5 Things You Should Know About the Trump Drug Price Lowering Executive Orders

July 28, 2020

1. “Executive orders” suggests that they happen right away, but what these and other orders really do is start the slow, multistage process of federal rulemaking. None of what they set out to do is going to happen right away — and maybe/probably not before the Nov. 3 election.

"I view them as political theater rather than implementable, near-term policies,” wrote Adam Fein on his Drug Channels website this weekend.

Fein is not alone in his cynicism.

2. Speaking of drama, the order that would lower Medicare Part B payments for prescription drugs and biologics has plenty of it.

That order would tie Part B payments to the lowest price paid by a developed country with a per-capita GDP comparable to that of the United States.

As explained by Avik Roy, this "most favored nation" notion of linking Part B payments to lower prices in a particular country is a variation on 2018 Trump administration proposal that would have linked Medicare Part B payments to the average price paid by a group of developed countries.

On Friday, Trump dangled this pricing order as a possibility and said he would delay it till August to give the pharmaceutical industry time to propose an alternative plan for lowering drug prices. The order (or, more precisely, the threat of it) infuriated the industry. The Trump administration is pursuing “a radical and dangerous policy to set prices based on rates paid in countries that he has labeled as socialist," PhRMA president Stephen Ubl said in a prepared statement. The Wall Street Journal editorial page was none too pleased; it slammed this and the other executive orders as a “me-too Democratic plan."

Trump was supposed to meet with pharma and biotech industry leaders tomorrow. Politico and other outlets reported today that the meeting was off because the industry refused to send any representatives.

It is hard to see where this fight is going, especially amid the COVID-19 pandemic and the billions of dollars the administration is sending to companies racing to develop a vaccine.

3. How serious is the administration about passing on drug rebates to seniors? One of the orders would seem to suggest it is. The order would, in effect, revive a Trump administration proposal that would force PBMs to pass on the rebates they receive from the drugmakers directly to seniors with Medicare Part D coverage.

The HHS statement about this executive order is more colorful than the department’s usual dry-as-dust pronouncements. It would, says HHS, “end a shadowy system of kickbacks by middlemen that lurks behind the high out-of-pocket costs many Americans face at the pharmacy counter.”

Currently, the rebates from drugmakers get divvied up between the PBMs and health plans. Their argument (and some analysis agrees): the rebate money helps keep premiums down.

However, the rebate executive order that came out Friday comes with an important catch. Stat, The National Law Review, and other outlets reported that it has a provision that says that the HHS secretary must confirm that the rebate order will not increase federal spending, premiums, or patient out-of-pocket costs. But the administration shelved its previous proposal to pass on rebates to seniorbecause it would have resulted in premium increases. It is not clear what has changed.

“This caveat to the EO (executive order) is understandable during an election year,” noted the understated The National Law Review, “but it is curious given that the administration withdrew its previous rebate rule over concern that the rule would increase beneficiary premium and Medicare costs.”

Fein said rebate executive order maybe could avoid raising premiums or out-of-pocket cost if it was limited to specialty drug with especially high rebates or drugs with high out-of-pocket costs taken by very few seniors.

4. And speaking of passing on discounts, one of the four orders would pass on the 340B discounts for insulin and EpiPens to patients. But the scope of the order is quite narrow and certainly not a major threat to the controversial 340B program.

The 340B program? In brief, it requires pharmaceutical companies to sell certain outpatient drugs at discounted prices to “covered entities,” including certain hospitals and clinics. Fein and other critics of the program say the covered entities make out because of the difference between they pay for drugs (steeply discounted because of 340B) and the what they charge.

But the order that Trump issues applies only to federally qualified health centers, which Fein says he considers the “good guys” of 340B and not to hospitals, which, in Fein’s view, are the worst abusers. Furthermore, it only applies to people who are low income.

5. Drug importation may be of the few issues that Bernie Sanders and the Trump administration agree on. Even so, how much of an effect it will have is debatable, partly because it's not clear what the available supply will be.

The executive order issued Friday seems to open the door to legal overseas bargain hunting by individuals; it talks about the HHS secretary “facilitating grants to individuals of waivers of the prohibition of importation of prescription drugs,” although the HHS website refers, confusingly, to the “use of individual waivers to purchase drugs at lower cost from pre-authorized U.S. (emphasis added) pharmacies.” The order also authorizes the HHS secretary to complete the rulemaking that's underway that would allow states, tribal and territorial entities to set up programs to buy prescription drugs from Canada.