Executive order calls for DOJ, FTC to review hospital merger guidelines

President Joe Biden issued a sweeping executive order Friday that presses the federal government to review and revise guidelines for hospital mergers that can lead to higher prices.

Biden also directed federal agencies to work with states to safely import prescription drugs from Canada and create new regulations that ban “pay for delay” agreements that stifle generic drug competition.

The directives were included in the executive order that aims to boost competition throughout all sectors of the economy. Biden though highlights several parts of the healthcare market that he says are reducing access to care.

Biden specifically called out hospital mergers that have “left many areas, especially rural communities, without good options for convenient and affordable healthcare service,” the order said. “Thanks to unchecked mergers, the 10 largest systems now control a quarter of the market.”

He added that consolidated hospital markets also tend to charge higher prices than more competitive markets.

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The order encourages the Justice Department and Federal Trade Commission to “review and revise merger guidelines to ensure patients are not harmed by such mergers.”

The FTC has waded into several hospital deals due to fears that increased consolidation will harm quality and raise prices. The agency launched a probe in 2019 on the impact of local hospital mergers on state antitrust protections.

FTC legal action has also scuttled some hospital deals. A proposed deal for Methodist Le Bonheur to buy two Memphis-area hospitals from Tenet Healthcare was called off late last year after a lawsuit from the FTC alleged the acquisition would harm access to care in the city metropolitan area.

The executive order also calls on the Department of Health and Human Services to support a Trump administration rule that required hospitals to post payer-negotiated rates. The rule went into effect this year but compliance among hospital systems has been slow.

Another part of the order focuses on consolidation in the health insurance industry, calling for HHS to standardize plan options on Affordable Care Act exchanges “so people can comparison shop more easily.”

Advocating drug importation

President Biden also signaled approval of another Trump-era policy when he directed the FDA to work with states and tribes to “safely import prescription drugs from Canada.”

The Trump administration finalized a rule last year that enables states and tribes to submit proposals to the FDA to create an importation program. The program must ensure that any imported drugs meet FDA safety regulations and reduce costs.

Biden’s order goes further by calling for HHS to issue a plan within 45 days that combats high drug prices and price gouging.

He also encourages FTC to create a rule that outright bans a tactic called “pay for delay” where brand-name drug makers pay generic competitors to delay bringing cheaper versions of their products to market.

An FTC study showed that the deals can cost consumers and taxpayers $3.5 billion.

Biden’s executive order on drug prices comes as Congress is considering major drug pricing reforms. House Democrats are pressing for legislation that gives Medicare the power to negotiate for lower drug prices to be included in a major infrastructure package currently being drafted in the Senate.