President Trump has signed four executive orders (EOs) designed to lower prescription drug prices. This administration has repeatedly touted lowering drug prices as a priority and these orders touch on areas the administration has previously looked at including setting Medicare Part B payment based on international prices (referred to as “most favored nation”), prescription drug rebates, and drug importation. A fourth order will direct 340B entities to pass-on discounts and rebates to patients on insulin and injectable epinephrine.
These executive orders all direct the Department of Health and Human Services (HHS) to take action to implement these policies so we expect additional rulemaking and other actions by HHS agencies, including the Centers for Medicare & Medicaid Services (CMS), the Food and Drug Administration (FDA) and the Health Resources and Services Administration (HRSA) to follow.
Most Favored Nation Executive Order Held Until Late August
In his remarks on the drug pricing executive orders, President Trump said a meeting was scheduled with pharmaceutical manufacturers for the week of July 27th and that if the meeting is successful and the industry comes up with an idea to lower prices, the “most favored nation” order would not be implemented. If the industry does not come up with a solution, the Executive Order would be released August 25th.
This unique set-up likely explains why the Administration has not released this fourth Executive Order, unlike the other three. Remarks from President Trump and other administration officials indicate that under this order, the United States would not pay more than any other comparable OECD country for Medicare Part B drugs. This differs from the International Pricing Index (IPI) model previously put forth by the administration that would base Part B drug payments to an average of the prices paid in other developed countries. However, questions still remain on how such a policy would be designed and implemented.
Executive Order Brings Back Past Proposal to Remove Existing Rebate Structure
One of the orders, entitled “Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen” appears to bring back the administration’s past proposal to eliminate drug rebates in Medicare Part D. In January 2019, the Department of Health and Human Services (HHS) released a proposed rule that would eliminate rebates paid by drug manufacturers to pharmacy benefit managers (PBMs). However, that rule was never finalized as concerns were raised by some administration officials that it would lead to increased premiums in Medicare Part D.
This Executive Order directs the Secretary of HHS to complete rulemaking to eliminate the safe harbor for drug rebates that are not applied at the point-of-sale as well as other remuneration that drug manufacturers provide to plan sponsors, pharmacies, and PBMs in Medicare Part D. The EO further states that a new safe harbor allowing discounts to be applied at the point-of-sale “to lower the patient’s out-of-pocket costs” and to allow for certain PBM service fees. These provisions greatly mirror the 2019 proposed rebate rule.
Likely in response to past concerns over increased premiums, the EO directs HHS to confirm that the new rule is not projected to increase federal spending, Medicare premiums, or total out-of-pocket costs for patients. This confirmation would have to be made public. To note, the Congressional Budget Office (CBO) previously projected that the rebate rule would increase federal spending by over $150 billion from 2020 to 2029.
340B Discounts on Insulin, Injectable Epinephrine Would be Passed on to Eligible Patients
Federally Qualified Health Centers (FQHC) are qualifying entities under the 340B Prescription Drug Program, which allows them to receive discounted prices on eligible prescription drugs. The new Executive Order directs the Secretary of HHS to take action to ensure that future grants under the Public Health Service Act are conditioned upon an FQHC having established practice to make insulin and injectable epinephrine available to certain low income individuals at the discounted price paid by the FQHC grantee or subgrantee. Eligible individuals would be determined by the Secretary and would:
- Have a high cost sharing requirement for either insulin or injectable epinephrine;
- Have a high unmet deductible; or
- Have no health insurance.
The Executive Order states that the high list prices for many insulins and some types of injectable epinephrines has led to many products being subject to the “penny pricing” policy when distributed to FQHCs. This allows these facilities to purchase the drug at a price of one penny per unit. Under existing rules, manufacturers are required to charge $0.01 for a drug whose calculated ceiling price is less than $0.01; certain products have a $0.00 ceiling price due to Medicaid drug rebate inflation factor penalties.
Drug Importation Plan Could be Finalized; Personal Importation of Drugs Could be Granted
Noting that Americans spend more per capita on pharmaceutical drugs than individuals in other developed countries, another of the Executive Orders instructs HHS to expand safe access to imported prescription drugs. Three actions for HHS to take are included in the order:
- Grant individuals a waiver of the prohibition of importing prescription drugs, providing the importation poses no additional risk to public safety and results in lower costs;
- Authorize the re-importation of insulin products upon the Secretary finding that it is required for emergency medical care; and
- Complete rulemaking related to the proposed rule to import certain drugs from Canada.
In a shift from previous importation-related efforts, this Executive Order opens the door for personal importation. HHS Secretary Alex Azar made brief remarks on this, saying that the FDA would set up a system to allow importation from places with comparable regulatory regimes.
This Executive Order also references a proposed rule from FDA released in December 2019 that proposed requirements related to state importation plans approved by the FDA. That proposed rule was released in conjunction with draft guidance from the FDA. As the proposed rule has already been released and had a public comment period, the agency would then need to release a final regulation. A final importation rule is not currently listed as under review at the Office of Management and Budget (OMB).