The Federal Trade Commission’s enforcement action against the major pharmacy benefit managers probably will continue under the incoming Trump Administration, given the newly-elected president’s past interest in reining in PBM rebating practices.
Key Takeaways
- The FTC will maintain and could heighten its scrutiny and enforcement of PBMs during a second Trump Administration.
- But the commission likely will be more flexible in its attitude toward biopharma mergers and acquisitions, which is expected to facilitate more consolidation in the industry.
- The FTC’s interest in discouraging patent gaming by brand drug firms also may continue in the next administration.
But the commission’s approach to merger and acquisition oversight may moderate under a Republican administration and facilitate more consolidation in the biopharma industry.
Donald Trump defeated Democrat Kamala Harris in the 5 November presidential election and the US Senate flipped to a Republican majority. Control of the House of Representatives was not determined at press time.
During her term, FTC Chair Lina Khan launched an extensive investigation into potentially anti-competitive activity by PBMs.
Although the framework of the investigation was initially challenged by Republican commission members, the panel ultimately agreed to embark on the study.
Republican commissioners Melissa Holyoak and Andrew Ferguson criticized the interim report when it was released last summer. Although the two did not disagree on the importance of investigating whether PBMs are engaged in anti-competitive behavior, they did not like the quality of the data underlying the report’s conclusions.
More Post-Election Coverage
“A proper and thorough study of PBMs would shed light on how well the relevant markets are performing, determine whether PBM business practices increase the cost of prescription drugs for consumers, and inform the commission’s future investigations and enforcement decisions,” Holyoak said in a dissenting statement.
“Moreover, it would illuminate legitimate concerns over PBMs’ opaque business model and price-making decisions,” she said. “But instead of providing this much needed evaluation of a critical area of our healthcare system, the report fails to provide the guidance the commission needs or the public demands. And most importantly, it fails to provide a credible basis for future commission action that can benefit consumers.”
Following release of the interim report, the commission filed an administrative complaint against the leading PBMs and their group purchasing organizations relating to insulin rebating practices, which could lead to a settlement or injunctive relief.
Based on many of the same concerns, Trump’s previous administration issued a rule in November 2020 revoking the anti-kickback safe harbor for rebates in Medicare.
Implementation of the rule has been postponed by Congress several times in order to use the hypothetical “savings” to the federal government that was produced by the delay to offset other legislative costs.
Trump may view the PBM issue as unfinished business.
“You may think that there will be a very different FTC [under Trump] but one area where it will not change is with PBMs because the Trump Administration was very skeptical about the roles of PBMs and that their rebates schemes really inflated drug costs,” antitrust attorney and former Federal Trade Commission official David Balto told the Pink Sheet.
“The case the FTC has brought will fit into the Trump Administration policy on PBMs,“ Balto said. “I think that case will have even stronger support [under Trump] than in the current administration.”
More Relaxed M&A Oversight?
Analysts are optimistic that the Trump Administration will be more friendly to industry consolidation than the current regime.
The commission under Khan made waves when it challenged Amgen’s acquisition of Horizon Therapeutics based on the novel theory that the deal would enable Amgen to use rebates on its blockbuster drugs to pressure PBMs and payers into favoring Horizon’s Tepezza and Krystexxa over future competitors.
The deal ultimately went through, but the agency formalized Amgen’s commitment not to bundle its products with Horizon’s orphan drugs.
The FTC’s subsequent action to block a single-asset licensing deal between Sanofi and Maze Therapeutics for a treatment for an ultra-rare disease also raised hackles in the biopharma industry.
Wall Street now is expecting the new administration will be less restrictive.
“We anticipate FTC changes, which could facilitate greater biopharma consolidation,” Leerink Partners said in a 6 November report. “A Republican-led FTC ... would likely be more flexible with respect to M&A oversight.”
Balto also said that “in those areas, industry will probably be happy with the change in Administration.”
“The Biden Administration, to a modest extent, has tried to strengthen pharmaceutical merger enforcement,” he said. Under the Trump Administration, “they’re going to go back to a more traditional approach.”
Patent Gaming
Khan also engaged in activity to promote access to generic drugs by challenging what it deemed as improper patent listings in the US Food and Drug Administration’s Orange Book.
Balto suggested that initiative could also “have a fair amount of appeal under a Trump Administration because Republican antitrust enforcers are always very concerned about regulatory abuse.”
“I would imagine that one and other things focused on [intellectual property] practices will get a lot of attention,” he said.
