Trump Administration Takes Aim at Drug Prices Again

View the September Order

The Executive Order was originally mentioned by the White House, along with three other Executive Orders discussing prescription drugs, back in July 2020, which Arent Fox covered in a prior alert.

The September Order includes a provision revoking a prior Executive Order of the same title and identifies the release date of that prior order as “July 24, 2020” (however, the prior order itself lists a release date of September 13, 2020, and is not reflected as being released in July per the official White House website). The referenced prior order was focused solely on reimbursement for certain drugs covered under the Medicare Part B program.

The September Order now directs the Secretary of Health and Human Services (HHS) to implement two payment models, presumably via the Center for Medicare & Medicaid Innovation (CMMI), to address reimbursement for certain prescription drugs under both the Medicare Part B and Part D programs. However, the September Order does not provide much detail as to how the demonstrations will be operationalized. Specifically, the September Order does not state whether the demonstrations will be mandatory or optional and whether the models will require participation by outside vendors, such as Competitive Acquisition Program vendors related to the Medicare Part B demonstration. The Part B model would “test a…model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, no more than the most-favored-nation price” and would also test “whether, for patients who require pharmaceutical treatment, paying no more than the most-favored-nation price would mitigate poor clinical outcomes and increased expenditures associated with high drug costs.” However, the September Order does not provide additional detail as to how mitigation of clinical outcomes would be evaluated. 

On the Part D side, the September Order directs HHS to also evaluate drug prices in comparison to those in the Organisation for Economic Co-operation and Development (OECD) member countries. The Part D model would evaluate payment “for Part D prescription drugs or biological products where insufficient competition exists and seniors are faced with prices above those in OECD member countries that have a comparable per-capita gross domestic product to the United States, after adjusting for volume and differences in national gross domestic product, no more than the most-favored-nation price, to the extent feasible.” As with the Part B model, the Part D model would also evaluate whether the new payment scheme “would mitigate poor clinical outcomes and increased expenditures associated with high drug costs.” Again, with no additional details provided, it is unclear exactly how “comparable” drugs would be evaluated, and how mitigation of clinical outcomes would be evaluated.

If these models do not require mandatory participation by the industry, it would seem that much of the September Order is without true impact. In addition, both models may face legal challenges. The Part B model, if mandatory, would conflict with the statutory mandate under the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) of 2003 to reimburse separately payable drugs under the Medicare Part B program based on Average Sales Price. The Part D model is ripe for potential legal challenges involving the “non-interference clause” under the MMA, which does not permit HHS to interfere in the negotiation of Medicare Part D plan reimbursement to pharmacies for dispensing Medicare Part D drugs to enrollees or negotiations between Medicare Part D plans and pharmaceutical manufacturers for rebates related to formulary placement of Part D drugs.

As always, members of the industry should be on the alert for additional details which are hopefully forthcoming from HHS.