On Sunday, September 13, 2020, President Trump signed an Executive Order, the next in a series of Executive Orders targeting the pharmaceutical industry, which aims to lower prescription drug prices in the United States (the “Order”). The order repealed and replaced a similar Executive Order, which was previously signed on July 24, 2020 but was held back from release by the Trump administration, and follows the signing of the Buy American Executive Order mandating the purchase of U.S.-manufactured drugs that we analyzed here.
The Order claims that while the United States Federal Government is the largest payer for prescription drugs in the world, it still pays more than other buyers, including other developed nations, for prescription medications. To combat unfairly high drug prices in the United States, the Order proposes a most favored nations pricing mechanism, which provides that the Medicare Part B and Part D prices of pharmaceutical products can be no more expensive than the lowest price for that product that the drug manufacturer sells to any member country of the Organisation for Economic Cooperation and Development (OECD). This comparison price will also account for volume and differences in national gross domestic product. The Order directs the Secretary of Health and Human Services to implement rulemaking to test whether such most favored nations payment models for Medicare Part B and D would mitigate poor clinical outcomes and increased expenditures associated with higher drug costs.
Similar to the Buy American Executive Order, the Order has evoked criticism from stakeholders. Stephen Ubl, the President and CEO of the drug lobby Pharmaceutical Research and Manufacturers of America (PhRMA) emphasized that rather than focusing on “lowering costs for patients, ensuring patients’ access to medicines, addressing the misaligned incentives in the pharmaceutical supply chain and protecting the critical work being done to end COVID-19….the White House has doubled down on a reckless attack on the very companies working around the clock to beat COVID-19,” and states that it is “an irresponsible and unworkable policy that will give foreign governments a say in how America provides access to treatments and cures for seniors and people struggling with devastating diseases.” Dr. Michelle McMurry-Health, the Chief Executive Officer of the biotech industry trade group, BIO, called the move “dumbfounding” in the midst of scientists and researchers fighting against COVID-19, and expressed concern that the Order would cause delays to innovation.
Other stakeholders, on the other hand, note that the Order only calls for testing of the payment model, making this just the first step in what is to be a long process. The Executive Vice President for Health Policy at the Kaiser Family Foundation, Larry Levitt observed “President Trump’s executive order on drug pricing does not by itself do anything. It has to be followed up by regulations, which will take time. Trump has a history of bold talk on drug prices, only to pull back when it comes to putting actual regulations in place.” This is underscored by the fact that when a similar bill to lower Medicare drug prices using an international reference was passed by the House of Representatives at the end of 2019, President Trump threatened to veto the bill.
Moreover, the authority to establish such model programs comes from the Patient Protection and Affordable Care Act, whose overturn the Trump Administration has consistently supported. This Order does not preclude the challenges to its authority that the Order and associated regulations will face in court as it moves forward. Consequently, the immediate and long-term effects of the Order may be negligible and remains to be seen.
We will continue to monitor any changes and will provide updates as developments occur.