Hannah Elson, a Morrison & Foerster summer associate in our Washington D.C. office, contributed to the writing of this article. 

On July 9, 2021, President Biden enacted a sweeping executive order creating a "whole-of-government competition policy." Morrison & Foerster outlined the administration's policy in a recent client alert that provides a comprehensive summary of the efforts to change both the substance and the approach of the federal government to U.S. competition policy. Among the many initiatives addressed to more than a dozen federal agencies, the executive order seeks to combat increased market concentration and rising prices in prescription drugs and devices, health insurance, and hospital markets.

The executive order's healthcare initiatives instruct federal agencies to undertake projects as varied as standardizing healthcare options in the national Health Insurance Marketplace to proposing a rule to permit over-the-counter sales of hearing aids. It also encourages the Department of Justice (DOJ) and the Federal Trade Commission (FTC) to review and consider revising their merger guidelines to better address increased costs and inadequate options caused by hospital mergers, particularly in rural areas, and instructs the Department of Health and Human Services (HHS) to implement the price transparency initiatives required by the No Surprises Act. 

However, the focus of the executive order's directives for the healthcare industry are designed to address drug-pricing concerns. The most significant new proposal directs FTC to consider exercising its statutory rulemaking authority to address "unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars."  President Biden also commits his administration to lowering prescription drug prices through "aggressive legislative reforms" such as allowing Medicare to negotiate drug prices, imposing inflation caps, and supporting a public health insurance option.

Other new policies include directing HHS to submit a plan within 45 days to combat excessive pricing, enhance domestic pharmaceutical supply chains, and address the "recurrent problem of price gouging," as well as directing the FDA commissioner to write a letter to the Patent and Trademark office within 45 days outlining any concerns regarding whether the patent system unjustifiably delays generic and biosimilar competition.

Many provisions in the executive order relating to drug pricing direct HHS and FDA to continue existing policy, including:

  • Directing HHS to continue increasing the transparency, efficiency, and predictability of the approval framework for generic drug and biosimilars, in order to promote competition and lower prices for those products by continuing to implement the FDA's Drug Competition Action Plan of 2017 and Biosimilar Action Plan of 2018;
  • Clarifying the standards for interchangeability of biosimilars;
  • Improving the understanding of biosimilar and interchangeable products among healthcare providers, patients, and caregivers;
  • Continuing to update the FDA's biologics regulations to clarify existing requirements and procedures related to the review and submission of Biologics License Applications by advancing the "Biologics Regulation Modernization" rulemaking; 
  • Working with the FTC to identify and address false, misleading, or otherwise deceptive statements about generic drug and biosimilar products and their safety or effectiveness;
  • Continuing to implement the CREATES Act of 2019 by issuing Covered Product Authorizations promptly and issuing guidance for industry; and
  • Requiring the administrator of the Centers for Medicare and Medicaid Services (CMS) to "prepare for Medicare and Medicaid coverage of interchangeable biological products, and for payment models to support increased utilization of generic drugs and biosimilars."

Notably, the executive order also directs HHS to continue implementing the controversial Importation of Prescription Drugs rule, which was finalized in President Trump's last months in office. The rule is subject to litigation in federal court that the Biden administration has continued defending. Just a few days before issuance of the executive order, the Biden administration pulled two other Trump-era proposals to allow the reimportation of insulin and broad personal importation from anywhere. FDA reportedly said it pulled the proposals because it had not received any proposals in response to the request for proposals, but was considering other options.

Last week CMS also submitted to the Office of Management and Budget (OMB) a new, economically significant proposed rule called "Most Favored Nation (MFN) Model," which likely is the newest proposal of the rule President Trump issued to tie Medicare Part B drug prices to those paid in other wealthy countries. The previous rule was issued in the final days of the Trump administration without notice and comment and was enjoined by a federal court in Baltimore for violating the Administrative Procedure Act. While the newest MFN proposal from CMS may be a negotiating tool to prompt action from Congress, it could be a sign that President Biden is continuing some of the most aggressive and controversial of the Trump administration's drug pricing initiatives.

These recent actions on drug importation and the MFN proposal, combined with the proposals in the Executive Order on Promoting Competition in the American Economy, demonstrate the Biden administration intends to keep the pressure on drug pricing.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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