money Here's how Biden's exec order could bring down health care costs
President Biden’s recent executive order aims to help Americans save on medical and drug costs while expanding health care coverage access.
His order requires changes with prescription drugs, enhancing price transparency rules, standardizing plan options in the health care marketplace, and allowing hearing aids to be sold over the counter.
The order — which includes other initiatives meant to increase economic competition in other industries as well — described these targeted areas as “where lack of competition in health care increases prices and reduces access to quality care.”
Here’s how it might impact your health care.
Cheaper prescription drugs
The order has several prescription drug-related directives.
It directs the Food and Drug Administration (FDA) to work with states and tribes to safely import prescription drugs from Canada. It also directs the Department of Health and Human Services (HHS) to increase support for generic and biosimilar drugs, along with creating a “comprehensive” plan within 45 days to combat high prices and price-gouging.
Nancy LeaMond, chief advocacy officer for AARP, said her organization was “encouraged” by these moves.
“Our recent poll found strong bipartisan support for lowering drug prices, with 70% of older Americans saying it’s very important that action is taken,” she told Yahoo Money. “The safe, legal importation of less expensive prescription drugs will help lower costs and add competitive pressure on drugmakers to lower the prices they set in the U.S.”
The order also encourages the Federal Trade Commission (FTC) to put an end to “pay for delay," a method pharmaceutical companies use to get around patent laws, according to David Blumenthal, president of the Commonwealth Fund.
Typically, a pharmaceutical company's drug is protected from competition by a patent for 20 years, meaning no other company can produce and sell a drug that is similar or relies on the same intellectual property, chemical properties, or biological properties, Blumenthal said. After that 20-year period, the competition can come in, produce the same drug, and sell it for less — hurting the profits of the company that held the patent.
To prevent that, some drug companies will pay their competition to not create generic drugs that are cheaper for consumers.
"They can get away with that because their margins on the branded product are so high that they can afford to basically give their generic competition a cut and still make a healthy profit — and a bigger profit than they would make it if they had to reduce their price enough to compete with the generic market," Blumenthal said. "That’s pay for delay.”
Price and plan transparency
Biden’s order also directs HHS to support existing hospital price transparency rules and finish implementing legislation with bipartisan support that addresses surprise billing — moves that can help patients potentially negotiate their medical bills.
“I don’t think we should expect any substantial effects on health care markets or prices from any of these transparency initiatives, but taking steps to build an all-payer claims database would allow policymakers and researchers to more easily identify gaming of rules, the adverse effects of consolidation, and other ongoings in the health care system that harm consumers,” said Loren Adler, associate director of the USC-Brookings Schaeffer Initiative for Health Policy.
Additionally, this executive order makes it easier for consumers to shop for health insurance by standardizing plan options in the National Health Insurance Marketplace.
“The marketplace for insurance is chaotic and incredibly complex,” Blumenthal said. “A lot of people just end up picking the cheapest plan, but the cheapest plan may not be a good value. Standardization means making it comparable from one plan to another for the average person, not someone who has a PhD."
Hearing aids, mergers
Another issue addressed in the executive order is making hearing aids more accessible and affordable. The order noted that 14% of the 48 million Americans with hearing loss use them and that they cost more than $5,000 per pair, which is often not covered by health insurance.
"A major driver of the expense is that consumers must get them from a doctor or a specialist, even though experts agree that medical evaluation is not necessary," the order stated. "Rather, this requirement serves only as red tape and a barrier to more companies selling hearing aids.”
The Biden administration also is asking the Justice Department and FTC to “review and revise” hospital merger guidelines.
“Hospital mergers can be harmful to patients,” Blumenthal said. “I have near-as-good empirical data to show that horizontal mergers between hospitals result in higher prices and that all these studies haven’t been able to pick up benefits associated with those mergers.”
The only remedy, he said, is antitrust enforcement through state attorneys general.
“I do think there’s a fair amount of consensus growing that in many markets, there’s virtually no competition among hospitals,” Blumenthal said. “For those who believe in competition — and not everyone in health care does — moving in this direction is a necessity in order to establish the conditions of a lack of competition.”
Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at adriana@yahoofinance.com.
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