Trump Signs “Most-Favored Nations Pricing” Executive Order

Country: UNITED STATES | Region: NORTH AMERICA | Type: Policy | Keywords: #executiveorder #hhs #medicare #mostfavorednationpricing #phrma #prescriptiondrugs


PRICENTRIC BRIEF:
  • U.S. President Donald Trump announced on Twitter this weekend that he has signed an executive order to lower U.S. drug prices to make sure Americans pay no more for their Part B or Part D prescription drugs or biological products than the “most-favored-nation” price
  • The most-favored-nation price would be the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product, potentially including, but not limited to Canada, France, Germany, the Netherlands, Switzerland, and the United Kingdom, according to the FREOPP World Index of Healthcare Innovation
  • Immediately, Secretary of Health and Human Services (HHS) Alex Azar must take the steps to implement this plan to test a payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, as well as Part D prescription drugs or biologics with insufficient competition, no more than the most-favored-nation price, to see if this would mitigate poor clinical outcomes and increased expenditures associated with high drug costs for patients who require pharmaceutical treatment

THE DETAILS

WASHINGTON, D.C., The United States – U.S. President Donald Trump announced on Twitter this weekend that he has signed an executive order to lower U.S. drug prices to make sure Americans pay no more for their Part B or Part D prescription drugs or biological products than the “most-favored-nation” price.

Essentially, the price would match the lowest price paid among other wealthy nations. The most-favored-nation price would be the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product.

As reported by Forbes, according to the FREOPP World Index of Healthcare Innovation, Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Japan, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and the United Kingdom are OECD-member counties whose GDP per capita are within 60% of the U.S.

With the signing of this Executive Order, Secretary of Health and Human Services (HHS) Alex Azar has been directed to immediately take the steps to implement this plan to test a payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, no more than the most-favored-nation price.

In addition, HHS Secretary Azar must implement a payment model pursuant to which Medicare would pay, for Part D prescription drugs or biological products where insufficient competition exists and seniors are faced with prices above those in OECD member countries that have a comparable per-capita gross domestic product to the United States, after adjusting for volume and differences in national gross domestic product, no more than the most-favored-nation price, to the extent feasible.

As noted by Trump, both models would test whether paying more than the most-favored-nation price would mitigate poor clinical outcomes and increased expenditures associated with high drug costs for patients who require pharmaceutical treatment.

HHS was unable to comment on how long fleshing out this policy would take.

“Americans Pay More Per Capita for Prescription Drugs Than Residents of Any Other Developed Country”

In a press release from the White House, Trump explained how Americans pay more per capita for prescription drugs than residents in other developed countries. In this way, Americans “make up the difference,” subsidizing innovation and lower drug costs for other countries, said Trump.

On top of this, the president cited concerns regarding the “economic and health consequences” of high drug prices, as well as the fact that the largest buyers in most markets get the best deal, which isn’t the case for Medicare.

“Americans should not bear extra burdens to compensate for the shortfalls that result from the nationalized public healthcare systems of wealthy countries abroad,” stated Trump.

Back in July, Trump announced that he signed four Executive Orders on prescription drug pricing, one being the Order just announced by Trump on Twitter. At the time, he gave Congress 30 days to provide an alternative drug pricing plan to his most-favored-nation plan; he also gave pharmaceutical companies the opportunity to meet to discuss the plan.

Although pharma company CEOs turned down Trump’s offer to meet, they put forth a counteroffer to the President’s plan to introduce an international pricing index (IPI) to base the prices of Medicare-covered drugs off those found in other countries. Their proposal sought to save Medicare in excess of $100 billion over a decade and avoid rulemaking by relying on voluntary demonstration programs within Medicare.

CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA) Stephen Uble declared Trump’s signing of this Executive Order “a reckless attack on the very companies working around the clock to beat COVID-19,” further calling the policy “unworkable” and an “overreach.”

Of course, Trump’s most-favored-nation Executive Order requires new federal rules and regulations before it takes full effect, and it falls short on Trump’s initial promises of an immediate cut to drug prices, lowering patients’ out-of-pocket costs. Rather, it starts the process to test the impact of this change.

However, if Trump is re-elected this November, there is no doubt that he will pursue solidifying these policy changes. Not only would this 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. Pharma must be prepared for the impact of this Executive Order, as the most-favored-nations clause is one of the most radical policy changes poised to take effect in the U.S. 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 U.S. marketplace
  • What alternate mechanisms might assist U.S. government aims without entering into referencing market mechanisms

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