In July, President Donald Trump signed four executive orders designed to “reduce the costs of prescription drugs.” These orders mark the administration’s latest effort to follow through on one of Trump’s primary 2016 campaign promises: to take on drug manufacturers and lower prescription drug prices for consumers. The new executive orders represent various drug pricing proposals announced previously during Trump’s presidency that had failed to be enacted.
With prescription drug spending in the U.S. hitting $335 billion in 2018 and prescription drugs expected to be the fastest growing health category over the next 10 years, any action aimed at lowering drug prices should be applauded. However, time will tell if the President’s actions will pay off as intended. Stat News reports that consumers are not likely to notice many changes from the new executive orders anytime soon because the appropriate legislative bodies and federal agencies, such as the Department of Health and Human Services (HHS), will need to follow government protocols to fully implement these orders.
Here's a closer look at what was unveiled:
Drug importation
The first order focuses on safe drug importation from foreign countries, a plan that the HHS and the Food and Drug Administration (FDA) originally released in December 2019. Under the new executive order, states, wholesalers, and pharmacies are allowed to import prescription drugs from Canada and sell them in the U.S. The order also includes a special provision to allow wholesalers and pharmacies to re-import insulin and biological drugs.
Despite the popularity of accessing foreign drugs at lower prices, there are many operational and safety challenges to consider. One major economic concern is that the importations could trigger a severe drug shortage and rationing in Canada due to the increased strain on their drug supply. The reality is that drug manufacturers would not increase their supply to Canada just because people from the U.S. are buying from there.
Another concern is the new drug tracking system being implemented following the Drug Quality and Security Act of 2013. Under that law, the FDA is overseeing the creation of an electronic, interoperable system that will identify and trace prescription drugs as they are distributed in the United States. This means that all drugs entering the U.S. drug channel must be traceable using a unique product identifier — something not required of Canadian products. The law requires all members of the pharmacy supply chain, including pharmacies
and wholesalers, to fully comply with the new electronic, package-level traceability system by 2023.
340B drug discounts
Another executive order targets drug discounts under the 340B Drug Pricing Program, specifically those for life-saving diabetes and allergy medications. Under 340B, drug manufacturers are required to provide discounted drugs to Federally Qualified Health Centers (FQHCs) that serve underinsured and uninsured patient populations, many of which live in rural areas. The new executive order directs FQHCs to pass the 340B pricing discounts
they receive for insulin and injectable epinephrine directly to their low-income patients.
This change benefits individuals with low incomes, as determined by the HHS Secretary, who have a high cost-sharing requirement for these medications, a high unmet deductible, or no health insurance.
Drug rebates
The third executive order focuses on drug rebates, reviving a previously abandoned plan introduced in January 2019 aimed at eliminating the rebates drug manufacturers pay to insurers. The new executive order establishes new safe harbors that would permit health plan sponsors, pharmacies, and PBMs to apply discounts at the point-of-sale in order to lower out-of-pocket costs. The idea is that rebate dollars from drug manufacturers would get passed directly to patients when they buy a medication, instead of to benefit managers and insurers — many of whom already pass the negotiated rebates they receive on to plan sponsors who decide how to utilize those dollars.
The change to drug rebates could have the most direct impact on commercial payers who benefit from manufacturer rebates on high-cost prescription drug products utilized by their members. However, the likelihood of the rebate rule actually being implemented remains questionable. The executive order includes a caveat stating that the change cannot be implemented if it will raise federal spending, out-of-pocket costs, or Medicare premiums — something even the government’s own actuaries predict would occur.
International drug pricing
The final executive order referenced the administration’s International Pricing Index (IPI) plan that was initially proposed in May 2018 as a five-year pilot program for Medicare Part B drugs with plans to launch in spring 2020. The IPI set prices for certain Part B-covered drugs based on the government-set prices in countries such as Austria, Ireland, Greece, Czech Republic, and others — essentially importing other countries’ price controls into the U.S. healthcare system. It’s important to note that the countries referenced in the IPI have access to fewer new drugs and a fraction of the cures that Americans do. The new executive order stopped short of mandating the IPI price cap. Instead Trump gave drug manufacturers a deadline of August 24 to “come up with something that will substantially reduce drug prices.”
Reducing the cost of prescription drugs and overall spend on pharmacy benefits is a top priority for many benefit managers and self-funded employers. It will be important to watch how things unfold with these executive orders to see if there will be real impact in the coming months. In the meantime, benefit managers can help their self-funded employers by carving out their pharmacy benefits, carefully analyzing their contracts and implementing sustainable clinical strategies that closely monitor claims and utilization management to ensure they are not overpaying for prescription drugs.
