With Joe Biden’s inauguration as the 46th president of the United States and Democrat control of both the house and senate, what are the expected policy priorities and changes for healthcare in 2021? As expected, the current focus of the administration is the pandemic, bolstering the roll-out of the vaccine and providing economic support to those parts of the economy that have been most impacted. Beyond this, there are changes in congress that will have potential impact to payers and pharmaceutical manufacturers.

First, with a new, albeit slim majority in the Senate, there will be changes in Senate committee leadership. The more moderate members of both parties are likely to hold outsized influence on key pieces of legislation. However, with new committee chairs, the priorities are likely to shift. The Democrats continue to maintain control of the House, but that majority has narrowed to just 4 seats. Given this narrow margin, the incentive to move with urgency is likely.

Next, President Biden’s administration nominations are likely to gain Senate approval quickly with a simple 51-vote majority required. At this time however, candidates for CMS, FDA, and other key positions have not been announced. Xavier Becerra, former Attorney General for California, is likely to be confirmed to lead the Department of Health and Human Services (HHS). He led the legal defense of the ACA when challenged by Texas at the Supreme Court. He has supported single payer Medicare-for-All and supports government review and approval of health system mergers. Payer should expect rules and regulations to focus on increasing government involvement in healthcare, away from private payers.

Expect more pharmaceutical-focused legislation to be proposed. However, the moderates are likely to limit more extreme options from being enacted. The slim Democrat majority weakens the free-market Republicans who have historically opposed increased government intervention in drug pricing. The use of Budget Reconciliation has already become a key lever for the Senate. This requires a simple majority of 51 votes to pass, but is limited in frequency and scope to budget and fiscal matters. Drug pricing reforms with budget savings may be used to fund expansion of the ACA or other healthcare priorities that can be passed via reconciliation. Despite this easier pathway to passage, enactment of significant drug pricing legislation is far from guaranteed.

The Covid-19 relief bill currently making its way through the House is expected to include a controversial Medicaid drug pricing policy. The policy is designed to help states recoup some of the costs they incur in their Medicaid programs when manufacturers increase the price of certain drugs. Under current federal law, there is a cap to the rebate amount of 100% of the Average Manufacturer Price (AMP), the new policy would rescind this “Medicaid rebate cap.” The policy could have a large impact on drugs like insulin, which have taken significant price hikes and PBMs are given large rebates. Without the cap in place, manufacturers could end up owing the states money for the Medicaid beneficiary’s prescriptions.

In addition to the federal Medicaid drug pricing policy, several state legislators are drafting bills that would penalize drug manufacturers for “unjustified” price hikes and cap payments based on Canadian drug prices. Hawaii, Maine, and Washington recently introduced bills that would impose an 80% tax on any drug price increase that ICER determines in its annual report are not supported by evidence of improved clinical value. The states would impose the tax based on in-state sales of their drugs and the price difference since the prior year. The revenue from this tax would reportedly be used to fund programs that help consumers afford their medication.

While this signals that drug pricing policy will continue be a focus, there continue to be far more questions than answers. We do not yet know how high of a priority further drug pricing reform will be to the Biden administration or the democrat-controlled legislature. President Biden has already signed several Executive Orders, one that was to strengthen the ACA as well as opening a special enrollment period. The interim final rules that outgoing HHS and CMS heads created have been frozen for the time being, with the expectation that most of these, including the Most-Favored Nations pricing model, will not move forward without a new round of rulemaking. Other rules that were rolled out in the final days of President Trump’s administration, such as the Part D rebate safe harbor rule, are also not expected to be implemented in current form. Manufacturers and payers should actively monitor signals from both Congress and the Administration as to what their healthcare priorities will be.