July 27, 2020

President Trump on Friday announced four executive orders aimed at lowering prescription drug costs in America that would, among other things, ban drug rebates used by pharmacy benefit managers and establish an international pricing index.

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Trump issued the orders amid several stalled legislative efforts regarding prescription drug costs, including a bill proposed by House Speaker Nancy Pelosi (D-Calif.) that would have expanded Medicare benefits and capped beneficiaries' out-of-pocket costs, as well as a bipartisan bill—backed by Trump—that would have "limited annual price increases and capped costs" among older Americans, the Associated Press reports.

All four of Trump's new executive orders, which he signed on Friday, call on federal departments and agencies to begin regulatory processes to implement the initiatives outlined in the orders, meaning they will not have immediate effects.

What the orders would do

1. Pass on discounts for insulin and epinephrine

The first executive order would require federally qualified health centers (FQHCs) to pass on to patients the discounts the health centers receive on insulin and epinephrine through Medicare's  340B Drug Discount Program.

"It is the policy of the United States to enable Americans without access to affordable insulin and injectable epinephrine through commercial insurance or federal programs, such as Medicare and Medicaid, to purchase these pharmaceuticals from an FQHC at a price that aligns with the cost at which the FQHC acquired the medication," the order states.

Only patients with low incomes; those with high cost-sharing requirements for insulin or epinephrine; those with high, unmet deductibles; and/or those without health insurance would be eligible for the discount.

2. Create an international pricing index

The second executive order, which hasn't yet been published publicly, would establish an international pricing index that would set the price Medicare Part B pays for the costliest medications covered under the program to the lowest price in other economically advanced countries.

However, Trump said his administration will hold the order until Aug. 24 because he may not implement it. Trump said pharmaceutical executives are slated to visit the White House on Tuesday to discuss this order, and he could choose to drop it if the executives come up with a better alternative by the Aug. 24 deadline.

3. Support the 'safe importation' of Rx drugs

The third executive order aims to lower the prices Americans pay for pharmaceutical drugs by supporting the "safe importation of prescription drugs."

Specifically, the order would require HHS to facilitate "grants to individuals of waivers of the prohibition of importation of prescription drugs" that would allow patients to import FDA-approved medicines from abroad, so long as doing so would result in lower costs. The order also would mandate that HHS expediate rulemaking that permits states and pharmacies to import certain drugs from Canada.

In addition, the order includes a provision that would allow wholesalers and pharmacies to re-import both biological drugs and insulin that were originally manufactured in the United States and then exported for international sale.

4. Eliminate certain drug rebates

The fourth executive order would end drug rebates used by "health plan sponsors, pharmacies or [pharmacy benefit managers (PBMs)] in operating the Medicare Part D program," instead requiring affected entities to pass those rebates directly to patients.

Specifically, the order would require HHS to exclude from safe harbor protections under the federal anti-kickback statute retroactive price reductions—including rebates given to PBMs, pharmacies, and health plan sponsors—that are not applied at the point-of-sale. Instead, the order would mandate that HHS establish new safe harbors that would allow health plan sponsors, pharmacies, and PBMs to pass on those discounts to consumers at point-of-sale "in order to lower the patient's out-of-pocket costs" and "permit the use of certain bona fide PBM service fees."

HHS Secretary Alex Azar said, "The new rule would require those kickbacks be passed through to our seniors when they walk into the pharmacy." He added that the order would reduce drug costs for seniors by between 26% and 30%.

However, the order would require that the HHS Secretary confirm that a ban on the rebates would not increase Medicare premiums, federal spending, or patients' overall out-of-pocket costs. That could prove difficult, STAT News reports, given that CMS' Office of the Actuary previously "estimated that the rebate rule would increase premiums by up to 25%."

Comments

Trump said the executive orders would "unri[g] [a] system that is many decades old" and generate "massive" savings.

Separately, Azar said the orders "make clear these are the policies of [Trump's] administration. These will happen. He has ordered them to happen. Debate is over."

Stephen Ubl, CEO of the Pharmaceutical Research and Manufacturers of America, criticized the orders, saying they are "a reckless distraction that impedes our ability to respond to the [coronavirus] pandemic—and those we could face in the future." He added that the orders "jeopardize[e] American leadership that rewards risk-taking and innovation and threatens the hope of patients who need better treatments and cures."

Pelosi said, "After promising that he would 'negotiate like crazy' for lower prescription drug prices, it is clear that … Trump meant not negotiate at all."

Michelle McMurray-Heath—CEO of BIO, a biotechnology trade group—specifically called out the international pricing index executive order, saying, "Adopting foreign price controls by executive fiat will cripple the small, innovative companies developing the vaccines and therapies that will help end [the coronavirus] pandemic and get the American people back to work."

And Lindsay Greenleaf, VP for policy at ADVI Health, said the orders could potentially increase prices on Medicare Part B drugs, as drugmakers may favor large volume buyers of their drugs, such as hospitals, instead of physician practices.

"The way that that model was previously proposed, there is a risk of driving consolidation because [individual] providers weren't going to be able to compete as well as they do currently," Greenleaf said (Cohen et. al., Inside Health Policy, 7/24 [subscription required]; Florko/Facher, STAT News, 7/24; Alonso-Zaldivar, Associated Press, 7/24; Higgins-Dunn et. al., CNBC, 7/24).

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