President Joe Biden’s recent Executive Order 14036 contains initiatives intended to lower drug prices for patients, create more competition to increase wages for workers, promote innovation, and foster economic growth. As part of it, on Sept. 9 Health and Human Services Secretary Xavier Becerra proposed additional legislative and administrative actions.
The drug price-reduction legislative proposals are perennials; their inclusion reflects both their popularity and the difficulty in attaining them.
Two executive order proposals – one to import cheaper drugs from Canada and the other seeking new authority to negotiate Medicare outpatient drug costs – stem from the 2003 law that established Medicare’s Part D drug insurance coverage, which banned negotiation by the government of Medicare Part D drug prices. Both have been non-starters.
The 2003 law allowed the HHS secretary to authorize the importation of prescription drugs from Canada as long as they “pose no additional risk to the public’s health and safety” and “result in a significant reduction in the cost of covered products to the American consumer.” The final Food and Drug Administration regulations for importation were issued only in October 2020.
However, the Canadian government opposes this export, and manufacturers dislike it because they lack sufficient Canadian inventory to meet the potential increased demand from the U.S. No drugs have ever been imported under that law.
Various unsuccessful efforts since 2003 testify to the extreme difficulty of removing the ban on negotiating Medicare Part D drug prices. However, the reconciliation bill this fall might offer a unique opportunity to achieve it.
The cost of generic drugs and biosimilars (copies of “biological drugs,” or “biologics”) should be less than the original branded products, because they introduce greater competition to the marketplace. Indeed, most pharmaceuticals sold today in the U.S. are lower-priced generics. However, some generics with only a single U.S. source have been priced astonishingly high, which diminishes the expected savings. The introduction of biosimilars has not grown nearly as rapidly, because of their much greater difficulty in replicating the branded originals, and also a variety of governmental and other hindrances.
The EO proposes that HHS agencies, including FDA and Centers for Medicare & Medicaid Services, the Commerce Department’s Patent & Trademark Office, and the Federal Trade Commission seek to remove those obstacles. But because of the complexities associated with those agencies’ regulations, the near-term likelihood of removing anticompetitive obstacles and quickly achieving the hoped for increases in generic approvals and savings is doubtful.
The EO created a White House Competition Council (WHCC) consisting of Cabinet and other senior officials, chaired by the director of the National Economic Council, to oversee the implementation of a range of actions in the EO and other possible reforms. In light of previous and expected strong opposition to most if not all legislative proposals that would lower drug prices, we would urge the council to look for administrative options that do not require congressional approval. HHS has offered some.
The pharmaceutical industry and the market for its drugs are global. China and India are the main sources for the essential “active pharmaceutical ingredients” (APIs) – the part of any drug that exerts the intended effects – used in manufacturing worldwide. Those countries are also the primary and sometimes the only sources of finished drugs and biological products. The WHCC and HHS should consider ways U.S. consumers and industry can benefit from greater competition, such as the development of alternative sources of APIs, the utilization of drug manufacturing in other advanced countries, importation of drugs approved in such countries, and other ways to enhance competition.
We have previously proposed a new reciprocal drug approval authority to reduce the bureaucratic costs and time burden of duplicative U.S. and foreign reviews of drugs approved overseas in certain countries, but not yet in the U.S. An approval by a regulatory agency with standards comparable to the U.S. FDA would automatically satisfy the safety and efficacy requirements for approval here, which would increase the number of competing drugs in the marketplace and put downward pressure on prices if priced competitively. Congressional support for reciprocity has been weak and, accordingly, is highly unlikely in the near term.
The FDA has long coordinated with other advanced drug manufacturing countries to develop harmonized drug approval standards and to arrange for foreign inspections of manufacturing facilities. Building upon this experience, and under its current authorities, FDA has permitted importation from advanced countries of select products approved in those nations, but not approved in the U.S., to meet urgent U.S. needs for critical medical products unavailable or in short supply.
An example of an administrative approach to expanding importation of unapproved drugs has been proposed by Thomas J. Bollyky and Aaron S. Kesselheim. They would have the FDA use its current authorities to focus on U.S. generic drug shortages, a persistent public health problem that inflates prices, and that the FDA has struggled to solve. They argue that to address potential U.S. shortages or for public health reasons, the FDA could give the green light to a foreign approved generic drug based on a much-abbreviated application; or FDA could issue approvals based on data already collected and assessed by the regulatory authority in another advanced country with standards comparable to ours.
The approvals could be temporary, in order to assuage understandable concerns that importation measures might undermine domestic pharmaceutical production and cut the FDA out of drug regulation. The FDA’s role in generic drug approval would be preserved – to require U.S. labeling, reject unqualified applicants, and collect user fees.
The FDA has additional authorities that could permit importation of drugs approved in other advanced countries but lacking U.S. approval. The HHS secretary has the authority to permit such importation for medical emergencies or shortages. The FDA itself also has various authorities tailored to meet the need for innovative medical products during emergencies. For example, during the COVID-19 pandemic, FDA has relied on Emergency Use Authorizations to get essential vaccines, drugs, and other products to Americans quickly; and accelerated approval is another rapid approval mechanism. Finally, FDA can exercise enforcement discretion – that is, elect to waive regulatory requirements – to make medical products more available in various exigent circumstances.
We urge the White House Competition Council and HHS to use existing authorities for achievable initiatives that will increase competition and access to drugs and reduce prices. Reciprocity of approvals with certain other countries, via existing FDA authorities, would be one such option.
John Cohrssen is an attorney who has served in a number of government posts in both the executive and legislative branches of government, including as counsel for the House Energy and Commerce Committee. Henry Miller, a physician and molecular biologist, was a research associate at the National Institutes for Health and the founding director of the Food and Drug Administration’s Office of Biotechnology.