Over the weekend, President Trump issued an executive order aimed at controlling drug prices in Medicare Parts B and D. Sound familiar? That’s because the President already issued three separate drug-pricing related executive orders in July. Those focused on reforming the 340B Prescription Drug Program, eliminating “kick-backs” from middlemen (such as pharmacy benefit managers), and increasing the use of drug importation.
So why did the President issue another executive order now? Well, when the President released the previous three executive orders, he also expressed interest in limiting Medicare payments for drugs to what other countries pay for them. He stated that he would implement such a policy if the pharmaceutical industry did not present him with a better alternative.
Ultimately, no deal between the pharmaceutical industry and the Trump Administration could be reached. Therefore, the new executive order establishes as an administrative policy objective that the Medicare program should not pay more for costly Part B or Part D prescription drugs or biological products than the “most-favored-nation price.” The most-favored-nation price is defined as the “lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organisation for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product.” In other words, the Trump Administration would like to set Medicare drug prices at the lowest price that manufacturers sell the drug in certain foreign countries.
It is important to remember that executive orders themselves do not establish new policies. Rather, they simply provide instructions to federal agencies to implement policies through regulatory rulemaking or demonstrations. Thus, in this executive order, the President calls on the Secretary of the Department of Health and Human Services (HHS) to test a payment model in which Medicare would pay no more than the most-favored-nation price for certain drugs and biological products covered by Medicare Part B. In addition, the executive order requires the HHS Secretary to develop plans to test another payment model that would set Medicare payments for high-cost Medicare Part D prescription drugs at no more than the most-favored-nation price.
It is unclear how close HHS is to announcing or implementing either the Medicare Part B or Part D payment model. However, despite the uncertainty in the implementation timeline, stakeholders have already spoken out in opposition to the most-favored-nation price policy. Pharmaceutical Research and Manufacturers of America (PhRMA), for example, stated that this approach would stifle innovation, calling it 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.”
Provider groups, including ACEP, have also expressed some reservations about a previously proposed Centers for Medicare & Medicaid Innovation (CMMI) model called the International Pricing Index (IPI) Model that this executive order may be attempting to revive in some form. The IPI model would phase down the Medicare payment amount for selected Medicare Part B drugs to more closely align with international prices (this is similar in concept to the Medicare Part B payment model referenced in the executive order). The administration originally proposed the IPI model in 2018 but has not yet implemented it or even established a timeline for implementation.
We will have to wait and see what actions HHS takes to carry out this executive order, including the potential implementation of the IPI model to lower Medicare Part B costs and/or the development of a new Medicare Part D payment model.
Until next week, this is Jeffrey saying, enjoy reading regs with your eggs, and tune in today at 3pm ET during our live Capital (30) Minutes to hear more about our federal advocacy efforts and to get your questions answered!