states to decide, in keeping with physician licensing standards. The challenge to this measured, and potentially patchwork, approach to device regulation is that national and global tech companies, who prefer begging for forgiveness to asking for permission, are developing and pushing their medical tech products onto consumers already. Millions of Americans report having used AI chatbots to replace a medical visit, and companies like OpenAI and Anthropic are rolling out health products to meet this demand, with minimal disclaimers about not being a physician substitute. As long as regulators are playing catchup, policy will be determined in response to patient harms, rather than in advance of them.

2. Healthcare costs projected to rise nearly 10 percent next year.

Employer healthcare costs in 2027 are projected to rise 9.5 percent, to over $19,000 per employee, according to professional services firm Aon, marking the fourth consecutive year of accelerating cost growth.
The Business Group on Health (BGH) released a similar finding, projecting median healthcare costs for employers will increase by 9.2 percent next year, while highlighting pharma spending as a key driver: 70 percent of employers identified cancer care as their most acute cost driver, and the share of employers covering GLP-1 weight-loss drugs dropped from 72 percent in 2025 to 60 percent in 2026 in response to rising utilization.

TrustWorks Take: From 2018 to 2027, employer healthcare costs will have increased by 76 percent, or about double the inflation rate. And while inflation has generally eased since its peak in 2022, healthcare costs have been growing faster each year. Moreover, since 2023, the observed healthcare cost trend has exceeded projections by increasing amounts, too, suggesting employers do not understand their healthcare costs well enough to effectively model them. This is not the worst period of cost growth we have seen in American healthcare, as premium increases in the early 2000s outpaced inflation by over 500 percent, but it feels like an “existential reckoning” for employers.

Healthcare’s cost drivers are well-known: rising utilization from an aging, chronically ill population; rising pharmaceutical costs, most notably cancer-treating specialty-pharma biologics and the rabidly popular GLP-1s; and rising prices charged by providers, who are consolidating in response to their own cost constraints. Every year, employers cry out for solutions to these problems, but no one has developed a model that has proven deflationary and sustainable. Eventually our system could reach a breaking point, but we see no signs that present trends will not continue, despite the increasing dissatisfaction of employers and workers.

3. Eli Lilly sues to prevent black-market sales of unapproved weight-loss drug.

Eli Lilly filed six lawsuits against med spas, a compounding pharmacy, and other vendors marketing counterfeit retratrutide, a medication Lilly is developing that has helped people lose up to 30 percent of their body weight in Phase III trials but does not have FDA approval.
The FDA has also sent warning letters to companies marketing illegal retratrutide, but Eli Lilly is calling for stronger enforcement actions to prevent these black-market sales.

TrustWorks Take: The demand for next-gen weight-loss drugs is so insatiable that consumers are buying counterfeit versions of a drug that has not received FDA approval because it may be even more potent than the blockbuster drugs on the market. The med spas and influencers marketing these black-market drugs are clearly putting patients at risk, but the FDA lacks the funding to pursue proper enforcement. The gray market for semi-legal healthcare products has flourished under the Trump administration, which has also moved to make it easier to buy and sell unregulated and under-researched peptides, leaving consumers on their own to determine what products are safe and which vendors are trustworthy.

Beyond the Whiteboard

Visualizing key trends from the healthcare industry

The Un-Elimination of Measles
Two residents of Pennsylvania recently became the first US measles deaths this year. Both were unvaccinated, and one was an infant. In Lancaster County, where they lived, the share of children receiving the measles, mumps, rubella (MMR) vaccine fell from 95.5 percent in 2017 to 87.6 percent last year, well below the herd immunity threshold of 95 percent. We see this same trend playing out across the country, where the number of states with at least 95 percent of kindergarteners vaccinated for MMR has dropped from 20 in 2019 to 10 in 2025. In 24 states, the vaccine exemption rate, which includes medical and non-medical reasons, has surpassed five percent, meaning that even universal vaccination among all non-exempt kids would not be sufficient to achieve herd immunity. Under these conditions, which have resulted in over 2,000 confirmed measles cases for the second year in a row, experts predict we will lose our measles elimination status when it is reevaluated in November. One of the most frustrating aspects of this is that vaccines remain broadly popular with the American public, but it only takes about five percent of parents opting out of routine vaccinations to cause a public health problem for everyone, especially infants too young to be vaccinated.

Dialing In

Sharing insights from our work with clients

Epic Going All in on Dr. AI
Last week I was in Madison, WI to meet with health system executives attending Epic’s annual User Group Meeting. What struck leaders in the audience the most was how “AI-forward” Epic has leaped. One physician leader reported, “It’s not just AI for administrative tasks or clinical decision support. They’re embracing agentic AI for clinical care and, honestly, clinician replacement. It was making a lot of people uncomfortable.” She was referring to Epic’s Ergo, which will unite all its outpatient AI solutions into a single platform, something Garrett Adams, senior VP of R&D described loftily as “the connection point between the ‘I think’ and the ‘I am’; between consciousness and reality or existence.”

As Epic is positioning to compete with OpenAI, Anthropic, and other tech companies in healthcare AI, a JAMA perspective paper made the argument that agentic AI is already outperforming physicians on five key cognitive tasks, including developing differential diagnoses and recommending guideline-concordant treatment. Their conclusion: “human in the loop” may not be best practice because we humans are dragging AI down. As author Dr. Ezekiel Emanuel wrote, “That in the near future AI-alone may provide better patient care than physicians or physician-controlled hybrids at 5 fundamental cognitive medical tasks is unsettling but seems probable.” Every doctor in America should read this paper, discuss it with their colleagues, and be prepared to engage productively with the prospect of agentic and autonomous AI medicine. If physicians don’t engage quickly, the future of healthcare AI will be determined by tech companies.

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Destination Regulation