Drugmakers could lose if executive orders tying Parts B and D prices to overseas comes to fruition

On Sunday, President Donald Trump issued a pair of executive orders (EOs) seeking to tie US drug prices to those paid in other countries. The EOs state that Medicare should not pay more than the “most-favored-nation price” for some Part B and Part D drugs. The biggest surprise from these new EOs is that for the first time, President Trump also is aiming to incorporate some Part D drugs into the policy.

In July, the president announced that action to tie US drug prices to prices paid overseas was coming when he signed other EOs aimed at codifying some of the healthcare proposals that he promoted on the campaign trail in 2016. (For more on the July orders, please see HRI’s article in Next in Health. For more on Trump’s 2016 campaign healthcare proposals, see HRI’s election night paper.)

Despite the announcements, the EOs are likely to face significant implementation challenges, as they would have to go through a lengthy rule-making process and many details are missing, making a complete assessment impossible.

That said, what do we know?

• Part B: The Medicare program would reimburse for physician-administered drugs at the most-favored-nation price, which will be the lowest price sold to an Organisation for Economic Co-operation and Development (OECD) member country, after adjusting for volume and differences in GDP. HHS would implement rule-making to test a payment model that would, “for certain high-cost” prescription drugs and biologics covered by Part B, reimburse no more than the most-favored-nation price and would test whether payment based on this price would “mitigate poor clinical outcomes and increased expenditures associated with high drug costs,” according to one of the EOs.
  
• Part D: HHS would implement a similar payment model that would link reimbursement for Part D drugs to those paid in other countries. However, the model would be limited to prescription drugs or biologic products “where insufficient competition exists and seniors are faced with prices above those in OECD countries.” Like the Part B model, this one would also assess whether CMS’ reimbursement of the most-favored-nation price would affect clinical outcomes and expenditures.
  

HRI impact analysis

Together with the remaining EOs from July and one issued in August, the Trump administration has rolled out a series of executive actions targeting pharmaceutical and life sciences companies in the past few months, with a focus on drug prices and manufacturing. Details for all of these orders remain scarce.

The administration has taken several actions to try to address drug prices, including approving more generic drugs and attempting to facilitate development of these drugs, requiring drug companies to list wholesale prices in televised ads and changing the way some 340B drugs are reimbursed. The drug industry has challenged the televised prices rule successfully in the courts; hospitals also have battled CMS over changes to the 340B program.

With the presidential election in November, both Trump and former Vice President Joe Biden, the Democratic nominee, have highlighted policies to address drug pricing and reshoring of medical products manufacturing (see HRI’s coverage of the different party proposals here and here).