Biden Administration Already Impacting Drug Prices

Merle M. DeLancey Jr.

The Trump administration issued numerous Executive Orders seeking to rein in drug prices. (See Recent and Possible Executive Orders on Drug Pricing: What You Need to Know – Government Contracts Navigator and Administration Issues Executive Order Tying Medicare Drug Costs to International Prices – Government Contracts Navigator.) While the Executive Orders made for good sound bites, none of them actually impacted drug prices. At the end of the day, most of the Trump administration initiatives never made it to the regulatory rulemaking phase, and those that did were met with legal challenges. Since then, in less than a month since taking office, the Biden administration has issued multiple Executive Orders and memoranda reversing the Trump-era Executive Orders and freezing pending regulations and enforcement policies with respect to existing regulations. Beginning on its first day, the Biden administration took action impacting drug prices and potentially signaled, directly or indirectly, the polices we may see over the next four years. The new administration’s actions have continued at a rapid pace.

First, on January 20, President Biden issued a “regulatory freeze” memorandum halting the previous administration’s “midnight regulations” and revoking certain Executive Orders. The memo instructed agencies to withdraw any last-minute rules not yet published and postpone for 60 days the implementation of published rules that had not yet taken effect. With respect to drug prices, the memo:

      • Delayed implementation of a Department of Health and Human Services (“HHS”) Office of Inspector General regulation issued pursuant to Executive Order 13939 that prohibited drug manufacturers from providing rebates to pharmacy benefit managers and insurers. 84 FR 2340. The regulation encouraged drug companies to provide discounts directly to patients at the pharmacy counter. This would have been a radical change in the way most drugs are priced and reimbursed under Medicare and Medicaid. The regulation was not revoked; rather, its implementation delayed until 2023.
      • Paused an HHS regulation requiring Federally Qualified Health Centers (“FQHC”), which primarily treat underserved communities, to pass on discounts they receive on insulin and epinephrine products to their patients. 85 FR 83822. Based on Executive Order 13937, the rule would have only affected insulin and epinephrine product prices purchased through the Public Health Service (“PHS”) 340B drug discount program, not the prices of these drugs for the general public. The effective date of the rule was delayed 60 days until March 22.

Second, although not covered by the regulatory freeze memo, the Biden administration is expected to abandon two drug pricing-related policies implemented through prior Executive Orders.

      • In November 2020, HHS issued a final rule that would have tied the reimbursement amount for certain drugs under Medicare Part B to foreign pricing indices. 85 FR 76180. The final rule was based on Executive Order 13948, the so-called “Most Favored Nations” Rule. Attempted implementation of the regulation has been enjoined by no fewer than three federal courts. Rather than revoking the rule, the Biden administration’s Department of Justice is expected withdraw opposition to the injunctions.
      • Pursuant to Executive Order 13938, in September 2020, HHS published a final rule establishing a path for, among other entities, states to set up drug importation programs. 85 FR 62094. In November 2020, the Pharmaceutical Research and Manufacturers of America (“PhRMA”) moved to block implementation of the final rule. While the Biden administration, including new HHS Secretary Xavier Becerra, have supported lower drug prices through importation, it remains to be seen whether the Biden administration will defend a “Trump policy” or whether the administration will withdraw the rule and issue a new Biden importation rule.

Other drug pricing issues are sure to arise during the Biden term, including whether to reverse the existing law that prohibits Medicare from negotiating lower prices with drug manufacturers. Similarly, whether the federal government should use “march-in rights,” also known as “compulsory licensing,” as a tool to lower drug prices–an approach supported by Secretary Becerra and Senator Elizabeth Warren—is also likely to be considered. (See What Could a DHHS Secretary Becerra Mean for the Pharmaceutical Industry? – Government Contracts Navigator.)

Everyone should stay tuned to see if or how the Biden administration tackles drug pricing. Will it take a hard-nosed, antagonistic approach, like that of the Trump administration, which ultimately was not successful? Alternatively, will the Biden administration seek to establish a more cordial relationship with the pharmaceutical industry in the hopes of implementing some form of pricing controls? Only time will tell.