On July 9, 2021, President Joe Biden issued an Executive Order (the “Order”) designed to promote competition in the American economy. The Order describes the administration’s concerns with competition in several markets, including healthcare, noting that industry consolidation has exacerbated racial, income and wealth inequality and emphasizing that robust competition is critical to the United States economy.
In this Order, to combat these concerns, the Biden administration affirms (i) its policy to support legislative reforms that would lower prescription drug prices, including by allowing Medicare to negotiate drug prices and by imposing inflation caps; and (ii) its policy to support the enactment of a public health insurance option.
The Order itself establishes 72 initiatives across multiple federal agencies. Many of these directly affect prescription drugs, hospital consolidation and price transparency, and access to health insurance. We describe these below.
1. Prescription Drugs
- Prescription Drug Importation. The Order directs the Food and Drug Administration (“FDA”) to work with states to develop prescription drug importation plans pursuant to the Medicare Modernization Act of 2003 and FDA’s related implementing regulations. This signals continued support of a Trump-era FDA rule that provides guidance for states to build and submit importation plans for drugs from Canada.
- Reducing the Price of Drugs. The Order directs the U.S. Department of Health and Human Services (“HHS”) to submit a report to the White House Competition Council within 45 days of the Order. This report must include a plan to combat excessive pricing of prescription drugs, to enhance the domestic drug supply chain, to reduce the price that the Federal government pays for drugs, and to address price gouging in the industry.[1]
- Support for Generics and Biosimilars. In order to lower the price of prescription drugs and promote generic and biosimilar competition, the Order includes several instructions that charge various agencies with additional tasks to protect generics and biosimilar products.
- Instructions to FDA:
- Improve the framework for approving generic drugs and biosimilars such that the process is more transparent, efficient, and predictable, including clarifying the standards for interchangeability of biological products;
- Develop effective educational materials to help providers, patients, and caregivers better understand biosimilar and interchangeable products;
- Update the agency’s regulations to clarify existing requirements and procedures related to the review of biologics applications;
- Prepare a letter to the Commerce Department and U.S. Patent & Trademark Office that lists and describes the agency’s concerns with respect to the patent process as it applies to generics and biosimilar; and
- Clarify existing requirements and procedures related to the review and submission of Biologics License Applications by advancing “Biologics Regulation Modernization” rulemaking (RIN 0910-AI14), a Trump-era FDA proposed rule that would clarify the requirements and procedures necessary to file a Biologic License Application and support the abbreviated pathway created by the Biologics Price Competition and Innovation Act.
- Improve the framework for approving generic drugs and biosimilars such that the process is more transparent, efficient, and predictable, including clarifying the standards for interchangeability of biological products;
- Instructions to the U.S. Federal Trade Commission (“FTC”):
- Specifically call out misleading and deceptive statements made about the safety and effectiveness of generics and biosimilars; and
- Issue rules that ban “pay for delay” agreements whereby name-brand drug makers offer patent settlements to pay generic companies to not bring lower cost alternatives to the market.
- Specifically call out misleading and deceptive statements made about the safety and effectiveness of generics and biosimilars; and
- Instructions to HHS:
- Implement the CREATES Act of 2019 by issuing Covered Product Authorizations[2] to help product developers obtain brand-drug samples, including guidance the industry about these authorizations.
- Implement the CREATES Act of 2019 by issuing Covered Product Authorizations[2] to help product developers obtain brand-drug samples, including guidance the industry about these authorizations.
- Instructions to Centers for Medicare and Medicaid Services (“CMS”):
- Prepare for Medicare and Medicaid coverage of interchangeable biological products and for payment models to support increased utilization of generics and biosimilars.
- Instructions to FDA:
In short, the Order includes a comprehensive, multi-agency proposal to help lower drug pricing and improve access to generics and biosimilars.
2. Hospital Consolidation and Price Transparency
The Order outlines the Biden Administration’s concerns with hospital consolidation, stating that consolidation has left rural communities with inadequate healthcare options.
With respect to hospitals, the Order encourages the U.S. Department of Justice and FTC to review and revise merger guidelines to ensure patients are not harmed by hospital consolidation. This directive comes roughly one week after the FTC voted to prioritize investigations into technology companies and digital platforms, and healthcare businesses such as pharmaceutical companies, pharmacy benefits managers, and hospitals.[3]
The Order also directs HHS to support existing hospital price transparency rules. This directive comes after a CMS announcement in April stating that CMS has begun auditing hospitals’ website and complaint submissions. CMS has confirmed that the agency has started sending warning letters to hospital it deems out of compliance with the Hospital Price Transparency Rule in April 2021.[4]
The Order further directs HHS to finish implementing federal legislation to address surprise hospital billing.[5] This directive comes roughly one week after HHS issued an interim final rule implementing the first of several requirements in the No Surprises Act, which was enacted December 27, 2020.
3. Health Insurance
The health insurance marketplace is also subject to the sweeping Order, which directs HHS to standardize plan options in the National Health Insurance (ACA) Marketplace. The idea is to help ensure Americans can compare prices across health plans more easily and choose health plans that meet their needs.
4. Hearing Aids
Finally, the White House is focused on lowering the high cost of care, including the high cost of hearing aids, which are typically not covered by health insurance. Part of this cost is driven by the fact that hearing aids are unavailable over the counter, even though — according to the White House — experts agree that medical evaluation is not necessary and amounts to “red tape,” and “a barrier to more companies selling hearing aids.” This affects approximately 12% of Americans. The Order directs HHS to issue proposed rules within 120 days of the Order that would allow hearing aids to be sold over the counter.
What to Expect
It is unclear how swiftly the federal government will move on the Order’s directives. While the Order instructs federal agencies to start work on these issues immediately, there are only two clear deadlines related to healthcare reform. Namely, HHS has been tasked with issuing a comprehensive plan within 45 days to combat high prescription drug prices and price gouging and to issue proposals within 120 days to permit over the counter hearing aid sales. However, the Order also signals the following Biden administration priorities:
- Support for rules and regulations enacted during the Trump administration that are directed at lowering prescription drug prices;
- Increased enforcement of the Hospital Price Transparency Rule;
- Increased scrutiny of hospital mergers; and
- Expanded access to and/or coverage of basic medical equipment (like hearing aids) and to generic and biosimilar drug products.
Matthew Salit was a contributing author to this alert.
[1] In recent years, prices of certain drugs have dramatically increased. For example, the anti-parasite drug Daraprim jumped from $13.50 to $750 per pill and a generic version of the antidepressant Prozac jumped from $9 per bottle to $69 per bottle.
[2] “Covered Product Authorizations” refers to the application of any “Covered Product,” defined as “(i) any drug approved under subsection (c) or (j) of section 505 of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355) or biological product licensed under subsection (a) or (k) of section 351 of the Public Health Service Act (42 U.S.C. 262);” or (ii) any combination of a drug or biological product as previously described. See Further Consolidated Appropriations Act, 2020, PL 116-94, December 20, 2019, 133 Stat 2534.
[3] See FTC Authorizes Investigations into Key Enforcement Priorities, Press Release (July 1, 2021).
[4] See CMS warns hospitals that aren’t disclosing payer-negotiated prices, Modern Healthcare (May 7, 2021).
[5] Consolidated Appropriations Act, 2021, PL 116-260, December 27, 2020, 134 Stat 1182.