President Trump Signs Drug Pricing Executive Orders, Touts “Most Favored Nation” Pricing

July 31, 2020

Last Friday, President Trump signed four executive orders aimed at lowering drug prices, including an order that would set up a “most favored nation” (MFN) pricing model for Medicare Part B drugs, effectively imposing foreign price controls on critical medicines for seniors. The goal, Trump said, is to “end global freeloading on the backs of American patients and American seniors.” Medicare Part B covers certain medical services and supplies, including outpatient care, preventive care, and drugs and biologics administered in the office setting.

The other three orders would pass along drug rebates to patients at point of sale, expand drug importation, and lower the cost of insulin and Epinephrine through the 340B prescription drug discounts provided to federal community health centers, designated in law as federally qualified health centers.

Language of the executive orders are provided below, with the exception of the MFN order, which has yet to be released. For now, the MFN order is on hold until August 25, pending discussions with the White House and drug industry on an alternative.

Drug Rebates Executive Order

Drug Importation Executive Order

Insulin and Epinephrine Executive Order

More information and analyses on these orders follow:

MFN Executive Order

The MFN order would require Medicare Part B to demo a reimbursement model under which prescription drugs would be paid at the lowest price available in European countries.

This directive is very troubling given its implications for innovation and patient access to Medicare Part B drugs, which include medicines to treat cancer and other serious diseases. It’s all the more troubling in the midst of a pandemic when the biopharma community is working round the clock to deliver treatments and vaccines for COVID-19.

The executive order would likely replace the current market-based system for reimbursing drugs under Medicare Part B – which ensures that Medicare payment reflects discounts negotiated in the commercial market via an Average Sales Price (ASP) – with prices set by foreign governments that don’t appropriately account for the value of medical innovation.

The approach is more extreme than an HHS proposed rule in 2018 which called for an International Pricing Index (IPI) demo using the average price paid for drugs in other developed countries, rather than the lowest price paid.

Last year, House Democrats passed drug pricing legislation, H.R. 3, which included IPI and required Medicare to negotiate prices lower than what would be paid under the index. The President’s own Council of Economic Advisors (CEA) estimated at the time that, if such policies were implemented, pharmaceutical revenues would be reduced by $500 billion to $1 trillion over the next decade and that 100 fewer drugs could enter the marketplace as a result of less investment in R&D. 

By importing foreign price controls, the MFN order could similarly lead to drastic reductions in R&D with fewer innovative drugs coming to market. It would harm patient and physician access to clinically important treatments as routinely seen in foreign countries. Moreover, many small drug discovery companies could see investment dollars dry up as betting on new treatments and cures becomes even more risky.

Although it’s unclear how the MFN order would be implemented, it’s possible that the Administration could issue the new policy as an interim final rule, which bypasses the traditional public comment period, and take effect immediately.

BioUtah and our biopharma partners oppose government engineered price controls, including MFN/IPI that would ultimately impede innovation and the development of new therapies and cures. While we agree that other countries should pay their fair share of innovation, we believe that goal is best pursued through trade agreements and other channels – not by importing foreign country price controls.

Rebates

This order directs HHS Secretary Alex Azar to “complete the rulemaking” that was previously proposed on reforming the drug rebate system. If finalized, the rule would push the system toward up-front discounts that are shared with seniors in Medicare Part D, as opposed to back-end rebates to PBMs and health plans. This is a favorable development for patients that overtime could also lead to similar changes in the commercial market. Currently, the biopharma industry pays approximately $166 billion in rebates, discounts and other price concessions into the U.S. healthcare system.

BioUtah supports the executive order to ban rebates – the drug discounts paid to middlemen like pharmacy benefit managers (PBMs). This would help ensure that cost savings are directly passed along to the consumer.

Drug Importation

The drug importation order would direct the FDA to finalize a rule that would permit states and other local governmental entities to submit plans to import certain prescription drugs from Canada. President Trump has supported such a policy in the past and last spring asked HHS to propose a regulatory pathway for safe importation. That proposed rule, however, was never promulgated. Although the executive order specifically mentions Canada, it also mentions unspecified “other countries.” Further, language contained in the order states that imported drugs must not pose “additional risk to public safety.”

The new order adds two other importation-related programs, one of which will authorize personal importation of drugs and biologics under certain guidelines. The other will permit re-importation from Canada of insulin made in the U.S.

As many as four states have passed drug importation legislation. Over the past few years, the Utah legislature has considered, but ultimately rejected, a series of importation proposals.

BioUtah opposes drug importation which undermines the FDA’s “gold standard’ of drug approval and regulation. Importantly, importation of drugs from Canada will do little to lower patient out-of-pocket costs. Numerous studies have shown that the costs of creating an importation scheme would not produce meaningful cost savings. Even if a rule is finalized, it is likely to take a long time, if ever, for states to get plans approved and implemented. In addition, Canadian authorities are on record opposing such an initiative. They view it as a threat to their own drug supply chain.  

Insulin and Injectable Epinephrine

This order requires federal community health centers to pass the discounted price they receive for insulin and injectable epinephrine directly on to patients. Today, the 340B statute requires drugmakers to provide a heavily discounted price for outpatient drugs and biologics to certain safety-net providers (including community health centers). However, there is no requirement that the entire amount of these discounts be passed along to patients. Although some believe the impact of this order may be limited,  making these medicines more affordable continues to be a bipartisan policy priority. In June, Utah implemented a program passed by the state legislature this year that imposes a $30 co-pay cap on insulin and provides the drug at the discounted prices paid by state employees.

It’s not surprising that President Trump is rebooting his drug pricing message given that reducing the price of prescription drugs was a 2016 campaign promise, which laid the foundation for the President’s 2018 drug pricing blueprint.

BioUtah will continue to monitor these executive orders and report on new developments as additional rulemaking will likely be needed to advance these policies. We will continue to push for solutions that effectively lower patients’ out-of-pocket costs while promoting continued innovation.