Biden Regulatory Freeze May Pause Sunset Rule, Medicare Rebate, Medicaid Line Extension Regs

BY CATHY KELLY

Executive Summary

Tactic aims to allow incoming Administration to scrutinize so-called ‘midnight rules’ issued in the final days of the Trump Administration before they take effect. Regulators may also solicit stakeholder comments on delayed rules. The incoming Biden Administration is following tradition by announcing a regulatory freeze on Inauguration Day to pause action on recent Trump Administration regulations in order to consider withdrawing or revising them.

White House Chief of Staff Ron Klain sent a regulatory freeze memo to the heads of executive departments and agencies on 20 January requesting that they “consider” suspending action on any new regulations that the Trump Administration tried to finalize in its last days and confer with the director of the Office of Management and Budget before renewing any regulatory activity.

This action will allow the Biden Administration to prevent any detrimental so-called ‘midnight regulations’ from taking effect, while ensuring that urgent measures in the public’s interest can proceed.

The tactic impacts rules that have been sent to the Federal Register but are not yet published and rules that have published but are not yet in effect. Those not yet published will be immediately withdrawn and the effective date of ones that have published will be delayed for 60 days.

During the period of delay, Klain suggests departments and agencies also “consider opening a 30-day comment period to allow interested parties to provide comments about issues of fact, law, and policy raised by those rules, and consider pending petitions for reconsideration involving such rules.” As appropriate and where necessary, “consider further delaying … such rules beyond the 60-day period,” the memo adds.

Important rules issued by the Health and Human Services Department and its agencies that will be affected by the freeze includes the HHS Sunset (Securing Updated and Necessary Statutory Evaluations Timely) rule. Opposed by biopharma, the rule requires that regulations be regularly assessed to determine whether they remain relevant and need updating. It was published in the Federal Register 19 January and is scheduled to go into effect 22 March.

Under the rule, all new regulations will expire 10 years after they are issued and after every subsequent 10 years unless they are reviewed. All regulations already in effect longer than 10 years will expire five years after the retrospective review rule takes effect if not reviewed and retained. (Also see “Some Long-Standing FDA Regs Face Mandatory Review Or Rescission Under New HHS Rule” - Pink Sheet, 8 Jan, 2021.)

Critics have argued it would overburden HHS and create regulatory uncertainty for regulated industry. It could affect regulations governing the toll-free number for reporting adverse events on human drug product labeling, as well as requirements for foreign and domestic facility registration and listing for human drugs, biologics and animal drugs.

Another potential reg that could impact FDA is a rule announced on 15 January that would subject policy directors in HHS agencies to five-year terms. Among others, FDA center directors, CDC center directors, and CMS deputy directors would have an automatic review every five years, and while they couldn’t be fired, they could be reassigned at the discretion of the HHS Secretary. The rule has not been published, and may never be if the Biden administration decides it could hurt agency performance.

A rule designed to reform the rebate system in Medicare Part D is also expected to be subject to the freeze. Promulgated by the HHS Office of Inspector General, the controversial rule is supported by biopharma but had a rocky path to release because it was opposed by some in the Trump White House as potentially too costly for the Medicare program and beneficiaries.

The final rule was pulled from the regulatory queue in July of 2019 prior to release and then was issued on 30 November in a last-minute flurry of drug pricing actions. (Also see “Medicare Part D Drug Rebate Rule Finally Sees Light Of Day: Now What?” - Pink Sheet, 22 Nov, 2020.)

The rule would eliminate the current anti-kickback safe harbor for prescription drug rebates and create two new safe harbors protecting pointof-sale reductions in drug prices and certain PBM service fees. The change to the definition of the safe harbor for discounts has an effective date of 1 January 2022 and the rest of the rule is scheduled to be effective 29 January 2021.

If the rule is not withdrawn by the Biden Administration it might be invalidated, or at least delayed, in court. The Pharmaceutical Care Management Association, which represents

pharmacy benefit managers, filed a lawsuit in federal district court 12 January seeking to overturn the rule because, the group says, it was released in violation of the Administrative Procedures Act. The rule also could be rescinded by Congress.

Medicaid Price Inflation Rebates For Line Extensions

The broad Medicaid final rule establishing a process for reporting multiple ‘best prices’ as a way to support value-based contracting, among several other provisions, will also likely be subject to the freeze. Published on 31 December, the final rule pushes the effective date of the new definition of best price until 1 January 2022 to allow for additional guidance to be developed on several lingering questions. (Also see “Value-Based Contracting: CMS Final Rule Leaves ‘Multiple Best Price’ Questioned Unresolved” - Pink Sheet, 4 Jan, 2021.) The rest of the rule is scheduled to go into effect on 1 March.

The rule also addresses changes to Medicaid rebate rules for line extensions, which could have a much more significant impact on manufacturers than the value-based contract provisions because it identifies what types of products will become subject to price inflation rebates in the program. (Also see “New Combo Products Exempt From Medicaid Rule Applying Price Inflation Rebates To Line Extensions” - Pink Sheet, 4 Jan, 2021.)

In addition, the rule would require manufacturers to exclude copay assistance amounts provided in commercial insurance when reporting best prices for Medicaid unless they have ensured the full value of the assistance is passed on to the consumer. The effective date of that change is 1 January 2023.

A final rule directing federally qualified health center participating in the 340B program to pass through discounts received on EpiPens and insulin to consumers at the point of sale could be subject to review as well. The rule, which carries out an Executive Order by former President Trump, was published on 23 December and is scheduled to go into effect on 22 January.

And a final rule on policy and technical changes in Medicare that allows Part D plans to establish preferred and non-preferred formulary tiers for specialty drugs, among other changes, may also be paused. The rule was published in the Federal Register 19 January and is scheduled to become effective on 22 March. (Also see “Two-Tier Specialty Drug Policy: Part D Plans Gain Formulary Flexibility But Impact May Be Limited” - Pink Sheet, 20 Jan, 2021.)

HHS ‘Midnight Rules’ Likely Subject To Regulatory Freeze

List includes important rules that were published before the Trump Administration left but have not yet become effective.