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White House Issues Executive Orders Addressing Drug Pricing

The White House released three Executive Orders on July 24, 2020 setting forth policies that the Administration believes will “deliver lower prescription drug prices to American patients.” A fourth Executive Order tying Medicare Part B reimbursement for prescription drugs covered under Medicare Part B (by and large physician-administered drugs) to international benchmarks is expected to be released in the coming weeks.

Executive Order: Lowering Prices for Patients by Eliminating Kickbacks to Middlemen

This Executive Order instructs the Secretary of Health and Human Services Office of Inspector General (HHS OIG) to finalize rulemaking related to changes to the discount safe harbor to the Federal Anti-Kickback Statute (AKS) related to back-end formulary rebates paid to Medicare Part D plans and their pharmacy benefit managers (PBMs). We previously reviewed the proposed rulemaking published in April 2019 in a previous blog post entitled “HHS OIG Proposes Major Changes to AKS Discount Safe Harbor,” available here. Specifically, HHS OIG is directed to promulgate regulations to:

(a) exclude from safe harbor protections under the AKS certain retrospective rebates or discounts 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; and

(b) establish new safe harbors that would permit health plan sponsors, pharmacies, and PBMs to apply discounts at the patient’s point-of-sale in order to lower the patient’s out-of-pocket costs, and that would permit the use of certain bona fide PBM service fees.
However, before promulgating these regulations, HHS must publicly confirm that neither Federal spending, Medicare beneficiary premiums, nor patients’ total out of pocket costs will be increased, which may prove difficult to do based on prior cost estimates from the Congressional Budget Office (found here).

Executive Order: Increasing Drug Importation to Lower Prices for American Patients

The second Executive Order is intended to “support the goal of safe importation of prescription drugs” by directing the Secretary of HHS to:

(a) facilitate grants to individuals of waivers of the prohibition of importation of prescription drugs, provided such importation poses no additional risk to public safety and results in lower costs to American patients;

(b) authorize the re-importation of insulin products upon a finding by the Secretary that it is required for emergency medical care; and

(c) complete rulemaking to allow importation of certain prescription drugs from Canada. (see the previously Proposed Rule here).

However, an ongoing debate remains as to whether allowing importation of drugs will actually result in significant economic savings, and whether importation of drugs from a foreign country will compromise the safety and effectiveness of the U.S. pharmaceutical supply chain.

Executive Order: Access to Affordable Life-saving Medications

The final Executive Order released on July 24 specifically addresses access to insulin and injectable epinephrine for low-income individuals. The Order directs the Secretary of HHS to require one subset of 340B Covered Entities, Federally Qualified Health Centers (FQHCs), to make insulin and injectable epinephrine available to their patients at the 340B price.

This Order has drawn scrutiny from many in the industry for a variety of reasons; namely, whether the Secretary has the power to impose such requirements on FQHCs, and whether targeting such a relatively small subset of 340B Covered Entities will make any meaningful impact on access to these drugs.

The immediate impact of these Executive Orders remains to be seen, particularly because each would require extensive notice and comment rulemaking on behalf of HHS. Members of the industry should be on the lookout for proposed rules related to these Orders and take advantage of all public comment periods. 

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