President-elect Joe Biden to work with divided Congress
With the highest overall voter turnout in U.S. history, Americans elected Democratic candidate Joe Biden as their 46th president. In the two houses of Congress, Democrats’ majority in the House of Representatives slimmed, and Republicans’ preserved their majority in the Senate. However, with two runoff Senate elections in Georgia slated for January, Democrats could evenly split the Senate, should they win both contested seats. Yet, as this is unlikely, we will likely see a divided U.S. government in the next Congress.
Ivan Zapien, head of the Hogan Lovells Government Relations and Policy Advocacy practice, said President-elect Joe Biden’s transition to power may be rocky, as we have seen President Trump refusing to cooperate with the normal presidential transition process. Prior to Biden’s inauguration, Congress will need to pass a budgetary package to fund the government, and it may pass another COVID-19 relief bill. Meanwhile, Biden has been working on selecting his cabinet members, and panelists discussed how Biden’s transition team is prioritizing competency and diversity in its seat picks. President-elect Joe Biden may face “contention around two or three different cabinet members” during the confirmation, Zapien predicted.
Although Congress is likely to be divided in 2021, Joe Biden’s history of working in the Senate and promoting compromise may help him pass legislation, Zapien speculated. Alice Valder Curran, head of the Hogan Lovells Global Regulatory and IPMT practice, recounted how President Trump also entered the White House with a reputation for “deal-making,” but we did not see a lot of collaboration between his administration and Congress. In the next four years, Biden’s experience in Congress may result in more legislation being passed than the previous administration, Valder Curran predicted. The panel summarized how, in his first 100 days in office, Biden will prioritize COVID-19 response, preserving the Affordable Care Act, economic issues, and leading internationally on climate change, among other goals.
Health care
COVID-19 will be the top priority for the incoming administration, explained Beth Halpern, partner in the Hogan Lovells health care practice. Not far behind that policy goal, Biden will also be trying to protect the Affordable Care Act and reduce drug prices. Halpern enumerated the seven prongs in the Biden plan to combat COVID-19, which will focus on ensuring access to testing, ramping up production of Personal Protective Equipment – using the Defense Production Act, if necessary – and ensuring domestic availability of vaccines and therapies. Kelly Ann Shaw, partner in the Hogan Lovells International Trade and Investment and Government Relations & Public Affairs practices, explained that the pandemic has raised a national security case for producing drugs and medical supplies regionally, and there are proposals in Congress to build on the Buy American Executive Order, which Shaw recently published about online here.
Regarding the Affordable Care Act, Halpern described how recent Supreme Court arguments have indicated that much of the ACA could remain intact, even if the Court finds the individual mandate to be unconstitutional. However, Halpern predicted, President-elect Biden’s larger goal to expand the ACA into Bidencare is likely to face issues in the divided Congress, although Biden’s shifting of the goal posts may open the door to compromise in Congress on smaller issues.
Drug pricing is another issue that Biden has prioritized in his campaign. Halpern outlined how Biden has specifically proposed to create an independent board to set “reasonable” drug prices based on those paid in other countries, limit drug price hikes, permit prescription drug importation, encourage generic drug development, end “surprise billing,” and repeal the law banning Medicare from negotiating drug prices directly. Valder Curran predicted that although the Biden Administration will continue the Trump Administration’s drug pricing reform efforts, Biden’s specific mechanisms for achieving those goals may differ. Zapien explained that because this is an area where both political parties have urged reform, under a divided government, the prospects are counterintuitively higher for either party to be able to pass drug pricing legislation in 2021.
FDA impacts
While the Trump Administration has emphasized funding for Operation Warp Speed (OWS) vaccines, under the Biden Administration, in addition to vaccine funding, we can expect a greater emphasis on funding for COVID-19 therapeutics, explained David Horowitz, partner in the Hogan Lovells Pharmaceuticals & Biotechnology practice. Horowitz also predicted a greater emphasis on transparency under Biden’s Food and Drug Administration, as the incoming administration looks to showcase the career scientists’ expertise and restore public trust in the agency. These enhanced efforts will likely include more direct communication and visibility on Emergency Use Authorization (EUA) decisions. Horowitz said the Biden Administration would seek to avoid “even the appearance of political interference,” in order to distinguish itself from the Trump Administration.
Interestingly, Biden’s aim of restoring public trust in FDA may result in renewed efforts for the agency to increase its independence, which may even include moving FDA outside of HHS control, Horowitz said, while noting that such a move still remains unlikely. Zapien commented that the next Congress is unlikely to have the bandwidth to legislate such a change in FDA control.
Yet, Horowitz explained, we are likely to see a change in the new administration’s position regarding FDA’s authority over laboratory developed tests (LDTs), including those used to diagnose COVID-19. Trump’s HHS has taken the position that FDA does not have legal authority to require premarket approval, including requiring EUAs, for such diagnostic tests. Horowitz said this landscape would shift in 2021, predicting that the Biden Administration will reverse prior efforts to undermine FDA’s authority over LDTs. However, Horowitz stated that the Biden Administration will likely support a legislative effort, and possibly rulemaking, to clarify the agency’s authority to regulate the tests.
Although as a candidate Joe Biden expressed support for the concept of expanding drug importation, Horowitz predicted that the Biden Administration would not rely on drug importation to reduce drug prices. The Biden Administration will inherit the Trump Administration’s drug importation final rule that was issued in September. However, as Horowitz has analyzed online here, this final rule will not provide a meaningful pathway to drug importation; and to ensure safety, the final rule contains extensive restrictions that will make it nearly impossible to achieve significant cost-savings. Horowitz raised the possibility that once it is understood that this drug importation rule is not having an impact, some in Congress may seek to advance new legislation. Zapien pointed out, however, that bipartisan action on drug importation is very unlikely in 2021.
Horowitz also described how FDA is likely to increase inspections and other enforcement actions under the Biden Administration, as COVID-19 becomes less of an impediment in the coming years, and as the incoming administration seeks to distinguish itself from its Republican predecessors. Horowitz predicted an uptick in compliance scrutiny related to foreign inspections, manufacturing quality, clinical trials, and advertising & promotion.
International trade
Among the policy areas that carry significant consequences for life sciences and health care companies, international trade has been top of mind in recent years. Shaw described how President-elect Joe Biden has said it is in the United States’ interest to build on international relationships, and has pledged to steer America away from President Trump’s more unilateral approach to foreign affairs. Valder Curran pointed out that the Biden Administration will have to struggle with balancing outreach to the world and its need to focus on domestic issues.
Biden has said that his Administration will prioritize domestic issues during his first year in office. However, there are a number of trade-related actions that the Trump Administration may take in the next 60 days. “You can fully expect to see tariffs on the menu of options in the next few weeks,” Shaw said, citing how the U.S. is continuing to investigate discriminatory practices by certain countries. The investigations on digital services taxes, for example, could result in tariffs on millions of dollars’ worth of trade for primarily European countries, which could implicate a number of products in the life sciences and health care sector, and potentially open the industry up to retaliation by the EU. Investigations are also ongoing with respect to Vietnam, as well as other national security investigations related to steel products.
China has been the focal point of the Trump Administration’s trade policy, and Shaw noted both Congress and the Administration are contemplating additional China actions in the coming weeks, specifically legislation addressing forced labor. Under the Biden Administration Shaw predicted the United States would continue to pursue tough actions on China but will pay significantly less attention to trade more broadly. For example, Shaw said it’s not yet clear what will happen to ongoing U.S. trade negotiations with the UK or Kenya. While there continues to be a national security case for U.S. participation in the Trans-Pacific Partnership (TPP), Shaw was doubtful the United States would find an economic case for rejoining under Biden. Shaw also outlined which government officials we can expect to play a key role in crafting trade policy under the Biden Administration.
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