On Friday, July 24, 2020, President Trump issued three executive orders, and announced a potential fourth executive order, with the stated intention of lowering the cost of prescription drugs in the United States. The general consensus among legal commentators is that the executive orders are not self-executing and implementation of the policies therein will, therefore, likely require either notice and comment rulemaking by the Department of the Health and Human Services (“HHS”) or legislation.
President Trump’s Executive Orders call for the following changes in drug policy:
- The first Executive Order addresses the price of insulin and injectable epinephrine (“Epi-pens”). The Executive Order requires the Secretary of HHS to “take action” and would permit Americans who have a high cost sharing requirement, high unmet deductible, or who are uninsured to purchase these pharmaceuticals from a Federally Qualified Health Center (“FQHC”) at the same price that the FQHC acquired the drug through their 340B drug discounts. The 340B program provides certain covered entities, including FQHCs, with the ability to enter into agreements with drug manufacturers to receive a discount on their purchases of covered outpatient drugs. The Executive Order would require FQHCs to provide these drugs to patients at their 340B discounted price “plus a minimal administration fee.”
- The second Executive Order would allow states, pharmacies, and wholesalers to import “safe” drugs from “other countries,” such as Canada, where the prices of drugs are lower. This policy aims to minimize the US drug price disparity with other countries and increase the exchange of lower cost drugs. The policy mirrors the December 2019 HHS proposed rule that to-date has not been finalized, and according to HHS’s regulatory schedule, could be finalized in December 2020. The Executive Order directs the Secretary of HHS to facilitate waivers to the prohibition on the importation of prescription drugs under section 804(j)(2) of the Federal Food, Drug, and Cosmetic Act (“FDCA”). The Secretary is also instructed to authorize “the re-importation of insulin products upon a finding by the Secretary [of HHS] that it is required for emergency medical care.” The order does not address requirements within foreign countries that may limit the ability of foreign physicians to co-sign prescriptions written by US physicians without first examining the patient and/or the ability of foreign pharmacies or pharmacists to fill prescriptions by physicians not licensed in the pharmacy’s home jurisdiction.
Both of these policies would permit the Secretary to utilize existing authorities under the FDCA. Notably, with regard to section 804(j)(2) waivers, HHS stated in its December 2019 proposed rule that it disfavored implementing 804(j)(2) waivers. In the preamble, HHS provided that there “are many rogue online pharmacies that sell medicines at deeply discounted prices” and that these “pharmacies are often run by sophisticated criminal networks that knowingly and unlawfully cause the importation of adulterated, counterfeit, misbranded and unapproved drugs into” the U.S. If the Secretary implements this portion of the Executive Order, it would appear to be a reversal in the agency’s position.
- The third Executive Order proposes to amend the Anti-Kickback Statute safe harbor for prescription drug rebates to health plan sponsors, pharmacies, or pharmacy benefit managers (“PBMs”). Under the Executive Order, drug manufacturer rebates would be passed on to patients’ in order to reduce their cost-sharing under Medicare Part D. The Executive Order states that these rebates “are the functional equivalent of kickbacks, and erode savings that could otherwise go to the Medicare patients taking those drugs.” HHS had proposed this policy in a February 2019 proposed rule. The Executive Order directs the Secretary of HHS to complete the rulemaking process and remove the Anti-Kickback Statute safe harbor protection for retrospective reductions in price that are not applied at the point-of-sale or other remuneration that drug manufacturers provide to health plan sponsors, pharmacies, or PBMs in operating the Medicare Part D program. The Executive Order would create new safe harbor protection for discounts at the “patient’s point-of-sale in order to lower the patient’s out-of-pocket costs.” However, the Executive Order only permits the Secretary of HHS to implement these changes if this action will not “increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.” This qualifying language was added because of the Congressional Budget Office’s May 2019 report that projected that this policy would increase federal spending by $177 billion from 2020 – 2029.
- The fourth proposed executive action that President Trump referenced in his remarks on July 24, 2020 would tie Medicare outpatient drug prices to the lowest international price that other developed countries pay if drug manufacturers do not propose an alternative by August 24, 2020. This proposal aligns with an October 2018 advance notice of proposed rulemaking by the Centers for Medicare and Medicaid Services (“CMS”) that sought public comments on aligning the payment amount for certain Part B drugs with international prices (also known as “reference pricing”).
The net effect of these orders and what other implications may arise from those orders remains to be seen, particularly due to the necessity of passing these policies through the notice and comment rulemaking process before implementation.
As COVID-19 cases continue to rise in the U.S., and with the 2020 presidential election fast approaching, President Trump appears to be prioritizing healthcare, which a KFF poll found to be the second most important issue for U.S. voters in the 2020 election following the economy.
Norton Rose Fulbright attorneys will continue to provide relevant updates on these drug pricing policies and their possible implementation on the Health Law Pulse.