Drug Pricing Executive Orders
Updated: Oct 27, 2020
(September 10, 2020) Two years after releasing a since-shuttered set of proposed drug pricing reforms as a "Blueprint to Lower Drug Pricing", the Trump administration has revived some of those policies in the form of 4 Executive Orders. The first time around didn't find success. Should we care this time? HaydenCG has a perspective on what they say and what it might mean.
Eliminate some drug rebates:
Removes safe harbor protections under the AKS (including rebates to PBMs & insurers) for Medicare Part D plans – only discounts applied directly at the point-of-sale to reduce patient
out-of-pocket costs would be allowed. This EO has revived a signature promise from Trump’s 2016 campaign; however, it remains unclear if a viable path exists to implement this reform. (The HHS previously walked away from similar legislation in 2018-2019, due to substantial complexity & transparency challenges.) This has the potential to completely change the drug distribution and reimbursement system, but there are many hurdles to implementation that need to be addressed.
Pass-through 340b discounts for insulin & EpiPens:
Mandates that 340b discounts to federally qualified health centers (FQHCs) be passed onto the patient. This order’s scope is incredibly limited (both in terms of eligible patients and the intended covered entity type – which notably does not include hospitals) and underlines the limited authority HRSA has to control & enforce the 340b program. Ultimately, the 340b system desperately needs reform, and this EO, along with the updated registration process for covered entities, could be a starting point.
Establish an international pricing index:
This EO has not yet been federally published (deadline was Aug 24), however, the aim is to lower the price of Medicare Part B drugs in line with other developed countries. This change would have a substantial impact to current drugs’ profitability, future launch strategy, and R&D/pipeline planning. Although HHS has not yet released a formal proposal, PhRMA has already counteroffered with a 10% discount for Part B medicines. This is lower than the expected ~30% discount that would stem from international pricing, however, it does suggest that the industry is willing to negotiate to curb risk from IPI.
Support the importation of medicines:
Authorizes states to develop plans to import drugs (specifically non-biologics & non-IV medicines) from approved countries & wholesaler sites. Similar to the IPI EO the details need to be worked out, but it is unclear how importation or reimportation proposals would comply with FDA drug track and trace requirements.
Although the Trump Administration calls these executive orders historic, these proposals have been discussed for 2+ years. They offer limited clarity on how patients would benefit, and little guidance on how they would be implemented.
However, they do pose significant risk to manufacturers and require attention – specifically, the IPI policy that would benchmark pricing of Part B drugs to ex-US pricing. Therefore, scenario planning, contingency analyses, & impact assessments should be conducted for hospital-administered medicines with older or aging populations.
PhRMA’s counteroffer suggests that such a policy could transpire quickly. Manufacturers need to know their own risk & be equipped with responsive strategies to mitigate impact. In addition, the potential removal of the safe harbor for rebates, although lower risk of implementation, should be addressed by manufacturers to understand the potential impact to gross and net sales.
Special thanks to Katie Harris for her work on this piece
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