The White House on Sunday released text of an executive order that aims to tie Medicare payments for outpatient and pharmacy drugs to the lowest price offered in comparable developed countries.
The order revokes a similar order that only would have applied to outpatient drugs, which the White House refused to release for more than seven weeks as the administration tried to force drugmakers to the negotiating table.
“Negotiations did not produce an acceptable alternative, so the President is moving forward,” White House spokesman Judd Deere said.
The most-favored-nation policy cannot be implemented by executive order alone, and would have to be followed up with regulatory action. However, the expansion to include drugs in Medicare Part D in some sort of international reference pricing plan was a big fear for drugmakers, as Part D makes up a larger share of drug spending.
Pharmaceutical Research and Manufacturers of America in a statement called the policy “irresponsible and unworkable.”
“What’s worse is that they are now expanding the policy to include medicines in both Medicare Part B and Part D, an overreach that further threatens America’s innovation leadership and puts access to medicines for tens of millions of seniors at risk,” PhRMA President and CEO Stephen Ubl said in a written statement.
President Donald Trump announced signing the new order Sunday afternoon.
“Just signed a new Executive Order to LOWER DRUG PRICES! My Most Favored Nation order will ensure that our Country gets the same low price Big Pharma gives to other countries. The days of global freeriding at America’s expense are over…” Trump tweeted.
Trump has campaigned as a foe of the pharmaceutical industry, though many of his drug-pricing policies have stalled or been stopped in the courts. Trump is bucking some conservatives who dislike international reference pricing, as they view it as importing foreign price controls from countries with “socialized” health systems.
“Importing price controls from foreign countries is flawed and dangerous policy that will result in a substantial reduction in investment in new cures and drugs at the worst possible time,” U.S. Chamber of Commerce Executive Vice President and Chief Policy Officer Neil Bradley said.
The 2020 Democratic platform states that if elected, “Democrats will take aggressive action to ensure that Americans do not pay more for prescription drugs than people in other advanced economies.”
The described “most-favored-nation” payment methodology would guarantee that Medicare would pay the lowest price of any Organisation for Economic Co-operation and Development member country that has a comparable per-capita gross domestic product, adjusted for volume and differences in national gross domestic product.
“When the Federal Government purchases a drug covered by Medicare — the cost of which is shared by American seniors who take the drug and American taxpayers — it should insist on, at a minimum, the lowest price at which the manufacturer sells that drug to any other developed nation,” the order states.
The order directs the HHS secretary to pursue rulemaking to create a demonstration of a payment model to ensure Medicare Part B pays the most-favored-nation prices for some high-cost outpatient drugs. A proposed rule to implement that policy has been under review since June 2019.
The HHS secretary is also directed to develop rulemaking to create a Center for Medicare and Medicaid Innovation demonstration for Medicare to pay the most-favored-nation price for Part D drugs with “insufficient” competition and that have prices higher in the United States than other comparable developed countries. The White House has not previously included Part D in international reference pricing proposals.
Johns Hopkins University Professor Gerard Anderson, who has advised the administration and congressional leaders on international reference pricing issues, said he met with CMS leadership last week and discussed some drug pricing issues, but implementing international reference pricing in Medicare Part D did not come up in the conversation.
Drugmakers have indicated they may pursue legal action if payments in Medicare tied to foreign countries are implemented. Dr. Michelle McMurry-Heath, president and CEO of the Biotechnology Innovation Organization, called the White House’s most-favored-nation pricing policy a “reckless scheme.”
“We will use every tool available – including legal action if necessary – to fight this risky foreign price control scheme,” McMurry-Heath said.