The four executive orders (EOs) announced on July 24 by President Donald Trump seek to codify key drug pricing strategies he has championed since his run for president. But the details and timing of these orders suggest that their impacts could be minimal, at least in the short term, for the industry. They are likely to face significant implementation challenges, as all would have to go through a lengthy rule-making process.
All four orders tie in some way to policy proposals on healthcare that Trump promoted on the campaign trail in 2016 (see HRI’s 2016 election night paper on Trump’s campaign positions on healthcare). The executive orders also track with policies outlined in the Trump administration’s drug pricing blueprint.
The EO calling for a rollback of safe harbors for rebates would pass on to Medicare Part D beneficiaries the net price negotiated by drug companies and pharmacy benefit managers (PBMs). As a result, the patient’s copay would be based upon the lower net price and not the list price. This rule cannot be implemented if it would increase Medicare beneficiary premiums.
The secretary of HHS must confirm and make public “that the action is not projected to increase Federal spending, Medicare beneficiary premiums or patients’ total out-of-pocket costs.” However, an analysis by the Congressional Budget Office found that such a policy would result in an increase of $170 billion in Part D premiums over 2020-29.
The EO calling for implementation of the international pricing index (IPI) would take effect by Aug. 24 unless drug manufacturers can come up with another method to reduce Part B drug costs. The rule would link the price CMS reimburses for Part B drugs to a reference price determined from a basket of drug prices negotiated by countries in the Organisation for Economic Co-operation and Development. Drug company executives had been slated to meet with the president on July 28 to propose alternatives to his plan to limit Part B prices, but the meeting was canceled.
The EO calling for importation of certain prescription drugs includes several provisions, including reimportation of insulin products, personal waivers as long as the imported product poses no additional risk to the public, and the completion of the previous rule-making process to allow the importation of certain drugs from Canada.
The EO on 340B prices for insulin and epinephrine pens calls for prices to be passed on to consumers with low incomes at Federally Qualified Health Centers (FQHCs). These entities already purchase drugs at significant discounts and are reimbursed by Medicare at a higher rate.
The rule would require these centers to make any patient copays or expenses for the drugs equal to the amount the entity paid for the drugs. This order is unlikely to have a significant impact on drug manufacturers, because the FQHCs called out in the order make up less than 2% of 340B covered entities.
The Trump 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 its 340B reimbursement change.
Additionally, the president’s proposal to pass rebates on to Medicare beneficiaries is widely supported by the biopharmaceutical industry. While the rule is intended to lower out-of-pocket costs for beneficiaries, it would also likely bring greater transparency to drug prices.
In HRI’s 2019 report on drug pricing, global executives surveyed said price transparency is putting the most pressure on traditional drug pricing models.
The IPI rule, however, if implemented, is expected to have negative consequences for some biopharma companies. In some instances, the requirement could result in delays in the launch of new products into international markets included in the index, while other manufacturers could change how the drug is delivered with physician-administered drugs potentially reformulated to be self-administered.
Seventy-eight percent of executives surveyed by HRI said their companies would need to make organizational changes or management and process changes if public health plans began using international prices as a benchmark for reimbursement.
HRI’s 2019 report found that value-based pricing could serve as a sustainable solution to address concerns over rising drug prices. A proposed rule from CMS that would change how Medicaid best price is calculated could facilitate this transition.