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Biden’s HHS on ‘Different Page’ About How to Curb Drug Prices

Jan. 21, 2021, 10:30 AM

Joe Biden enters the presidency with a slew of lawsuits waiting over Trump-era moves to lower drug prices, an issue the new administration will likely tackle in its own way.

The Department of Health and Human Services under Biden inherits challenges to rules that tie drug reimbursement to cheaper foreign prices and allow medication imports from Canada. It also faces complaints over the Trump administration’s push for drugmakers to send discounted drugs purchased by low-income health centers to commercial contract pharmacies.

The attacks flow from major pharmaceutical companies like Sanofi and AstraZeneca, as well as groups representing a wide range of industry players. Lowering drug prices is a concern for Biden, but policy watchers say the HHS won’t defend most of the lawsuits or the rules that spurred them.

The Trump and Biden administrations are “not on the same page, but in the same book,” Ian Spatz, a senior adviser at Manatt Health, said.

The HHS will likely withdraw the rules, make regulatory changes to reduce the rules’ impact, or devise its own modified plans. Democrats in Congress are also considering which agency regulations they might want to overturn in the administration’s early days using the Congressional Review Act.

“We will have an interesting dance. The Biden campaign and Democrats generally are in favor of reducing the high cost of prescription drugs by any means available,” Kyle Sampson, a partner at King & Spalding LLP, said. “So there will be some desire for a repeal and replace kind of thing.”

Hours after inauguration, the Biden administration issued a freeze on certain rules kicked out during Trump’s tenure in the White House that had yet to take effect.

Foreign Drug Prices

Lowering drug costs was a priority for the Trump administration, but the HHS’ issuance and application of regulations to do so drew fire from drug companies, clinics, and health centers.

The HHS faces at least four lawsuits over a rule released in November 2020 that ties Medicare reimbursement for drugs administered in doctor’s offices to lower prices paid in other countries. The Pharmaceutical Research and Manufacturers of America and other trade groups allege the HHS failed to follow required notice-and-comment procedures before finalizing the rule and have urged the courts to strike it down.

A federal court in Maryland in December temporarily halted the rule, which was supposed to take effect Jan. 1. The U.S. District Court for the District of California followed suit and blocked the HHS from implementing the rule until the government undergoes the notice-and-comment process. A federal court in New York also blocked the rule as it pertains to Regeneron’s drug Eylea Injection.

The parties in the Maryland case agreed to stay the litigation until a final rule based on the one that was challenged is published in the Federal Register.

The Biden administration isn’t expected to “vigorously defend” this rule, Emily Cook, a McDermott Will & Emery LLP partner who advises health-care providers, said. She noted that the rule doesn’t control drug prices directly.

And with the rule’s implementation halted, the Biden administration gets “a chance to have a de novo look at the entire issue,” Spatz said.

“They’re inheriting an idea, but not a rule,” he said.

Spatz added that the HHS won’t need to act right away because the preliminary injunction “will maintain the status quo for quite a long time.”

Canadian Imports

Biden’s team will also have to grapple with a rule that allows for the importation of prescription drugs from Canada.

PhRMA sued to block the rule in November in the U.S. District Court for the District of Columbia. The case, which is ongoing, alleges that pharmacists would be able to import certain prescriptions into the U.S. without drugmakers’ oversight or authorization and present “significant safety risks.”

“HHS secretaries as well as FDA commissioners have never certified this in any administration, either Democrat or Republican,” James Stansel, the group’s executive vice president, said.

“You can’t guarantee safety. And there’s illusory savings,” he said.

The Biden administration also may not be keen on signing off on a rule associated with its Republican predecessor, attorneys say.

“I don’t think they want to defend anything that could be called a Trump rule,” Sampson said. The Biden administration will “probably withdraw the rule or issue some kind of modification of it so it could be called the Biden plan and defend that,” he said.

“They’ll be on a very different page, but take the same approach of seeing where they can use existing administrative authority to advance their policy goals,” Spatz said.

Discount Debacle

The pharmaceutical industry isn’t alone in suing the HHS over drug practices.

The American Hospital Association and a group of HIV/AIDS clinics separately sued the HHS to force Eli Lilly, AstraZeneca, and other major drug companies to refund what they call overpayments for certain products.

Drugmakers last year cut back on the number of off-site outfits that can access discounted products under the federal 340B program. Under that program, companies must offer steep discounts to hospitals with primarily low-income patients, which can then ship the purchased drugs to commercial contract pharmacies.

The National Association of Community Health Centers in October sued the HHS for failing to set up a venue to resolve 340B disputes. The agency in December finalized a rule to establish the sought-after administrative dispute resolution board, though some say the move was too late.

The Affordable Care Act had “required an ADR process to be set up within 180 days of the passage of the law,” Stansel said. “Here we are 10 years later, and the administration is just now implementing a process that fails to take into account the program’s significant changes over the past four years.”

The cases brought by the HIV/AIDS clinics and health center group were stayed for the parties to pursue their fights via the ADR process, a venue that may be seen as preferable to Biden’s HHS.

The government has moved to dismiss one of the cases, while both were stayed pending ADR proceedings. It’s “essentially saying, there’s the process, we can step out of this. The in-house ADR adjudication should play out before a court gets involved,” John Shakow, a King & Spalding partner, said.

“For the time being, from the government’s perspective, a stay is as good as a dismissal,” Shakow said.

Yet pharmaceutical companies are wary of the ADR vehicle, particularly after the HHS issued an advisory opinion that drug manufacturers must give discounts to 340B facilities even when those facilities want contract pharmacies to distribute the drugs at the ceiling price. Drug companies including Sanofi and Eli Lilly have sued to tear down the opinion.

Early Look

Cook said both the Trump and Biden administrations likely view drugmakers’ current discount practices as inconsistent with the 340B statute. “Biden may be more interested in taking enforcement action,” Cook said.

Xavier Becerra, Biden’s pick for HHS secretary, in December led a group of attorneys general in a letter calling on the agency to hold drug companies accountable for cutting off 340B discounts. The letter “is potentially illuminating,” Shakow said.

“If the letter actually reflects Mr. Becerra’s opinion, we could see action by President Biden’s HHS to oppose the contract pharmacy policy that some manufacturers have taken,” he said.

When it comes to drug pricing, attorneys say HHS policies under Trump marked a departure from prior administrations. And the Biden administration appears poised to return to the norm.

“They’re going to have a very practical, consensus building approach in this area,” Spatz said. “They’re going to be looking at litigation in terms of what their overall strategy will be on pharmaceutical pricing issues. They’re going to see the bigger picture.”

To contact the reporter on this story: Ian Lopez in Washington at ilopez@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Alexis Kramer at akramer@bloomberglaw.com; Karl Hardy at khardy@bloomberglaw.com

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