What Does President Biden’s July 9, 2021 Executive Order on Competition Mean for the Pharma Industry?
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Citing concerns about growing consolidation, reduced competition, and increasing prices, President Biden issued on July 9, 2021 a sweeping Executive Order containing 72 initiatives to address competition concerns in a number of industries, including pharmaceuticals, biotech, and healthcare.
In his remarks at the signing of the July 9, 2021 Executive Order, President Biden focused on three specific initiatives, the first of which relates to lowering prescription drug prices. "Americans are paying too much for prescription drugs and healthcare services — far more than the prices paid in other countries," the Executive Order declares.
The Executive Order simultaneously backs legislative proposals to address drug prices, and directs agencies to take specific action designed to facilitate pharmaceutical competition. The Executive Order thus advances a focus on competition in the pharmaceutical industry, from both the legislative and executive branches, that is likely to have a significant impact on the industry.
Support of Legislative Proposals to Address Drug Prices
The July 9, 2021 Executive Order expressly supports key legislative proposals that have long been at the center of the debate on drug prices. Specifically, the Executive Order makes clear that the Biden Administration supports "aggressive legislative reforms that would lower prescription drug prices, including by allowing Medicare to negotiate drug prices, by imposing inflation caps, and through other related reforms."1 As outlined below, the Executive Order also directs the FDA to work with states to import less-expensive pharmaceuticals from outside the US. These measures are not new. Indeed, Medicare price negotiation and inflation caps have been proposed in recent bills and were trumpeted by Democratic lawmakers like Nancy Pelosi only a day before the Executive Order was announced.2
Since taking office, President Biden largely has stayed out of the fray when it comes to backing specific legislative proposals on drug pricing. Thus, his Administration's express support of these specific proposals now could jumpstart the discussion on moving forward with federal drug-pricing legislation that has largely stalled in recent years.
Specific Directives to Health and Human Services and the FTC
The Executive Order also directs HHS and the FTC to take direct action regarding the prices of drugs and healthcare costs, with a specific focus on facilitating more competition from generic drugs and biosimilars and preventing allegedly anticompetitive agreements. Below are some of the most notable directives.
- Develop a Plan to Address Drug Prices: The Executive Order requires HHS to, "not later than 45 days after the date of this order [by August 23, 2021], submit a report . . . 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."3 There is no clear guidance, however, regarding what proposals should be included in that HHS drug pricing plan.
- Promotion of Generic and Biosimilar Competition at the FDA and FTC: The Executive Order requires HHS to "lower the prices of and improve access to prescription drugs and biologics" and "continue to promote generic drug and biosimilar competition" by, among other things, (1) clarifying and improving the FDA approval process for generic drugs and biosimilars, including clarifying the standards for interchangeability of biological products; (2) supporting biosimilar product adoption by providing educational materials and communications to improve understanding of biosimilar and interchangeable products among healthcare providers; (3) facilitating the development and approval of biosimilar and interchangeable products; and (4) "with the Chair of the FTC, identifying and addressing 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."
- Balancing Innovation and Generic/Biosimilar Entry – Patent Reform: The Executive Order requires HHS 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."4 In doing so, HHS must, within 45 days of the Order, "write a letter to the Under Secretary of Commerce for Intellectual Property and Director of the United States Patent and Trademark Office enumerating and describing any relevant concerns of the FDA."5
- Prepare for Medicare-Medicaid Coverage of Interchangeable Biological Products (Biosimilars): The Executive Order requires HHS to work with the Centers for Medicare and Medicaid Services to "prepare for Medicare and Medicaid coverage of interchangeable biological products, and for payment models to support increased utilization of generic drugs and biosimilars."6
- Importation Programs: The Executive Order requires HHS to "work with States and Indian Tribes that propose to develop section 804 Importation Programs."7 The Administration explained that this provision "[d]irects the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003."8
- Rulemaking to Address Allegedly Anticompetitive Agreements Involving Generic Entry at the FTC: The Executive Order directs the FTC to exercise its rule-making 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."9 While it is unclear from the Executive Order exactly what behavior is targeted here, the accompanying Fact Sheet indicates that the Executive Order "[e]ncourages the FTC to ban 'pay for delay' and similar agreements by rule."10 President Biden's call on the FTC to employ rulemaking authority follows the FTC's announcement last week that it voted to "reinvigorate the FTC's rulemaking procedures" in order to promote robust competition.11
- Call to Reverse Course on Trump Proposal Barring March-In Rights on Federally Funded Drugs: The Executive Order directs the Secretary of Commerce to "consider not finalizing any provisions on march-in rights and product pricing in the proposed rule 'Rights to Federally Funded Inventions and Licensing of Government Owned Inventions."12 Among other things, the proposed rule President Biden seeks to set aside would limit the federal government's ability to invoke march-in rights under the Bayh-Dole Act and seize control of the patents of drugs developed with federally funded research based on "high" prices.
Although it remains to be seen what, if any, effect the Biden Administration's support of various legislative proposals will have on lawmakers, the Executive Order commands action by the agencies that could have an immediate impact on the pharmaceutical and healthcare industry. Even setting aside the call to HHS for a plan to address drug prices and price gouging, it is clear from the directives in the Executive Order that the Administration is seeking to lower drug costs by supporting generic and biosimilar drug products, including the regulatory approval of interchangeable biosimilars and opening the pathway for importation from Canada.
The Executive Order and accompanying Fact Sheet also indicate that the Administration wants the FTC to target certain agreements involving pharmaceutical manufacturers, such as so-called "reverse payment" (also known as "pay for delay") settlements, either through enforcement actions or the FTC's rulemaking authority, the latter of which would be a significant departure from FTC tradition. While much of the discussion of late regarding competition enforcement has been focused on large technology platforms, President Biden's July 9 Executive Order signals—and in fact expressly calls for—a particular focus on enforcement in pharmaceuticals and healthcare markets: "[The Executive Order] [a]nnounces a policy that enforcement should focus in particular on . . . healthcare markets (which includes prescription drugs, hospital consolidation, and insurance), and the tech sector."13
White & Case's Global Competition/Antitrust Group and the White & Case Pharmaceuticals & Healthcare Industry Group are tracking these developments in Administration competition and drug policy closely, with a specific focus on potential investigations and litigation.
1 "Executive Order on Promoting Competition in the American Economy," White House (July 9, 2021).
2 Erik Wasson, "Pelosi Slams Drugmaker Buybacks, Wants Price Cuts in Bill," Bloomberg (July 8, 2021).
3 Order at Sec. 5(p)(iv).
4 Id. at Sec. 5(p)(vi).
6 Id. at Sec. 5(p)(viii).
7 Id. at Sec. 5(q).
9 Id. at Sec. 5(h)(iii).
10 "FACT SHEET: Executive Order on Promoting Competition in the American Economy," White House, July 9, 2021, ("Fact Sheet").
11 FTC Votes to Update Rulemaking Procedures, Sets Stage for Stronger Deterrence of Corporate Misconduct, FTC (July 1, 2021).
12 Order at Sec. 5 (r)(ii).
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