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Breaking down the Trump administration’s executive orders on drug pricing

Experts discuss their skepticism about three of the rules and why a forthcoming additional one could ultimately be effective.

Gabriel Perna | August 5, 2020

At July’s end, the Trump administration signed multiple executive orders that take aim at prescription drug prices. However, drug pricing experts have low expectations that these orders will make any sort of impact at all on the often-debated issue. 

“Ultimately, we’re going to need bipartisan legislation for meaningful drug pricing reform. This is election time and we’ve seen previous executive orders around the drug space from this administration that equates to signaling and handwaving more thasomething that has actual teeth,” says Tim Lash, chief strategy officer of West Health, a family of nonprofit organizations focused on seniors and lowering health care costs.   

Drug pricing researcher Inmaculada Hernandez, PharmD., assistant professor of pharmacy at the University of Pittsburgh School of Pharmacy, says the concepts in the administration’s executive orders are “nothing new.” The administration has been touting these ideas, drafting guidance, and releasing orders around them for the last few years. Meanwhile, various lawmakers have come up with their own proposals to thwart the drug pricing problem and former Vice President Joe Biden, the Democratic candidate for President has his own solutions. 

Although there is skepticism on the effectiveness of these orders, and the lack of faith that there will be a major legislative effort passed in an election year, there was also praise for some of the ideas the Trump administration is bringing forth. In particular, the fourth order (which technically hasn’t been published yet and won’t be until at least the end of August) is something that has worked elsewhere. The concept, which would require Medicare to purchase drugs at the same price as other countries, has been effective in Europe and has promise, says Hernandez.  

Health Evolution examined each executive order to see its potential impact: 

Making insulin and Epinephrine (EpiPen) available for low-income patients 
This executive order grants low-income patients the ability to access affordable insulin and injectable epinephrine from a Federally Qualified Health Centers (FQHCs) at a price that aligns with the cost at which the FQHC acquired the medication under the 340B Prescription Drug Program. Patients who qualify don’t have health insurance, have high unmet deductibles or have high cost-sharing for those drugs, the order states. 

While she is on board for lowering the cost of these drugs, Hernandez skeptically notes that the price of insulin and EpiPens is often covered in the news. This is why she believes those particular drugs are being targeted here. “There are multiple drugs that are expensive and used on a frequent basis. We need to figure out a system, not only for insulin and EpiPen, but all the other drugs that we use on a regular basis,” she says. “I don’t think it’s a long-term solution.” 

Legal experts say this order isn’t enforceable and that it’s an attempt by the “administration to change the discount program without actually using the 340B statute itself.” 

Eliminating drug rebates to “middlemen”  
This executive order takes aim at health plan sponsors and pharmacy benefit managers (PBMs), which collect the rebate checks they receive from Medicare Part D drugs and don’t pass them onto the patient. This rule would require them to pass on those rebates directly to the patient and narrow safe harbor protections under the anti-kickback statute. The Trump administration claims this order alone will “allow tens of billions in dollars of rebates on prescription drugs in the Medicare Part D program to go directly to patients.” 

Health and Human Services (HHS) Secretary Alex Azar says this order will “reduce drug costs for seniors by between 26 percent and 30 percent.” HHS is tasked with the rulemaking around this order. Naturally, PBMs and health plans pushed back on this order 

America’s Health Insurance Plans (AHIP) cited an HHS Actuary report that these actions on the rebate rule would increase Medicare premiums by 25 percent and increase Medicare drug spending by $196 billion. “The problem is the price. With the greatest urgency, the Administration should focus on bipartisan, workable solutions to protect patients, taxpayers, and all Americans from higher drug costs in their greatest time of need, especially in the middle of the COVID-19 crisis,” stated AHIP CEO Matt Eyles. 

However, this order has received some support from health care stakeholders. The Community Oncology Group applauded the order and said the “PBM drug rebate system has caused enormous pain and confusion among patients with cancer and other serious diseases.” 

Importing drugs from Canada 
In July of 2019, the administration released an outline proposing the U.S. to legally import cheaper prescription drugs from Canada. By the end of the year, the FDA had issued a proposed rule and guidance to import drugs from Canada.  

Almost a year after the initial outline, the President signed an executive order that requires HHS to complete the rulemaking process regarding the proposed rule to allow importation of certain prescription drugs from Canada. Various states, such as Florida and Vermont, have already passed or proposed laws to make this legal, but they need federal approval to get started. Experts say this order could be the most impactful as the secretary has the authority to move quickly.  

There has been a fair amount of backlash to this idea since it was initially proposed last year. Canadian government officials, medical groups and stakeholders oppose the idea because it would create issues in their own supply chain. The pharma industry opposes the idea because they say it would cause safety and regulation issues. Although, it’s fair to note they make the most profit in the U.S. and that’s a major reason for their objection to this order. There are other flaws, according to experts. 

“If you look at the size of the population of the U.S. compared to the population of Canada, it’s pretty clear we can’t rely on the importation of drugs from there,” Hernandez says.  

Favored nations  
The fourth order, which President Trump called the granddaddy of them all, essentially creates a favored nations clause where the U.S. would get the lowest-possible price on certain prescription drugs. Trump said he was holding the order until August 24, to give pharma CEOs time to make a deal with him. Pharma industry reps already scrapped a scheduled meeting with the President and have spoken out about the proposal. 

“People want to compare their prices…but conveying a price to a country where the price may be lower and there’s zero access and the society is struggling to get its innovation is not really a truthful comparison nor the lack of understanding of rebates in the United States to what the actual net prices are,” Sanofi CEO Paul Hudson recently said on an earnings call.  

Experts are more bullish on an international pricing index, which CMS estimates would produce approximately 30 percent savings in total spending for the selected Part B drugs in the model. A 2019 study in Health Affairs gave a mild recommendation for the proposal when it said “U.S. drug prices would decline and prices in the reference group countries would increase, although the magnitude of these changes is highly uncertain.” 

Lash also says that reference pricing tools could help effectively determine a fair price of future therapeutics. But in general, he says anything that’s going to fundamentally change pricing has to be written into statutory law.  

The reform that’s needed to get at the totality of drug pricing reform is going to require statutory changes and that’s going to require the House and the Senate to work together,” Lash says. “The good news is the concern is real on the left, right and the middle, in terms of Americans feeling the pain of drug prices. There is bipartisan support, not from elected officials, but from those that elect the officials. That may create sufficient pressure to move us forward.” 

If executive orders aren’t effective, what legislative efforts and levers in the private sector, could move the dial on drug pricing? We asked a panel of experts this subject. Be on the lookout next week when we share their insights. 

About the Author

Gabriel Perna, Senior Manager, Digital Content

Gabriel Perna is the Senior Manager of Digital Content at Health Evolution. He brings 10+ years of experience in covering the intersection of health care and business. Previously, he was at Chief Executive, Physicians Practice and Healthcare Informatics. You can reach him via email or on Twitter at @GabrielSPerna