Recent Drug Pricing Executive Order Prompts Questions on Authority, Scope, Implementation Timeline
September 18, 2020—President Donald J. Trump issued the most recent in a series of Executive Orders aimed at drug pricing earlier this week. The order, “Lowering Drug Prices by Putting America First,” endeavors to implement a “most-favored-nation price” for certain outpatient drugs reimbursed by Medicare. Significant questions exist about the authority underlying its directives, its intended scope, and the implementation timeline.
Executive Order 13948 directs the Secretary of Health and Human Services to test a Medicare payment model to determine whether a program based on most-favored-nation pricing would mitigate poor clinical outcomes and increased program expenditures associated with high outpatient drug costs. While the order references drugs covered by Medicare Part B and Part D, it is unclear whether all such drugs would be included or only those above a certain cost threshold.
The Executive Order defines “most-favored-nation price” 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 Organization for Economic Cooperation and Development [OECD] that has a comparable per-capita gross domestic product.”
OECD includes 37 member countries. Among them, Iceland has the per-capita gross domestic product most comparable to the United States. Canada, Mexico, France, Germany, and Japan are also OECD members. Presumably, the definition of “comparable” and the data source that would serve as the basis for such comparison would be announced as part of a future rulemaking process.
Although the Executive Order directs the Secretary to “immediately take appropriate steps” to implement a plan, drug manufacturers are unlikely to be impacted in the near future given the pace of notice-and-comment rulemaking and the anticipated legal challenges.
The text of the Executive Order is available here. (https://www.govinfo.gov/content/pkg/FR-2020-09-23/pdf/2020-21129.pdf)
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