President Biden Issues Executive Order Addressing Competition in Health Care

On July 9, 2021, President Biden issued the “Executive Order on Promoting Competition in the American Economy,” which set out a “whole-government policy” of enforcing antitrust laws to prevent excessive consolidation and thus improve competition. Encompassing a wide range of directives and policy statements, the order specifically targets four important issues facing the healthcare industry: prescription drug prices, hospital consolidation, health insurance competition, and hearing aid costs.

While the Executive Order (EO) does not have the effect of law, the President does wield a significant amount of control over the Department of Health and Human Services (HHS) as an administrative agency of the federal government.  Likewise, while the President has less ability to explicitly direct the actions of independent agencies such as the Federal Trade Commission (FTC), the EO provides “encouragement” for the FTC in the form of policy directives, which are often carried out by the agencies. Thus, the policy focuses found in the EO can be reasonably expected to take effect through rules and regulations issued by HHS and be enforced by the FTC.

Hospital Consolidation
The EO claims that hospital consolidation and unchecked mergers have left many areas, especially rural communities, without access to quality health care services. Hospital mergers and consolidations have increased in recent years.  Likewise, more and more physician practices are being acquired by hospitals to achieve “system-ness” and cost efficiencies.  A report from the American Medical Association found that 2020 was the first year in which less than half (49.1%) of physicians worked in a private practice—a practice that was wholly owned by physicians.”[1]

To combat what the administration views as rampant hospital consolidation, the EO first encourages the Justice Department and the FTC to review and revise hospital merger guidelines to ensure patients are not harmed by hospital mergers. It additionally directs HHS to support existing hospital price transparency initiatives for hospitals, other providers, and insurers, as well as any new changes made necessary by the No Surprises Act finalized by an interim final rule issued on July 1, 2021. These initiatives require hospitals to increase transparency around the prices they pay and the prices they charge for certain services and procedures. 

Notably, both of these directives continue and in some cases further the policies of the Trump administration, which focused on greater price transparency. These initiatives were intended to increase consumerism in health care and thus further competition by improving the ability of consumers to “shop” for healthcare services. The Biden administration is reaffirming this policy focus.

Non-Competition Agreements
Included in these provisions is a directive to the FTC to consider using its rulemaking authority to “curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.” The instructions handed down by the Biden administration are (perhaps purposefully) vague, giving the FTC a significant amount of leeway in how it tackles unreasonable non-compete agreements. The use of the word “unfair” in the directive implies that not all non-compete agreements will be banned, but rather only those that excessively limit workers from pursuing alternative positions.

Currently, the validity of non-compete agreements varies widely by state. Some states, such as California, Oklahoma, and North Dakota, completely refuse to enforce non-compete agreements. About a dozen other states limit the kind of employees non-competes who can be subject to a non-compete. For example, courts might not enforce non-competes against employees who are paid on an hourly basis or who earn below a certain income. Which of these more restrictive models the FTC might choose to pursue is unclear. But, a new federal law or regulation could unify these regulatory differences and make it easier to gauge the validity of non-compete clauses.

The EO could also add to the momentum of the Federal Workplace Mobility Act (FWMA), a bi-partisan bill that was introduced in Congress in March 2021. The FWMA would seriously limit the use of non-compete agreements, basically restricting them to situations where a sale of a business or a dissolution of a partnership exists. It would also give workers a private right of action to sue for violations of the FWMA. The reaction to this provision of the EO and any regulation the FTC proposes may be indicative of the likelihood of the FWMA succeeding in Congress.

Health Insurance
The EO also directs HHS to implement standardized options in the national Health Insurance Marketplace in order to ensure that Americans can more easily comparison shop between health insurance options. It also encourages HHS to pursue “any other appropriate mechanisms to improve competition and consumer choice.”

Prescription Drugs
The EO also argues that high prescription drugs are partially a result of a lack of competition among drug manufacturers. As such, the EO requires HHS to submit a plan for combatting excessive pricing of prescription drugs within 45 days of the EO – or by August 23, 2021. That plan should attempt “to enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging.”

The EO encourages the FTC to exercise its authority to limit unfair anticompetitive conduct in the prescription drug industries. This includes “pay to delay” agreements, in which drug manufacturers pay generic drug manufacturers to delay the entry of generic drugs into the market. The FTC has previously estimated that “pay to delay” agreements increase drug prices by $3.5 billion each year. Additionally, the EO directs the FDA to work with states and tribes to import prescription drugs from Canada in order to lower prescription prices.

Conclusion
The EO signals an increased interest in enforcing various antitrust laws to reduce consolidation and promote competition. In the health care realm, these policies result in an ongoing focus on decreasing prescription drug prices, a continued interest in increasing price transparency for hospitals, and specific provisions for improving access to healthcare for consumers as well as enabling worker mobility. The full impact of this EO will not be seen until HHS, the FTC, and other agencies go through the rulemaking process required to turn many of these policy statements into law.

[1] https://www.forbes.com/sites/theapothecary/2021/07/15/biden-seeks-to-build-on-many-of-trumps-health-care-policies/?sh=4a4b423915ac

Scott S. Moore
Andrew D. Kloeckner
Rebecca Human