Biden Executive Order Takes Aim at Drug Prices, Hospital Mergers

Hospital mergers, drug prices, and non-compete clauses for the rank and file are all targets of President Joe Biden’s pen today as he signed a sweeping executive order instructing federal departments and agencies to reshape what he called “booming” economy by putting workers first, encouraging higher wages and the opportunity for mobility.

The order spans sectors from banking to transportation with 72 specific initiatives, including several that target healthcare, which is already undergoing upheaval amid the COVID-19 pandemic, which has exacerbated shortages of doctors and nurses, strained supply chains, and pushed veteran administrators into retirement.

“For decades, corporate consolidation has been accelerating,” a statement issued with the order reads. “In over 75% of U.S. industries, a smaller number of large companies now control more of the business than they did twenty years ago. This is true across healthcare, financial services, agriculture and more. That lack of competition drives up prices for consumers.”

The statement cited data claiming that mark-ups have tripled, raising costs for necessities like prescription drugs, hearing aids, and internet service—which became essential during the pandemic as telehealth became the only way to see a doctor.

Key items in Biden’s executive order include:

• Making it easier to change jobs, including between states, by reducing occupational licensing requirements and limiting non-compete agreements.
• Reducing prescription drug prices by allowing programs run by states and tribes that import drugs from Canada.
• Selling hearing aids over the counter.
• Promoting more procurement opportunities for small business with federal agencies.
• Empowering antitrust agencies, including the Federal Trade Commission, to address problems surrounding consolidation in certain industries, including healthcare, where mergers have left some rural areas with no hospital.

The order creates a White House Competition Council the track progress on the initiatives and agencies’ response.

Consolidation in healthcare over the past decade—mergers of hospitals into larger systems, acquisition of practices, and vertical integration of health plans and pharmacy benefit managers (PBMs)—has drawn fire from consumer and antitrust advocates who say the trend works against keeping down costs, especially when one looks at some individual markets.

The order directs the Justice Department and the FTC to examine guidelines on hospital mergers to ensure that patients are not harmed.

Recent trends also work against reining in the price of prescription drugs, because powerful PBMs can dictate which drugs appear on formularies, demand rebates, or impose fees. Just this week, a study by authors at USC’s Schaeffer Center found that Medicare overspent by $2.6 billion in 2018 on commonly prescribed generic drugs compared with prices charged by Costco.

Biden’s order directs HHS to do the following:

1. Support hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing. This is significant, because many wondered the fact of the transparency rules imposed at the very end of the Trump administration.
2. Restore a rule from the Obama era that insurers selling plans under the federal marketplace, created by the Affordable Care Act, must have at least one standard design to serve as a benchmark for consumers to compare with other companies. This concept was scrapped under the Trump administration.
3. Directs the FDA, which is part of HHS, to work with states and tribes on safe import practices under the Medicare Modernization Act of 2003.
4. Increases support for generic and biosimilar drugs and allows 45 days for a comprehensive plan to combat high prescription prices.
5. Empowers FTC to ban “pay for delay” and similar practices that keep low cost drug or biosimilar options off the market.