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What’s next for drug pricing in the US?

New challenges may lie ahead for the pharmaceutical industry

What’s next for drug pricing in the US?

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Proposals to alter antitrust and patent laws may signal a renewed focus on drug pricing by federal lawmakers, while the growing web of state laws is expected to increase compliance challenges for the pharmaceutical industry. 

What’s changing?  

A new package of proposed bills, announced in connection with an April 2021 US House of Representatives Judiciary Antitrust Subcommittee hearing on drug prices, may indicate that federal lawmakers are turning their competition focus to the pharmaceutical industry. 

Three of the bills would change US antitrust laws to target ”reverse payment” patent settlements, ”product hopping” and ”sham” citizen petitioning. A fourth bill would cap the number of patents in an infringement action resulting from a “patent dance” information exchange in the abbreviated approval pathway for biosimilars. Supporters claim these bills would target conduct that supposedly prevents or slows competition from less-expensive drugs. These proposals follow two laws that President Biden recently signed supporting generic and biosimilar alternatives to branded drugs.  

At the same time, US state lawmakers have actively continued a trend of introducing new state laws targeting issues at the center of debates on drug pricing. In 2020, states debated more than 400 such proposed laws and enacted more than 20 of them. These new state laws require pricing transparency from pharmaceutical manufacturers, mandate disclosures from pharmaceutical benefit managers (PBMs) and insurers, and cap consumer cost-sharing on certain drugs, among other changes. As of June 2021, more than 500 state drug pricing bills have been introduced this year, several of which go beyond reporting requirements and actually propose various degrees of price control.

What does it mean for you? 

The proposed federal antitrust and patent law changes and recent Congressional hearings suggest that federal lawmakers are refocusing on certain conduct that supposedly leads to higher drug prices by delaying or thwarting the entry of less-expensive alternatives. 

If passed and enacted into law, any one of these federal bills could have a significant impact on antitrust compliance or patent enforcement in the pharmaceutical industry. Collectively, the bills could trigger substantial changes and uncertainty for the industry, especially with respect to patent settlements and new product introductions for both biologic and small-molecule products. 

At the state level, complexity and compliance challenges are increasing, with further state actions likely. States may believe they have more leeway to enact such legislation after the US Supreme Court’s 2020 decision upholding an Arkansas law regulating PBM payments to pharmacies as a “cost regulation” not pre-empted by ERISA.

What steps can you take now?    

While “high” prices alone do not create antitrust liability, pharmaceutical manufacturers need to be aware of the potential implications of pricing decisions—including list prices, discounting/rebating practices and price increases—that could draw the attention of federal and state enforcers as well as private plaintiffs seeking to investigate underlying business conduct.  

Similarly, pharmaceutical manufacturers and others in the distribution and payment chain should pay close attention to developing state laws and their impacts on pricing decisions in order to manage compliance, minimize risks and government scrutiny, and avoid fines and penalties. 

 

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