Biden Executive Order Targets Competition to Lower Drug Prices

WASHINGTON — President Biden’s executive order on improving competition in the prescription drug arena and other economic markets was interesting not just for what was in it, but also for what wasn’t there, according to one expert.

“The policy does nothing to restrain the cost of the priciest Part B drugs by policies such as using AMP [average manufacturer price] rather than ASP [average sales price] to reimburse hospital outpatient clinics, as the MMA [Medicare Modernization Act] allows, or proposing legislation to impose an inflation penalty on Part B drugs,” Marsha Simon, PhD, president of Simon & Co., a consulting firm specializing in pharmaceutical issues, said in an email to MedPage Today. “The latter proven policy is largely responsible for reducing the cost of drugs to state Medicaid programs by 50% and is included in the House leadership and Senate bipartisan bills.”

In addition, “despite losses in the lower courts, this administration has pursued the Trump policy of clawing back 340B savings from safety-net hospitals when a better alternative would be to share savings between the hospitals and the Medicare program,” said Simon.

The 340B program is one in which drugmakers are required to sell their products at lower prices to hospitals that treat a lot of low-income patients. “Why pursue a policy that reimburses safety-net hospitals less than those that serve fewer low-income seniors and persons with disabilities?” Simon said.

The executive order, signed last Friday, contained a number of provisions dealing with drug pricing, including:

• Urging the chair of the Federal Trade Commission (FTC) to work with commission members to “exercise the FTC’s statutory rulemaking authority… in areas such as unfair anticompetitive conduct or agreements in the prescription drug industries, such as agreements to delay the market entry of generic drugs or biosimilars”
• Asking the HHS secretary to submit a report to the administration within 45 days “with a plan to continue the effort 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”
• Also asking the HHS secretary to “lower the prices of and improve access to prescription drugs and biologics [and to] continue to promote generic drug and biosimilar competition” by making generic drug and biosimilar approval more “transparent, efficient, and predictable, including improving and clarifying the standards for interchangeability of biological products”
• Ordering the FTC chair and HHS secretary to work together to “identify and address any efforts to impede generic drug and biosimilar competition, including but not limited to false, misleading, or otherwise deceptive statements about generic drug and biosimilar products and their safety or effectiveness”
• Requiring the FDA commissioner to write to patent and trademark officials about relevant concerns in order to “help ensure that the patent system, while incentivizing innovation, does not also unjustifiably delay generic drug and biosimilar competition beyond that reasonably contemplated by applicable law”
• Asking the administrator of 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”
• Asking the FDA commissioner to work with states and tribal organizations that want to develop drug reimportation programs

“Americans are paying too much for prescription drugs and healthcare services — far more than the prices paid in other countries,” Biden said in the executive order. “Hospital consolidation has left many areas, particularly rural communities, with inadequate or more expensive healthcare options. And too often, patent and other laws have been misused to inhibit or delay — for years and even decades — competition from generic drugs and biosimilars, denying Americans access to lower-cost drugs.”

He added that his administration intends to “enforce the antitrust laws to combat the excessive concentration of industry, the abuses of market power, and the harmful effects of monopoly and monopsony — especially as these issues arise in labor markets, agricultural markets, [and] healthcare markets (including insurance, hospital, and prescription drug markets).”

Biden noted that “it is also the policy of my administration to support aggressive legislative reforms that would lower prescription drug prices, including by allowing Medicare to negotiate drug prices.”

Ian Spatz, JD, senior advisor at Manatt Health, a New York City-based professional services firm, remained cautious about the order’s effects.

“Like any executive order, this is more about signaling priorities than about legally binding changes,” he said in an email . “For prescription drugs, the executive order lists many items that are already in the works. Most impactful may be its call for creating standardized health plans in the ACA [Affordable Care Act] exchanges. How those plans treat prescription drug coverage could be impactful.”

The American Hospital Association (AHA) was less circumspect.

“Today’s executive order falls short in several ways,” AHA president and CEO Rick Pollack said in a statement released on Friday. “It does not recognize the exceptional value and essential services health systems provide to their patients and communities each day,” especially during the COVID-19 pandemic. “Additionally, it is important to stress that hospital mergers and acquisitions undergo an enormous amount of rigorous scrutiny from the federal antitrust agencies and state attorneys general.”

“Finally, contrary to statements in the executive order, health systems can be a particularly important option for retaining access to hospital services in some rural communities,” said Pollack. “Mergers with larger hospital systems can also provide community hospitals the scale and resources needed to improve quality and decrease costs.”

Simon panned another element of the executive order. “Why bother proposing reimportation again?” she said. “It is a Rube Goldberg device that imports another country’s drug pricing policies rather than developing our own. The past experience of Florida’s failed attempt to operationalize the policy should suggest to the administration that they need to look at other alternatives.”