Ignoring industry’s threat of a lawsuit, U.S. President Donald Trump is moving forward with his plan for “most-favored nation” pricing of certain prescription drugs.
The president, on Sept. 13, signed the executive order he threatened in July if industry didn’t come up with a better offer by Aug. 24. Industry did make a counter offer last month, but apparently it wasn’t enough.
The industry offer consisted of a voluntary program, to be administered through the Center for Medicare & Medicaid Innovation, in which drug companies would give participating hospitals a discount on Part B drugs administered to both inpatients and outpatients. (The current 340B discount program, although mandatory, is limited to outpatient Part B drugs and certain eligible hospitals.)
The voluntary program was projected to deliver up to $100 billion in savings over 10 years. No savings amount is estimated in the order Trump just signed, as it doesn’t call for a full-scale rollout of his plan. Instead, it tasks Health and Human Services with developing and implementing rulemaking for payment models on most-favored nation pricing for both Medicare Part B and Part D. The models would then be used to test the impact of the pricing on patient outcomes.
Under a most-favored nation system, Medicare would get “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 Organisation for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product,” according to the order.
The Part B model would focus on “certain high-cost” prescription drugs and biologics administered by a provider, but the order doesn’t specify which Part B drugs or how many should be included. The Part D model would be limited to drugs with “insufficient competition” and prices above those in comparable OECD member countries.
Coming so late in Trump’s term, the executive order is being seen by many as an empty political gesture during an election year, given the threat of court challenges and the long process of putting such a plan into place.
Randall Stanicky, an RBC Capital Markets LLC analyst, said that although the order came as no surprise, there are “a lot of unknowns here, most notably around timing and response from industry … but we suspect this will provide ‘tough on pharma’ talking points in the weeks leading up to the election.”
The industry response came quickly and, also, with no surprises. “We will use every tool available – including legal action if necessary – to fight this risky foreign price control scheme,” Michelle McMurry-Heath, president and CEO of the Biotechnology Innovation Organization, said in reaction to the order.
Both she and Stephen Ubl, president and CEO of Pharmaceutical Research and Manufacturers of America, called the plan reckless, especially at a time when biopharma companies are working around the clock to fight the COVID-19 pandemic.
End the freeloading
The stated goal of Trump’s most-favored nation pricing is to end international freeloading on the U.S. investment in biopharma R&D. “Other countries’ governments regulate drug prices by negotiating with drug manufacturers to secure bargain prices, leaving Americans to make up the difference — effectively subsidizing innovation and lower-cost drugs for the rest of the world. … Americans should not bear extra burdens to compensate for the shortfalls that result from the nationalized public healthcare systems of wealthy countries abroad,” according to the executive order.
While the timing of the executive order smacks of electioneering, it is a reminder that drug prices are still an issue. Although Congress has stalled in passing any meaningful pricing legislation during the pandemic, many lawmakers have signed on to bills calling for forced government negotiations and an international pricing index. The outcome of the November election could determine whether any of those bills will be reintroduced and gain traction in the next Congress.
Joe Biden, Trump’s Democratic opponent, also has made drug prices a part of his campaign rhetoric. His health care plan includes direct Medicare negotiations, reference pricing or an independent assessment to determine the price of new drugs, a general inflation limit on price increases and importation.
Meanwhile, social justice issues and the pandemic, along with its impact on the economy, have made health care issues, including drug prices, a much lower priority with U.S. voters. According to a Kaiser Family Foundation poll released Sept. 10, health care ranked No. 5 among the top issues for the November election, with 10% of registered voters saying it was the most important issue.
In comparison, 32% ranked the economy as the top issue, followed by 20% citing the pandemic as the biggest concern. Criminal justice and policing were at the top of the list for 16% of the registered voters, and race relations were the most important issue for 14%.