Prescription Drug Executive Orders’ Future Unknown
Four orders have been signed, but it’s unlikely they will go into effect before the election. Read on for details about the orders and their possible impact.
Even though President Trump signed four executive orders in July aimed at lowering prescription drug costs, it doesn’t appear they will be implemented before the election in November. The Secretary of Health and Human Services must move the directives through the federal rule-making process first before they can take effect.
Trump says the orders will reduce drug prices by 50 percent or more in certain instances by enacting discounts for insulin and epinephrine for low-income individuals, eliminating rebates, allowing importation of some drugs, and creating an index tying U.S. prices to those elsewhere. It’s expected that at least two of the orders will be limited to federal health care programs.
Trump made drug pricing one of his key issues during the 2016 presidential election campaign. However, after several of his administration’s attempts to effect prescription drug competition and price negotiations failed, Trump signed the orders.
In the meantime, pharmaceutical companies are enacting mid-year price hikes, even during the pandemic. GoodRx, which tracks prescription drug prices, reports that AstraZeneca, Eli Lilly and Sanofi were some of the companies that increased dozens of prices by low single-digit percentages in July.
The following are highlights of each of the executive orders and their possible impacts:
Lowering Prices by Eliminating Kickbacks
Drug manufacturers sometimes give rebates to pharmacy benefit managers or health plans that negotiate discounts on the list prices of drugs. This order eliminates the rebates for prescription drugs in Medicare plans. Instead, the discounts would be passed along to Medicare beneficiaries.
A U.S. Department of Health and Human Services spokesperson said that the order could achieve substantial savings, because existing rebates are more than 50 percent on some drugs in the Part D program. If implemented, this order could affect about 14 percent of the population &mash; 65 million Americans — who are enrolled in Medicare.
The nonpartisan Congressional Budget Office and the Centers for Medicare & Medicaid Services Office of the Actuary reviewed a similar proposal in 2019 but determined that it would increase federal spending by $196 billion over 10 years, because without the rebates, health plans would need to raise Medicare premiums. These premiums would be paid by the government and beneficiaries.
In response to these concerns, Trump’s executive order requires the HHS secretary to make sure whatever action is taken doesn’t increase federal spending, Medicare premiums or total out-of-pocket costs.
Access to Affordable Life-saving Medications
If this executive order is implemented, low-income individuals without health coverage or access to affordable drugs would have access to low-cost insulin and epinephrine.
The HHS secretary would have to determine the definition of low-income. Federally Qualified Health Centers already provide primary care in underserved areas and offer drugs at discounted prices. So, if the secretary only defines low income as under 100 percent of poverty, this might not change anything for those already receiving services.
Increasing Drug Importation to Lower Prices
U.S. law allows some drugs to be imported from Canada if the HHS secretary certifies that it would “pose no additional risk to the public’s health and safety” and would “result in a significant reduction in the cost of covered products to the American consumer.” However, no HHS secretary has certified any drugs from Canada because of concerns over safety.
The third executive order requires the HHS secretary to expand access to cheaper imported drugs by granting waivers for individuals to legally import drugs, including insulin if needed for emergency medical care. Insulin is 50 percent cheaper or less in Canada. However, some observers are not convinced that these low prices will be available on drugs that are imported. It’s expected that Canada and the pharmaceutical industry may take action to protect their lower prices in that market and discourage or even prevent importation. In 2019, Canadian officials objected to the idea of Americans importing drugs for fear it would harm the country’s drug supply and increase costs for Canadians, according to a Reuters report.
A Potential Fourth Executive Order
The fourth executive order hasn’t been formally released by the White House, but it’s expected to tie Medicare prices for drugs administered in a doctor’s office to the prices other countries pay. According to HHS, Medicare “currently pays roughly 80 percent more than other countries” for such drugs covered under Medicare Part B.
This executive order’s purpose is to ensure that the Medicare program and seniors pay no more for Medicare Part B drugs than what patients pay in economically comparable countries. This policy is sometimes referred to as an international pricing index. According to HHS, Medicare “currently pays roughly 80 percent more than other countries” for such drugs covered under Medicare Part B.
The Trump administration proposed something similar in 2018, but this new policy would go further by tying the drug prices to the lowest price paid among certain countries. Centers for Medicare and Medicaid Services estimate it would see a 30 percent savings in total spending for select Part B drugs.
In comparison, Democratic Presidential nominee Joe Biden supports giving Medicare the authority to bargain on drug prices.