President Trump Issues Executive Order on Prescription Drug Prices

On September 13, 2020, President Trump issued an executive order targeting prescription drug process paid by Medicare under Part B and Part D. The order, titled “Executive Order on Lowering Drug Prices by Putting Americans First,” outlines a new policy that Medicare should not pay more for Part B or Part D prescription drugs than the “most-favored-nation price.”

The order defines the “most-favored-nation price” as the lowest price, after adjusting for volume and differences in GDP, for a drug that the manufacturer sells to an Organization for Economic Co-operation and Development (“OECD”) member country with a comparable GDP per capita. For reference, Norway, Austria, and the Netherlands are all OECD member countries with a GDP per capita comparable to the United States.

The order has no immediate effect on prescription drug prices. Change will only occur once regulations have been promulgated, and this process has not yet begun. However, the order directs the Department of Health and Human Services (“HHS”) to “immediately” implement a test payment model. The test model would apply the new policy to certain high-cost prescription drugs and biological products covered by Part B to determine whether paying the “most-favored-nation price” leads to better clinical outcomes and/or cost-saving. The order also directs HHS to develop and implement a similar test payment model for Part D prescription drugs but does not impose a timeline on HHS to do so.

Critics argue that, even if these price-lowering measures came to fruition in the near future, it would not have a great impact on prescription drug prices overall. Between Part B and Part D, only about 50 million people would see these lowered prices. In comparison, the approximately 280 million people who use neither Part B or Part D Medicare may feel little effect, leaving them to still pay the high prescription drug prices.

It is unclear when HHS will begin to implement new payments models, how the results of the test models will be measured, how long the test models will run, or how HHS will adjust “for volume and differences in GDP.” Further, the order faces significant opposition from pharmaceutical companies and is likely to be challenged in the courts. Significant legal developments and guidance from HHS are to be expected before the practical impact of the order is known.

For over 35 years, Wachler & Associates has represented healthcare providers and suppliers nationwide in a variety of health law matters, and our attorneys can assist providers and suppliers in understanding current health law news, including executive orders and other rules and regulations that may have an impact on Medicare and Medicaid providers. If you or your healthcare entity has any questions pertaining to healthcare compliance, please contact an experienced healthcare attorney at 248-544-0888 or wapc@wachler.com.