Inauguration day on January 20th, 2021 will mark the end of a tumultuous 4-year run of the Trump Administration’s failed attempts to overturn the Affordable Care Act (ACA) and find a solution to meaningfully lower drug costs for all. Looking at Trump’s approach from a high level, his agenda was primarily focused on improving negotiation leverage and fostering competition. And, on this front, there were some small wins along the way, such as qualifying biosimilars as Medicare Coverage Gap Discount Program eligible, implementing Part B step therapy programs, and allowing indication-based formularies in Medicare. The problem with these solutions, however, was that they were limited to Medicare (approximately 18% of US population1) and they primarily impact specialty drugs that are utilized by less than 5% of patients. In contrast, the incoming Biden administration will aim to expand the ACA and from a drug cost perspective and will look toward empowering the government to negotiate lower drug prices. But, at the end of the day, will Biden be any more successful in moving the needle toward improving affordability? Moreover, how will National Healthcare Payers and Drug Manufacturers respond?

To gain a better sense of where the Biden administration’s focus on affordability may center upon, perhaps we can look toward 2 competing bills put forth by the Senate and House of Representatives back in 2019. The Senate proposed a bi-partisan bill from Chuck Grassley (R-Iowa) and Ron Wyden (D-Ore.) entitled the, Prescription Drug Pricing Reduction Act (PDPRA) of 2019 and Nancy Pelosi (D-CA) of the House released the Lower Drug Costs Now Act of 2019. Although the Trump Administration favored the Senate bill, the House bill was not entirely without bipartisan support as certain provisions were common between both. Examples of common provisions included:

  • Capping out-of-pocket costs for seniors
  • Caps on price increases and rebates that exceed price inflation
  • Medicare Part D coverage phase reform

Lastly, we can look at the Trump Administration’s recent November 20, 2020 interim rule to institute their Most Favored Nation (MFN) drug pricing model. Although this model will face considerable pushback and its likelihood of implementation by the Biden administration is questionable, the notion of basing US drug prices off of international drug price indices was also a provision contained within Pelosi’s bill.

So, the question remains, what are some examples of policies can we expect from the Biden administration, partially based upon bipartisan commonalities? We know that affordability will be a continued focus and this is evidenced by Biden’s agenda to expand subsidies to help expand ACA access. From a drug cost perspective, it is likely Biden will move forward with an initiative to overturn prohibitions that prevent Medicare from negotiating drug rebates. This assumes Trump’s most recent Rebate Safe Harbor final rule is overturned. But, Biden’s approach will also likely receive pushback from National Part D payers as they have already negotiated steep rebates from drug manufacturers. Moreover, it is unknown how Medicare negotiated rebates will be used, meaning will they be passed on to consumers or will they be used to offset CMS liability in the catastrophic phase. If the government uses rebates for cost offsets, the lost rebate stream for payers could drive premiums upwards and we’re back to square one. Policies that target drug pricing controls are likely to stem from the Biden administration. As seen with the prior Pelosi bill, capitation and price inflation arrangements that link drug prices to benchmarks such as inflation or international price indices will likely remain on the table.

Payer response to future healthcare policy will not be knee-jerk as they have been primed by the forward (and abrupt) nature of the Trump administration’s execution strategies. Moreover, many payers have created new infrastructure to handle potential future actions. For example, the newly merged PBM-health plans (Express Scripts – Cigna and CVS-Aetna) have created internationally-based group purchasing organizations (GPOs) that can circumvent rebate safe harbor restrictions. These organizations have also created formulary offerings capable of administering pass-through rebates at the point-of-sale (see CVS Allure Plan from 2019). Knowing that payers are better positioned today for impending change, it is important for drug manufacturers to understand how national payers have responded to past legislative actions and how they have prepared themselves for future policies.  Likely there are new partnership opportunities contained within. For example, value-based arrangements have seemed to avoid the limelight of drug rebate scrutiny and by expanding contract portfolio offerings, this front could possibly help payers address future legislative actions. Additional target areas of focus could include distribution channels, GPO arrangements, quality performance, and risk sharing among others. In summary, payers have not sat idly when confronted with legislative policy and their proactive response strategies are opening doors for new opportunities.


  1. USAFACTS. Approximately 8% of the population—26.1 million—lack health insurance in 2019. Accessed December 9, 2020.
  2. The National Law Review. The overlap of drug pricing proposals. Published September 29, 2019. Accessed December 9, 2020.