President Donald Trump signs an executive order to reduce drug prices at the White House in … [+]
On Friday, July 24, President Trump issued four executive orders on prescription drug prices. The executive orders are designed to, in the president’s words, “completely restructure the prescription drug market.”
Leaving aside the president’s hyperbole, there are caveats and limitations associated with the four executive orders. And, the orders contain little or no substantially new policy change. In fact, most of the policy changes contained in the orders were included in the Department of Health and Human Services Plan to Reduce Drug Prices and Reduce Out-of-Pocket Costs, released in May 2018.
There are conditions that may impede the implementation of orders, especially with respect to the two executive orders with the greatest potential impact on patient prices and out-of-pocket costs: international reference prices for drugs administered by physicians and reimbursed under Medicare Part B, and reimbursement transfer to Medicare Part D beneficiaries.
Let’s start with perhaps the most shocking executive order, which would link Medicare payments for Part B drugs administered in a doctor’s office to prices paid by other countries.
This was already available, although it never ended, as a five-year pilot program would take effect in November 2020. Initially proposed in 2018, the pilot program would target so-called target prices for an as yet undisclosed Medicare number. Part B. These target prices would be partly linked to an international price index (IPI), which includes the prices of drugs administered by doctors in 15 other developed nations.
The IPI would effectively limit Part B payments based on an average of the prices paid across the 15 nations. The pilot program would apply to selected geographic areas that would represent approximately 50% of Medicare Part B spending on prescription drugs.
President Trump postponed pursuing this executive order until August 24, giving pharmaceutical manufacturers time to develop an alternative pricing plan. In this regard, the executive order appears to be a one-month ultimatum to establish a negotiating position. If Management is not satisfied with the alternative plan, it says it would move forward with the IPI program.
The IPI program would likely face strong legal challenges. There are conflicting accounts of whether the Centers for Medicare and Medicaid Services (CMS) has the legal authority to determine payments based on de facto imported price controls. CMS states that it has such authority, at least for the IPI model, under Section 1115A of the Social Security Act, which includes a provision authorizing CMS to develop and test payment models.
The next potentially most shocking executive order is Pharmacy Benefit Manager (PBM) Pending Reimbursements in the Medicare Outpatient Program, Part D. Here, Trump is resurrecting a proposed change to the rebates first issued in 2018. So far Federal regulations have established a so-called safe harbor for PBM refunds that prevents them from being treated as bribes. Without providing further details, the executive order states that it would reduce the safe harbor for refunds under the anti-rollback statute.
The total elimination of the safe harbor exemption would end the refunds as we know them, as they would be subject to being considered illegal bribes. This, in turn, would force PBMs to either waive reimbursements entirely or pass them directly to Medicare beneficiaries. Instead of PBMs receiving rebates in exchange for moving market share to products that are given a preferred position on the form, they would receive a fixed fee per prescription handled under the policy change.
However, it is well in the air if any steps would be taken to review the refund system. The wording of the executive order suggests that “before taking any action” regarding changes to the reimbursement system, the Secretary of “HHS must confirm that such policy would not lead to increases … in premiums for beneficiaries of Medicare. ” But, that is precisely the problem that PBMs and payers have repeatedly raised over the years, as they claim that gutting rebates will lead to increases in premiums.
A third executive order requires federally qualified community health centers, clinics that care for low-income patients, to go through the 340B program discounts for insulin for diabetics and epinephrine for severe allergy sufferers. Although limited in scope in terms of the number of products affected, this executive order tangentially addresses widespread concern about the 340B program.
The 340B program requires drug manufacturers to provide outpatient drugs to eligible healthcare entities at significantly reduced prices. Community health centers and hospitals depend on discounts on medications that the 340B program provides to treat indigent patients. However, the program has come under scrutiny in recent years as hospitals have bought drugs at huge discounts and then Medicare and private insurers have reimbursed them at full cost, making effective 340B profits without necessarily going through discounts. to the patients. Additionally, many hospitals that benefit from the 340B program provide very little charity care.
The executive order is directed at the wrong entity, at federally qualified community health centers, and does nothing about the top criminals, the big hospitals.
On the surface, the executive order on the importation of drugs appears to be the most direct. The order appears to be consistent with an HHS plan enacted in 2019 to “lay the groundwork for the safe importation of certain prescription drugs.” Specifically, that plan would authorize pilot projects developed by “states, wholesalers, or pharmacists and under HHS review, describing how they would import certain drugs from Canada that are versions of FDA-approved drugs and that are manufactured in accordance with FDA approval. ”
The executive order mentions Canada, but expands to include unspecified “other countries”. Furthermore, the language contained in the order makes it clear that imported drugs must not present an “additional risk to public safety”. And here lies a possibly fatal flaw for the order. Almost always when importation is mentioned as a way to reduce drug costs, potentially significant security risks present themselves as an obstacle.
Finally, it is worth mentioning that executive orders are not immediately enforceable. In fact, they are the first steps in a regulatory process that is likely to drag on. This implies that the Trump Administration would need to finalize the regulations and follow follow-up procedure steps that could take many months. Additionally, in the meantime, the four executive orders could be challenged in court.
.
