Merle M. DeLancey Jr.
On July 9, President Biden signed Executive Order 14063, designed to promote competition in the American economy with the goal of lowering prices for families, increasing wages for workers, and promoting innovation and even faster economic growth. The Order is expansive—requiring more than 12 federal agencies to pursue 72 initiatives. One of the Order’s prominent targets is drug pricing. At the signing ceremony, President Biden reiterated that “Americans pay two-and-a-half times more for prescription drugs than in any other leading country,” and “nearly one in four Americans struggles to afford their medication.” We have heard similar words multiple times before over many years, however, to date, there has been little progress.
The Order’s initiatives focusing on drug prices do not appear very different from similar efforts in recent years. First, the Order calls on the Department of Health and Human Services (“HHS”) to create a plan within 45 days to combat “excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the federal government for such drugs, and to address the recurrent problem of price gouging.” While perhaps a good sound bite, this initiative is not new. In fact, it sounds similar to the Trump administration’s “Most Favored Nation” drug pricing initiative under which Medicare reimbursement for certain drugs would be based on lower prices in other countries. The call for a plan to be delivered in 45 days is curious since it is reported that HHS delivered a new, Biden administration, most favored nation drug pricing rule to the Office of Management Budget for review earlier last week. Perhaps the plan will address how the Biden administration can implement this policy and avoid being bogged down in litigation.
Continue reading “Biden Administration Initiatives to Rein in Drug Prices—Déjà vu All Over Again”
Merle M. DeLancey Jr., Craig Stetson*, and Jennifer A. Short
In our last post on this topic, we touched on how the acceptance, use, and forgiveness of Paycheck Protection Program (“PPP”) loans can be viewed in the context of a Defense Contract Audit Agency (“DCAA”) audit. This post focuses on audits and investigations involving PPP loans. Close scrutiny of PPP loans is not a prediction; it is reality. The Small Business Administration (“SBA”) has announced it will audit all PPP loans in excess of two million dollars following a lender’s submission of a borrower’s loan forgiveness application, and it reserves the right to “spot check” any PPP loan of a lesser amount at its discretion. The Department of Justice has already charged multiple individuals with PPP fraud. And this is just the beginning of what many think will be a tidal wave of enforcement activity involving PPP loans.
Overview of the PPP
The PPP is the largest relief measure for small businesses under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The government has made available nearly one trillion dollars in PPP relief funds through four separate funding measures ($349 billion via the CARES Act; $310 billion via the PPP and Health Care Enhancement Act; $284 billion via the Consolidated Appropriations Act of 2021; and $7.25 billion via American Rescue Plan Act of 2021).
The PPP makes available guaranteed SBA loans to small business that meet certain eligibility requirements. In addition, PPP loans can be forgiven fully if used properly to cover specified business expenses such as payroll, rent, utilities, mortgage interest, and other limited uses. As of April 11, 2021, the SBA had approved more than 9.5 million loans totaling more than $755 billion using more than 5,400 lenders.
Continue reading “Paycheck Protection Program Audits Are Upon Us—Borrowers Prepare!”
Merle M. DeLancey Jr. and Craig Stetson*
This is the third in a series of posts regarding what we believe will be an onslaught of government investigations and audits of COVID relief funds and contracting. Previously, we identified likely categories of programs, contracts, and companies the government might investigate or audit. Below, we discuss the Defense Contract Audit Agency’s (“DCAA”) current direction, interests, and initiatives related to contractors’ receipt of COVID relief funds and the impact an uncertain business environment may have on government contract pricing and costing forecasts.
COVID Relief Funds
The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) funding opportunities come with unique government contract compliance requirements and financial reporting obligations. The funding is not “free” and may result in financial consequences to unwary contractors. DCAA knows this and will be conducting audits to test contractors’ compliance with unique relief fund requirements. Contractors unaware of these accounting and reporting requirements risk DCAA questioning or denying costs.
In January 2021, DCAA issued an audit alert to its regional offices pertaining to COVID relief legislation and regulation. The audit alert includes frequently asked questions and answers (“FAQs”) concerning contractors’ request or receipt of COVID relief funding. Originally released last summer, the FAQs have been revised and expanded several times. The FAQs telegraph DCAA’s position on various instances where COVID relief funding intersects with or impacts government contract cost accounting and compliance.
Continue reading “COVID-Related Audits and the DCAA’s New Audit Direction”
Merle M. DeLancey Jr. and Craig Stetson*
This is the second in a series of posts regarding what we believe will be an onslaught of government investigations and audits of COVID relief funds and contracting. Previously, we identified the government offices that will be conducting the investigations and performing the audits. Below, we identify three categories of programs, contracts, and companies we believe are more likely to be investigated or audited.
The first group of companies ripe for audits are those accepting COVID relief funding and contractors performing large COVID-specific contracts, as well as contractors performing traditional government contracts that entail certain COVID-related twists impacting performance.
Companies accepting COVID relief funds are likely at the top of auditors’ lists for several reasons. First, because of the magnitude of funds at issue. Second, due to the complex and ambiguous eligibility, use, and reporting requirements. For example, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) and supplemental legislation appropriated funds to reimburse eligible healthcare providers for healthcare-related expenses or lost revenues attributable to COVID. Receipt of funds was easy. Most recipients’ funds were automatically deposited into their bank accounts. But healthcare provider recipients have not yet been required to file reports attesting to the proper utilization of the relief funds. Relief funds recipients in other non-healthcare industries may also be affected. Certain monies received under the CARES Act also involve ongoing and downstream reporting requirements by companies regarding statutory limitations on compensation paid to certain employees and the receipt of a variety of potential tax credits. Thus, recipients’ use of funds has not been tested, and it is unlikely that all usage has been in compliance with the ambiguous requirements and multiple rounds of agency guidance and interpretations.
Continue reading “The Likely Targets of COVID-Related Audits and Investigations”
Merle M. DeLancey Jr.
During 2019 and 2020, states enacted fewer laws requiring drug manufacturers to disclose pricing and related information. Initially, the slowdown may have been due to federal actions to rein in drug prices through the Trump administration’s multiple executive orders. Thereafter, states were focused on responding to the pandemic and drug pricing was understandably placed on the back burner.
Circumstances have since changed. We now have a new president and administration, and the country is hopefully turning the corner on the COVID-19 pandemic. Inevitably, the federal government and states will again turn their focus to drug prices. While the Trump administration’s executive orders made for good public sound bites, they had little to no actual impact on drug prices. At the end of the day, most of the Trump administration’s initiatives never made it to the regulatory rulemaking phase and those that did were met with legal challenges.
Only a month in, the Biden administration has issued multiple executive orders and memoranda reversing prior executive orders and freezing pending regulations and enforcement policies with respect to existing regulations. After a brief discussion of what we have seen in the early days of the Biden administration in terms of drug pricing, this article reviews new and existing state laws requiring drug manufacturers to report pricing and other information. Thereafter, we again question the efficacy of the state price transparency efforts and what manufacturers should be doing in terms of compliance.
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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. Continue reading “Biden Administration Already Impacting Drug Prices”
Jay P. Lessler, John M. Clerici, and Merle M. DeLancey Jr.
President-elect Biden plans to nominate California Attorney General Xavier Becerra to serve as Secretary of the U.S. Department of Health and Human Services (“DHHS”). The current Administration has frustrated the pharmaceutical industry with numerous Executive Orders and proposed rules and regulations trying to impact drug pricing. DHHS’s interim final rule implementing a Most Favored Nations Model (i.e., an international pricing index) for reimbursement of certain Medicare Part B drugs is the most recent example.
Numerous pundits suggested that pharmaceutical companies manufacturing vaccines and other drugs to respond to the COVID-19 pandemic waited until after the November election to announce their progress. The rationale was that the companies would prefer working with a Biden Administration rather than suffer through four more years of acrimony with the Trump Administration. The Becerra announcement, however, could indicate the pharmaceutical industry is not yet out of the woods. Continue reading “What Could a DHHS Secretary Becerra Mean for the Pharmaceutical Industry?”
Merle M. DeLancey Jr.
On Sunday, while everyone was watching the return of NFL football, the Administration was busy fulfilling a promise it made in July to lower drug prices paid by the United States and Medicare beneficiaries by tying pricing to certain foreign countries.
In July, the Administration issued three Executive Orders concerning drug pricing and access to critical therapies. At that time, the Administration also announced that, unless the pharmaceutical industry proposed a plan that would decrease prices paid by Medicare Part B by August 24, the Administration would move forward with its own plan. Apparently, no agreement with the industry was reached because on Sunday the Administration announced its own plan.
In what is being called the “Most Favored Nations” Executive Order, the Administration is re-starting its efforts to reduce the prices the United States pays for drugs under Medicare Parts B and D. The Order uses the “most-favored-nation price” as the benchmark for prices to be paid by the United States. Most-favored-nation price is defined as the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a comparable member country of the Organisation for Economic Co-operation and Development (“OECD”).
Perhaps most surprising is the increased scope of the Order. The Order goes beyond what was proposed in July by seeking to link not only Medicare Part B drug prices but also Medicare Part D prices to lower prices paid by other countries. With respect to both Medicare Parts, the Department of Health and Human Services’ (“HHS”) “payment model” is to test whether poor clinical outcomes improve as a result of patients paying lower prices—no more than the most-favored-nation prices—for certain high-cost pharmaceuticals and biologics.
While the Order makes for a snappy sound bite, any potential benefits of lower drug prices will not be seen anytime soon. First, HHS will need to complete its rulemaking, which could have its own challenges. For example, in November 2018, HHS published an Advance Notice of Proposed Rulemaking (“ANPR”) proposing to implement an international reference pricing payment model for use by Medicare and Medicaid. Ultimately, nothing became of the ANPR. Even then, implementation of the contemplated programs is precarious. Industry opposition to the Order has been palpable and any HHS plan will likely face legal challenges that could substantially delay implementation.
Merle M. DeLancey Jr. and John M. Clerici
On August 6, 2020, President Trump issued another Executive Order (“EO”) that will likely have dramatic and long-lasting effects on the pharmaceutical industry. The impact of the EO may be far greater than currently anticipated. It is well-considered, well drafted, and structured in a way that is likely to survive if there is a change in Administration. The EO will have a greater and immediate impact on Medical Counter Measures (“MCMs”) for chemical, biological, radiological, and nuclear threats, and emerging infectious diseases than on Essential Medicines. The inclusion of Critical Inputs (i.e., active pharmaceutical ingredients (“API”)) and starting materials potentially makes the impact far reaching, especially when coupled with the significant funding from the federal government to support onshoring efforts as a result of the COVID-19 pandemic. Continue reading “Executive Order Regarding Domestic Production and Purchase of Essential Medicines: A Lot to Unpack and More Than Meets the Eye”
Merle M. DeLancey Jr.
On July 24, 2020, President Trump signed three Executive Orders aimed at lowering prescription drug costs and increasing patients’ access to life-saving medications. A fourth Executive Order was discussed, which could reduce the prices Medicare Part B pays for drugs based upon international prices, unless the pharmaceutical industry implements measures in the next 30 days. Leaving politics and rhetoric aside, below are the key facts regarding the Executive Orders.
First Executive Order: Access to Affordable Life-Saving Medications
The Order: Click here to view the Order.
Effective Date: July 24, 2020
Purpose: Requires Federally Qualified Health Centers (“FQHCs”) to pass on the discounted prices they pay for insulin and epinephrine to low income patients. FQHCs are federally funded, community-based health care providers serving low income patients and underserved areas. Under the Health and Human Services’ (“HHS”) 340B Drug Discount Program, drug manufacturers charge FQHCs statutorily discounted prices, sometimes as low as $0.01, for drugs including insulin and epinephrine. But FQHCs are not required to pass on the discounted prices to their patients. This Executive Order requires FQHCs to make insulin and epinephrine available to their patients at the price paid by the FQHC. The FQHC is permitted to charge a minimal administration fee. Continue reading “Recent and Possible Executive Orders on Drug Pricing: What You Need to Know”