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Executive Order on Promoting Competition in the American Economy: The Biden Administration Considers Drug Pricing Strategies While Keeping the “Most Favored Nations” Drug Reimbursement Program on the Sidelines

On August 10, 2021, the Centers for Medicare and Medicaid (“CMS”) published a proposed rule (“Proposed Rule”) to rescind the Most Favored Nation Model (“MFN Model”) interim final rule that was published on November 26, 2020 (“Interim Final Rule”).  As described in our December 2020 blog post, the Interim Final Rule established seven-year nationwide, mandatory MFN Model that would test an alternative way for Medicare to pay for certain Medicare Part B single source drugs and biologicals.  The MFN Model, originally set to begin January 1, 2021, would have tied the prices for certain Part B single-source drugs and biologics to the average price paid by several overseas countries and remove incentives to use higher cost drugs, in order to determine whether this could “control unsustainable growth in Medicare Part B spending without adversely affecting quality of care for beneficiaries.”  Had the Interim Final Rule been implemented, Medicare Part B reimbursement would have been significantly reduced starting January 1, 2021.

In the Interim Final Rule, CMS found there was good cause to waive the notice and comment requirements under section 553(b)(B) of the Administrative Procedure Act because of an acute need for affordable Medicare Part B drugs during the COVID-19 pandemic.  However, in December 2020, while the comment period was open, four lawsuits were filed related to CMS’s waivers of proposed rulemaking and delay in effective date, as well as other aspects of the MFN Model and the Interim Final Rule.[1]  On December 28, 2020, the U.S. District Court for the Northern District of California issued a nationwide preliminary injunction which preliminarily enjoined the U.S. Department of Health and Human Services (“HHS”) from implementing the MFN Model and the Interim Final Rule.[2]  In addition, during the stay of the Interim Final Rule, CMS received approximately 1,166 comments, many of which expressed concern about beginning the model on January 1, 2021.  CMS stated that given that (i) the nationwide preliminary injunction precluded implementation of the MFN Model on January 1, 2021; (ii) multiple courts found procedural issues with the Interim Final Rule, and (iii) stakeholders expressed concern about the MFN Model start date, CMS proposed to rescind regulations added by the Interim Final Rule and remove the associated regulatory text at 42 CFR part 513.

Now, as part of President Biden’s July 9, 2021 Executive Order on Promoting Competition in the American Economy that, in part, directs the Secretary of HHS to take steps to lower the prices of and improve access to prescription drugs and biologicals, HHS is exploring opportunities to (i) promote value-based care for beneficiaries; (ii) address the high cost of Medicare Part B drugs, manufacturers’ pricing, and the resulting growth in Medicare Part B drug spending; and (iii) modernize the Medicare program to improve the quality and cost of care for beneficiaries.  Therefore, CMS will now continue to consider comments on the Interim Final Rule and, as stated in its Proposed Rule, “explore all options to incorporate value into payments for Medicare Part B drugs and improve beneficiaries’ access to evidence-based care.”

Stakeholders may submit comments here until October 12, 2021.  We will continue to provide updates to the Proposed Rule as applicable.

FOOTNOTES

[1] Association of Community Cancer Centers v. Azar, No. 8:20–cv–03531 (D. Md.); California Life Sciences Ass’n v. CMS, No. 3:20–cv–08603 (N.D. Ca); Regeneron Pharmaceuticals v. HHS, No. 7:20–cv–10488 (S.D.N.Y.); and Community Oncology Alliance, Inc. v. HHS, No.1:20–cv–03604 (D.D.C.).

[2] California Life Sciences Ass’n v. CMS, No. 3:20–cv–08603 (N.D. Ca).

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 232
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Kenneth Yood Healthcare Attorney SheppardMullin
Partner

Ken is a partner in the Corporate practice group in the firm's Los Angeles office. Chambers USAranks him highly for Healthcare, where he was commended for his "broad-based ability in the regulatory area." Clients appreciate that "his explanations are clear, and he understands the business side of things," notes Chambers 2016.

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Ken represents a wide range of healthcare providers and healthcare companies, including specialty and general acute hospitals (including local district, nonprofit and...

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Kathleen Stratton, Sheppard Mullin Law Firm, Washington DC, Corporate Law Attorney
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Kathleen M. Stratton is Special Counsel in the Corporate Practice Group in the firm’s Washington D.C. office.

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Kathleen Stratton represents health care industry clients in a range of matters focusing predominantly on regulatory compliance, licensure, certification, and operational issues facing a vast array of provider types. Over the past 30 years, her provider clients have included hospitals, specialty pharmacies, ambulatory surgery centers, durable medical equipment suppliers,...

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Dhara B. Waghela Associate Corporate Healthcare
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Dhara Waghela is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm’s Healthcare team.

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Ariana Stobaugh Corporate Attorney Sheppard Mullin Law Firm Century City
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Ariana Stobaugh is an associate in the Corporate Practice Group in the firm's Century City office and is a member of the firm’s Healthcare team.

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Ariana advises healthcare organizations on business, regulatory and transactional matters.

Prior to joining Sheppard Mullin, she worked as a high school English teacher in Los Angeles.  While attending law school at USC Gould School of Law, she served as an extern at Public Counsel and Neighborhood Legal Services....

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