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Biden’s actions on health care pricing keep the issue in focus

Gabriel Perna | July 21, 2021

Earlier this month, HHS published the first rules for surprise medical billing as part of “The No Surprises Act,” which aims to end the practice entirely.  

Since then, the Biden administration has made two more moves to keep the issue of lowering health care costs at the forefront. On Friday July 9th, the President published an executive order that aims to lower the price of prescription drugs. Then in a proposed outpatient rule on Monday, July 19th, HHS said it is increasing the fine in which hospitals will pay for not publishing their pricing information online.  

Here’s a breakdown of both of these actions, as well as industry reactions. 

Drug pricing  

Biden’s drug pricing executive order had a number of provisions to curb the costs of prescription drugs. The executive order encourages the Commissioner of Food and Drugs to work with States and Indian Tribes to import drugs from Canada under Section 804 of the Federal Food, Drug, and Cosmetic Act. Biden also asked HHS to create a plan to address drug pricing with its own strategy by the end of the summer, specifically within 45 days of the order. The order calls on HHS to reduce the prices paid by the federal government for prescription drugs and address price gouging. 

“Just a handful of companies control the market for many vital medicines, giving them leverage over everyone else to charge whatever they want. As a result, Americans pay two and a half times more for prescription drugs than in any other leading country. And nearly one in four Americans struggles to afford their medication,” President Biden said during an event where he signed the executive order.  

One of the challenges of the drug importation executive order  is that Canada would have to agree to export their drugs to the U.S. In November, Canadian Prime Minister Justin Trudeau banned the export of certain prescription drugs if they would create a shortage at home. Matthew Fiedler, a fellow with the USC-Brookings Schaeffer Initiative for Health Policy, told Kaiser Health News that it was unlikely to ever work.  

“A number of the proposals may be inconsistent with existing statutory and regulatory authority, with litigation likely to follow if these proposals are finalized and implemented,” Sidley Austin partners Meenakshi Datta and Trevor Wear wrote.  

Another facet of Biden’s drug pricing executive order focuses on anticompetitive conduct, targeting pharma companies who engage in “pay for delay” schemes. In this strategy, brand-name drug manufacturers pay generic manufacturers to stay out of the market. The order calls on the FTC to ban “pay for delay” schemes and pursue companies that engage in these tactics. It also calls on HHS to support generic and biosimilar drugs, which provide low-cost options for patients. 

The Association for Accessible Medicine (AAM), a generic drug industry group, doesn’t want to see “pay for delay” banned. The association has challenged a California-based law that bans the practice and has said that doing so would “severely chill the ability of generic and biosimilar developers to obtain a settlement and disincentivize their ability to challenge patents in the first place.” However, the American Consumer Institute Center for Citizen Research said that “pay for delay” arrangements are bad for consumers and banning them would result in savings for consumers.  

Pricing transparency  

The pricing transparency provision is part of the Hospital Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) proposed rule for the Calendar Year 2022. For hospitals who do not publish clear, accessible pricing information online, CMS has proposed to increase minimum civil monetary penalty of $300/day that would apply to smaller hospitals with a bed count of 30 or fewer and apply a penalty of $10/bed/day for hospitals with a bed count greater than 30, not to exceed a maximum daily dollar amount of $5,500. 

Currently, the fine for the hospital is a maximum of $300 per day for any hospital. However, a recent report found that the less than 6 percent of hospitals were actually compliant with the rule. The report said that the majority of noncompliant failures were the result of non-posting or incomplete posting of the negotiated prices clearly associated with all of the payers and plans accepted by the hospital. There was also a lack of publishing the full list of discounted cash prices. Another report, published in Health Affairs, found similarly low compliance numbers  

HHS Secretary Xavier Becerra said in a statement: “No medical entity should be able to throttle competition at the expense of patients. I have fought anti-competitive practices before, and strongly believe health care must be in reach for everyone. With today’s proposed rule, we are simply showing hospitals through stiffer penalties: concealing the costs of services and procedures will not be tolerated by this Administration.” 

The new proposed rule would amount to a minimum annual penalty of $109,500 per hospital, and the maximum total penalty amount would be $2,007,500 per hospital. One challenge that has held back the current pricing transparency rule is that only 9 percent of the general public knows that hospitals are required to publish these prices on their website, according to the Kaiser Family Foundation Health System Tracker 

On the new proposed rule, the American Hospital Association’s President Rick Pollack said in a statement: “We will closely review the agency’s regulations related to price transparency and advocate that any final policies meet this objective. However, we are deeply concerned about the proposed increase in penalties for non-compliance, particularly in light of substantial uncertainty in the interpretation of the rules.” 

The group PatientRightsAdvocate.org that released the report that found more than 94 percent of hospitals were non-compliant with the pricing transparency rule is a proponent of the increased charges to hospitals. “The Hospital Price Transparency rule has the potential to shift the power away from hospitals and into the hands of consumers – meaning patients, employers and union sponsored plans. If hospitals comply, the transparency rule will drive down the cost of care and coverage,” said Cynthia Fisher, founder and chairman of PatientsRightsAdvocate.org. 

The Biden administration also wants to halt the elimination of the inpatient only list, procedures that Medicare will only make payment for when provided in the inpatient setting. This was a provision that was proposed by the Trump administration in December and received backlash from provider organizations when it was announced. The Biden administration suggests the agency first must evaluate whether the procedures met the long-standing criteria previously used to determine if a procedure could be safely removed. 

The proposed rule has a 60-day comment period. The final rule will be published in November.  

About the Author

Gabriel Perna, Senior Manager, Digital Content

Gabriel Perna is the Senior Manager of Digital Content at Health Evolution. He brings 10+ years of experience in covering the intersection of health care and business. Previously, he was at Chief Executive, Physicians Practice and Healthcare Informatics. You can reach him via email at gabrielp@healthevolution.com or on Twitter at @GabrielSPerna