On September 13, 2020, President Trump issued an Executive Order, “Lowering Drug Prices by Putting America First” (the Order), directing the Secretary of Health and Human Services (HHS) to pursue implementation of new Medicare payment models for both Part B and Part D drugs. The Order revokes and expands upon the fourth Executive Order announced by the Trump Administration on July 24, 2020 (as reported here), which President Trump signed but held pending further discussions with the pharmaceutical industry. Like the three other Executive Orders announced in July, this Order raises significant questions as to whether its directives are consistent with existing statutory and regulatory authority.
Section 3 of the Order directs the Secretary of HHS to “immediately take appropriate steps” — to the extent consistent with law — to “implement his rulemaking plan to test a payment model pursuant to which Medicare would pay” for selected Part B drugs and biological products “no more than the most-favored-nation price.” The Order defines the “most-favored-nation” or “MFN” price as “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 model would test whether “paying no more than the most-favored-nation price would mitigate poor clinical outcomes and increased expenditures associated with high drug costs.” A list of OECD countries is available here.
The Part B payment model described in Section 3 of the Order appears to reflect a significantly modified version of the contemplated Part B International Pricing Index (IPI) model on which the Centers for Medicare and Medicaid Services (CMS) sought public comment in October 2018. In an Advance Notice of Proposed Rulemaking (ANPRM), CMS described and solicited public comments on an IPI demonstration model that the Center for Medicare and Medicaid Innovation (CMMI) could test to more closely align Medicare Part B payment for included drugs with target prices that are indexed to an average of certain international prices among certain identified developed countries. The ANPRM noted that an IPI model would be mandatory for certain providers in participating geographies such that the model would encompass 50% of Medicare Part B spending on separately payable Part B drugs. The comment period for the ANPRM closed on December 31, 2018. The ANPRM presents significant questions as to whether it would be consistent with applicable legal authority, if implemented, which could similarly affect implementation of an eventual Part B MFN model.
Section 3 of the Order and the ANPRM are limited to Medicare Part B. However, Section 4 of the Order addresses Medicare Part D. Specifically, Section 4 directs the HHS Secretary — to the extent consistent with law — to
take appropriate steps to develop and implement a rulemaking plan, selecting for testing, consistent with section 1315a(b)(2)(A) of title 42, United States Code, a payment model pursuant to which Medicare would pay, 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.
Section 1315a(b)(2)(A), referenced in Section 4 of the Order, grants authority to the HHS Secretary to test certain payment and service delivery models through CMMI and directs the Secretary to “select models to be tested from models where the Secretary determines that there is evidence that the model addresses a defined population for which there are deficits in care leading to poor clinical outcomes or potentially avoidable expenditures.” As with Section 3 of the Order, Section 4 states that the model should test whether paying no more than the MFN price “would mitigate poor clinical outcomes and increased expenditures associated with high drug costs.” However, based on the plain text of the Order (which calls for the HHS Secretary to “immediately take appropriate steps to implement” a Part B MFN model and to “take appropriate steps to develop and implement” a Part D MFN model), it appears the Administration contemplates implementing a potential Part B model on a faster track than any potential Part D model.
For more on other breaking drug pricing related news, visit Sidley’s Global Drug Pricing page.
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