President Biden Signs an Executive Order on Competitive Drug Pricing

On July 9, 2021, President Biden signed an expansive Executive Order on Promoting Competition in the American Economy (Order). The Order addresses several issues and areas of the economy in which the Biden Administration (Administration) plans to spur competition to promote small business, worker, and consumer interests. Among the many issues that Order addresses is the cost that healthcare consumers pay for prescription drugs and healthcare services. The Order sets out several administrative policies meant to decrease prescription drug prices.

According to the Biden Administration, President Biden’s Order identifies several factors that have weakened competition in the marketplace.

The purpose of the Order is to spur competition in the economy at large. The Order says that excessive concentration in industries have led to less competition and rising costs to consumers. It states that the Administration must increase efforts to enforce antitrust laws to stem consolidation. According to the Order, the Administration will also support legislation aimed at increased competition in markets. Finally, the Order establishes specific policies targeted at the prescription drug industry.

The Order introduces several initiatives aimed at reducing prescription drug prices and increasing competition in the pharmaceuticals market.

The Executive Order has a few policies that it states will spur competition, lowering the cost of prescription drugs. The Administration’s first initiative is to encourage the Federal Trade Commission (FTC) to exercise its rulemaking authority to inhibit practices that unfairly impede competition in the prescription drug industry. Specifically, the Order directs the FTC Chair to draft rules that deter or prohibit conduct or agreements that delay the market entry of generic drugs or biosimilars into the pharmaceutical market.

The Order directs the Federal Drug Administration (FDA) to write a letter to the U.S. Patent and Trade Office (PTO).

According to the Order, the FDA Commissioner must draft a letter to the PTO detailing concerns of the FDA relating to the patent system and the patenting of prescription drugs. The Order states that the FDA’s letter should describe how the patent system should incentivize innovation while not delaying generics from competing in the market beyond a reasonable delay as contemplated by applicable law.

The Order directs federal agencies to take actions meant to reduce prescription drug costs.

A provision of the Order directs the Centers for Medicare & Medicaid Services (CMS) to prepare for Medicare and Medicaid coverage of interchangeable biological products. Based on the Order’s directive, CMS must create payment models that support an increase in the use of generic and biosimilar drugs. A provision of the Order directs the Department of Health and Human Services (HHS) to draft a report to the White House within 45 days. The report must provide the Administration with a proposal to combat excessive drug pricing and enhance domestic pharmaceutical supply chains. The HHS report must also address how the federal government can reduce the prices it pays for prescription drugs and address the recurrent price-gouging problem. HHS is also ordered to show support for more generic and biosimilar drugs. In addition, the Order directs HHS to support generics and biosimilars by being more efficient in the approval of generics and biosimilars, clarifying the standards for interchangeability, and creating a campaign to educate relevant parties on the efficacy of biosimilars and generics. HHS is also directed to further implement the Creating and Restoring Equal Access to Equivalent Samples Act of 2019 (CREATES). The 2019 CREATES Act promotes competition in the prescription drug market by facilitating more efficient entry of lower-cost generics to market.

In this Order, there are provisions affirming that the Biden Administration plans to continue the initiatives proposed by and during the Trump Administration.

Part of the policy that HHS must create will likely involve continuing the Trump Administration’s Section 804 Importation Programs. Section 804 Importation Programs allow the importation of certain approved generic drugs from Canada. According to the Order, the FDA Commissioner must partner with the States and Indian Tribes to develop the Section 804 Importation Programs to reduce the cost of products that the rules cover.

This latest Executive Order does not create any requirements for health plans and insurers, but its policies aimed at lowering the cost of drugs may reduce claim and premium costs.

The pharmaceutical industry’s most prominent industry group, the Pharmaceutical Research and Manufacturers of America (PhARMA), argues that the initiatives detailed in President Biden’s Order are unnecessary because the U.S. has the world’s most competitive market for prescription drugs. PhARMA previously filed a lawsuit seeking to block HHS from importing Canadian drugs shortly after the Trump Administration proposed the Section 804 Importation Program. It claims to be prepared to work to reach common-sense solutions that will lower the out-of-pocket costs consumers pay for prescription drugs. The President’s Order proposes several initiatives that should help increase competition which should, in turn, lead to lower prescription drug costs. These lower costs should reduce what plans pay out for claims. The lower claim costs should translate into lower premiums and out-of-pocket costs for plan participants. Expect more information and articles on lowering drug costs as the agencies release their required rules and proposals.

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