Medicare would set drug prices based on the lowest amount paid for medicines in developed countries under an executive order the White House released Sunday. The order makes clear that President Donald Trump was unable to reach a price-cut agreement with pharmaceutical executives, as he had tried to do.
The executive order seeks to use international prices as a benchmark for drugs filled at a pharmacy or administered by physicians in hospitals or clinics. The administration had previously focused only the latter group of drugs, which are covered under Medicare Part B, in a draft regulation proposed in 2018.
Trump has proposed numerous plans to bring drug prices under control during his term in office, but most of those initiatives have been stalled or abandoned. The executive order comes just weeks before election day, but the regulations to implement them will take longer to develop and finalize.
Trump has talked a lot about controlling drug prices, but has struggled to do so through government action.
A requirement that television drug advertisements include price information was struck down by a federal court. The “most favored nation” plan signed this weekend — along with rules enabling the reimportation of lower-priced drugs from overseas and banning rebates to insurers in Medicare’s Part D program — were all previously proposed and then stalled for years. They re-emerged this summer in the form of executive orders.
The most favored nation proposal was part of a carrot-and-stick strategy to bring pharmaceutical executives to the table to agree to some form of price-reduction plan. However, the sector as a whole didn’t appear to be willing to meet and discuss a plan, even though media reports have indicated the industry prepared a counteroffer.
The two industry groups representing drug companies, the Pharmaceutical Research and Manufacturers of America and the Biotechnology Innovation Organization, sharply criticized the Trump administration’s proposal, describing it as foreign interference in the U.S. health care system.
“That is why we will use every tool available — including legal action if necessary — to fight this risky foreign price control scheme,” Michelle McMurry-Heath, BIO’s president and CEO, said in a statement.
The mechanics of the most-favored-nation proposal, at least for Part B, had been outlined in a draft rule released in 2018. Medicare would designate contractors to make bulk purchases of physician-administered drugs — typically expensive biologics that have to be injected or infused intravenously — and then be reimbursed on the basis of an “international pricing index.”
This idea mirrors a program that was attempted and abandoned in 2008 for lack of interest from physicians and vendors.
How using a most-favored-nation price — which the White House described as the lowest adjusted price paid in a member country of the Organization for Economic Co-operation and Development — would be applied in Part D is a bigger question. Medicare relies on private health care plans to administer benefits for these drugs, and those plans negotiate with developers for price and formulary access.
In addition, the programs Trump intends to use to implement the Part B proposal are authorized under the Affordable Care Act, a law that the administration is attempting to invalidate in court.
Even though Trump has signed the executive order, both proposals would need to be implemented through the normal channels of federal regulations. This process requires publication and public comment periods before any proposal can go into place, and could provide drugmakers with the legal leverage to challenge them in court. Therefore, it’s likely the price-reduction plans won’t be in place for months.