Drug Price Executive Orders: What to Know, What to Do

What impact could the 4 healthcare-related executive orders that President Trump signed last Friday (July 24) have on the pharma industry. As a healthcare company focused on delivering communications, here’s our take on the recent action.

The order that’s getting the most attention is the fourth one, which Trump referred to as the “Most favored nation” order. It’s designed to bring US drug prices more in line with prices in Europe—and it’s the only order being held until August 25, ostensibly as a negotiating tool designed to pressure pharma companies into proposing an alternative. 

Generally, the orders cover:

1. Drug importation: This order would allow states, wholesalers, and pharmacies to import drugs from Canada. Several states have passed legislation to allow importation, including Florida, which has a famously large population of senior citizens. Canada has previously balked at such a proposal, citing concerns that it would stress their own supply of medicines.
2. Requiring 340B discounts on insulin and EpiPen be passed on to patients: The order would require certain health centers to pass the negotiated discounts directly to patients. The 340B program requires pharmaceutical companies to provide discounts to hospitals that serve a large low-income population.
3. Rebate rule: Trump revived a version of the “rebate rule” that would essentially require Pharmaceutical Benefit Mangers (PBMs) to pass on to patients the discounts that the PBMs negotiate with pharmaceutical companies (rather than keep a portion of the savings for themselves). The rule applies to Medicare Part D. Last year, the administration pulled an earlier version of this proposed rule.
4. International price referencing/most favored nations clause [delayed until August 25]: Under a “most favored nations” rule, the proposal would require the price of certain drugs covered under Medicare Part B be the same as those paid in other economically-similar countries that pay lower prices. Trump said that under the order “Medicare will be required to purchase drugs at the same price that other countries pay.”

OUR TAKE

• Trump is trying to show the public that he took action to lower drug prices – one of his 2016 campaign promises and in accordance with the Blueprint he outlined in 2018. Executive Orders (EOs) do not carry the full weight of federal regulation, particularly when they relate to actions taken by executive agencies. Friday’s EOs are no different and are unlikely to actually take effect, since executive power in this area is limited. Importantly, executive orders can take several months to finalize, and pharmaceutical companies will likely challenge the orders in court. So, the ultimate impact with an election 99 days away is unclear. 
• Both presidential candidates support bringing US drug prices more in line with those in Europe. Trump’s election opponent, former Vice President Joe Biden, has also expressed support for external reference pricing to bring US drug prices more on par with the lower prices paid in Europe. If the issue resonates with the public, it could become a more widely-covered topic as the election heats up. Similarly, both candidates support importing drugs from Canada, a proposal that’s very popular with voters, but the impact is somewhat nominal. It is likely manufacturers and Health Canada will not shift supply volumes significantly to enable mass importation/re-importation.

HOW TO PREPARE

With both presidential candidates now positioning themselves as a bulwark against rising drug prices and signaling healthcare as a signature issue, the pharma industry will be in the spotlight well into the winter. In response to the EOs and the imminent election cycle, life science leaders must be prepared to address questions about traditional and new issues, such as:

• How medicines for COVID-19 treatment and adjunctive care are priced
• If prices will be adjusted to existing therapies
• How the out-of-pocket cost for medicines are being made more affordable 
• If supplies and therapies are made in America—and whether America has first access to them

Whether your company is launching a drug – or preparing for an annualized price adjustment – you are likely to face more scrutiny than ever before. Chronic and rare disease medicine prices alike will be under more scrutiny as state Medicaid and Medicare budgets strain under the costs of COVID.  

At a minimum, pharma leaders must be reactively prepared. The next step would be to consider new price and access leadership strategies in response to the nation’s mounting medical costs.