New Executive Order Aims to Lower Drug Prices

A new executive order signed by President Joe Biden today aims to lower prescription drug prices by allowing importation of drugs from Canada and promoting the availably of biosimilar and generic drugs.

“Just a handful of companies control the market for vital medicines,” President Biden said during live remarks introducing the executive order. “Competition keeps prices low. Competition keeps the economy fair and open.”

Biden is directing his administration to support state and tribal programs that will import safe and cheaper drugs from Canada, according to a White House fact sheet on the order.

In addition, the Department of Health and Human Services Administration (HHS) should increase support for generic and biosimilar drugs, which provide low-cost options for patients, according to The White House.

The order directs HHS to issue a comprehensive plan within 45 days to combat high prescription drug prices.

The Federal Trade Commission should also ban “pay for delay” and other similar agreements, according to the order. “One strategy that drug manufacturers have used to avoid competing is ‘pay for delay’ agreements, in which brand-name drug manufacturers pay generic manufacturers to stay out of the market,” The White House said.

That strategy has raised drug prices by $3.5 billion per year, and research also shows that “pay for delay” and similar deals between generic and brand name manufacturers reduce innovation—reducing new drug trials and research and development expenditures, according to the Biden Administration.

Biden’s order also aims to promote competition among hospitals and health insurers, with a goal of making care more affordable, according to The Washington Post.

The Biden Administration said that hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service. “Thanks to unchecked mergers, the 10 largest healthcare systems now control a quarter of the market.”

Hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors, according to a brief from the Kaiser Family Foundation.

As a result, the order underscores that hospital mergers can be harmful to patients and encourages the Justice Department and FTC to review and revise their merger guidelines to ensure patients are not harmed by the mergers.

It also directs HHS to support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.

Regarding the prescription drug lowering initiatives, Americans pay more than 2.5 times as much for the same prescription drugs as peer countries, and sometimes much more, according to report in January 2021 from the Rand Corporation.

“Price increases continue to far surpass inflation, as a result, nearly one in four Americans report difficulties paying for medication, and nearly one in three Americans report not taking their medications as prescribed,” The White House order said.

The high prices are in part the result of lack of competition among drug manufacturers, according to The White House. “The largest pharmaceutical companies are able to wield their market power to reap average annual profits of 15% to 20%, compared with average annual profits of 4% to 9% for the largest non-drug companies.”

These executive orders are part of a larger effort that includes 72 initiatives by more than a dozen federal agencies to address issues regarding competition in the economy. The order also establishes a White House Competition Council to monitor progress on these initiatives.