Trump Signs 4 Executive Orders on Prescription Drug Pricing

WASHINGTON, D.C., The United States — United States President Donald Trump has signed four Executive Orders (EOs) on prescription drug pricing directing Secretary of Health and Human Services (HHS) Alex Azar to (1) pass on savings for insulins and epinephrine through the 340B program to patients, (2) end kickbacks, (3) allow the importation of certain prescription drugs, as well as re-importation of insulin, and (4) make sure Medicare beneficiaries and seniors pay no more for their medicines than any economically comparable OECD country.

According to Trump, “The four orders that I’m signing today will completely restructure the prescription drug market, in terms of pricing and everything else, to make these medications affordable and accessible for all Americans.”

1. Part 340B – Medicare Part B beneficiaries with low incomes will have another chance to receive savings, as federally qualified health centers (FQHCs) who purchase insulins and epinephrine in the 340B program will be required to pass the savings from discounted drug prices directly on to patients by preventing hiding any subsidies. The EO extends to the 1,000 FQHCs, which are visited by 28 million patients, six million of whom are uninsured. While the EO would directly lower the price for those patients, the FQHCs are dispensing a relatively small percentage of the overall scripts for epinephrine and insulin.
2. Medicare Rebates – Ending the current rebate, or kickback system, which Trump said is the reason many Americans face high out-of-pocket costs at the pharmacy counter, will allow seniors under Medicare Part D to receive kickbacks as discounts. In 2018 alone, Part D discounts totaled more than $30 billion, representing an average discount upwards of 30%. However, it is unclear how some of the prior challenges that the administration ran into in trying to implement this change will be solved by the EO. Unclear implementation plan, a risk of Medicare Premiums actually rising for some beneficiaries, and legal questions surrounded the prior attempt to implement changes to the rebate model
3. Reimportation – States will be allowed to import certain prescription drugs from abroad, and re-importation of insulin products will be authorized, bringing cheaper versions of these products to patients. The U.S. has its eyes set on Canada as a key source of importation. While Canada previously expressed it would cooperate with the U.S., Kirsten Hillman, Canada’s Ambassador to the U.S., has warned, “Not only are we too small of a market, Canada cannot increase its domestic pharmaceutical drug supply to meet U.S. demand. Canada remains dedicated to working with the U.S. to improve our citizens’ health and well-being, recognizing that Canada’s priority is to ensure a steady supply of medications at affordable prices for Canadians.” A number of analysts, including Adam Fein of Drug Channels, are raising questions about whether the part of the EO can survive regulatory scrutiny.
4. Most Favored Nation Pricing – Trump said the final EO, whose text has not yet been released, will take effect in 30 days unless Congress acts and seems like a variation on his prior international pricing index proposal (IPI). While the least defined so far, it is potentially the most impactful of these EOs. Not only would it change Medicare channel pricing based on most favored nations to ensure Americans pay no more for their prescription drugs under Medicare Part B than patients in similar OECD countries, but it is more likely to shift both broader US and Global pricing models if implemented. It is unclear how this EO will be implemented, and how it will address some of the challenges that the prior effort ran into.

Most Favored Nation Pricing

From a global impact, the fourth EO is the most important but also least defined. Although there’s been little headway made in accomplishing these drug pricing campaign promises to date, with the election less than 100 days away, Trump is indicating the issue of lowering drug prices is still very much of interest. This time, Trump has set a deadline – 30 days from now – to give the pharmaceutical industry a chance to make a deal on international referencing.

At the White House, Trump said, “Under this transformative order, Medicare will be required to purchase drugs at the same price as other countries pay.  So we would pay four or five times more for a drug.  We now pay — if somebody else pays $1 and we pay $5, we’re paying $1.  Now what’s going to happen is their number will go up, our number will come very substantially down, and we’ll all agree at two and a half or two or whatever the final number is.”

Throughout his presidency, Trump has been a vocal proponent of enacting price controls on prescription drug prices that bring prices in-line with the rest of the world, with previous efforts in the works since 2018 and the Most Favored Nations proposal announced in July 2019. The most favored-nation proposal, which was set to lower drug prices to what lowest OECD equivalent country pays, was a follow-up to the proposed international pricing index (IPI) model, an index of prices from select other countries to set drug prices for certain Medicare Part B-covered drugs.

Currently, the industry is not keen on any radical policy changes, especially given the COVID-19 pandemic. Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Stephen J. Ubl has said, “Yet, in the middle of a global pandemic, when nearly 145,000 Americans have lost their lives and millions of others have suffered untold economic hardships, this administration has decided to pursue a radical and dangerous policy to set prices based on rates paid in countries that he has labeled as socialist, which will harm patients today and into the future.”

Previous efforts to adjust U.S. policy in this regard were never given a deadline. The Notice for Proposed Rulemaking (NPRM) for the IPI model was supposed to take effect in August 2019, and would have been a radical policy change for the U.S. Had there been any action on this measure, drug payments would be based on a target price derived from the index of drug prices in other countries: Austria, Belgium, Canada, Czech Republic, Finland, France, Germany, Greece, Ireland, Italy, Japan, Portugal, Slovakia, Spain, Sweden, and the United Kingdom—where target drug prices are collectively 44% lower. Target prices would be phased in, beginning with an 80% ASP/20% target price blend in Year 1 and by Year 5, 100% of the target price would be used.

While Trump has pursued these changes throughout his presidency, little progress has been made. However, bipartisan support for reducing the difference between the U.S. and the rest of the world exists. Senator Bernie Sanders’ and Speaker of the House Nancy Pelosi’s attempts to pass similar legislation have also stalled.

Summary

In summary, Trump’s 4 EOs will surely be litigated and there are many questions about the ability to implement these EOs. Trump’s call to allow the importation of prescriptions from Canada has been in the making since December 2019, when the Food and Drug Administration (FDA) and Department of Health and Human Services (HHS) issued an NPRM to permit importations. It is unclear how the EO impacts this work, other than giving it more visibility and perhaps serve as a reminder of the urgency of the issue ahead of November.

The EOs seem more of a visible callout of his stance on policy priorities because of the upcoming election. Besides the final EO on benchmarking drug prices, the scope of Trump’s proposals focus solely on Medicare beneficiaries, which in total represent 18% of the US population.

If Trump is re-elected this November, there is no doubt that he will pursue solidifying these policy changes. Pharma must be prepared for the impact these EOs will have on the overall policy landscape in 2021, given the current political climate ahead of this election. The launch of an international pricing index will definitely be impactful. Pharma should consider:

• What final shape the rule might take
• What impact the inclusion/exclusion of certain countries might have
• How this pricing proposal impacts new global drug launches now that might be priced into an uncertain landscape
• How to manage increasing complexity in the already onerous process of managing and reporting prices in the US marketplace
• What alternate mechanisms might assist U.S. government aims without entering into referencing market mechanisms

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