President Trump Signs Four Executive Orders Intended to Lower Drug Prices

Increasing Drug Importation to Lower Prices for American Patients

This Executive Order addresses the Administration’s “goal of safe importation of prescription drugs” and has three components.

First, it contemplates the Secretary of HHS “facilitating grants to individuals of waivers of the prohibition of importation of prescription drugs” provided that it “poses no additional risk to public safety and results in lower costs to the American People” under section 804(j)(2) of the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 384(j)(2).

Second, it addresses authorizing the reimportation of insulin products where the Secretary of HHS finds that it is “required for emergency medical care” under section 801(d) of the FDCA (21 U.S.C. § 381(d)). Unless this exception is met, this statutory provision generally places limitations on the reimportation of U.S.-made insulin products.

Third, it requires the Secretary of HHS to complete the rulemaking process regarding a proposed rule to import prescription drugs from Canada. On December 23, 2019, HHS published a proposed rule regarding drug importation from Canada; the proposed rule received more than 1,200 public comments. The proposed rule contemplates allowing states and certain other non-federal government entities to import certain prescription drugs from Canada if the requirements of Section 804(b) through (h) of the FDCA (21 U.S.C. § 384(b)-(h)) are met.

Since its enactment some two decades ago, HHS has not previously determined that the standards of 804 were met. The Executive Order sets no specific deadlines for these actions.

Lowering Prices for Patients by Eliminating Kickbacks to Middlemen

This Executive Order directs the Secretary of HHS to finalize a proposed rule on certain rebates, originally published by the HHS Office of Inspector General (OIG) in February 2019, that would revise the discount safe harbor to the federal Anti-Kickback Statute (AKS) with respect to pharmaceutical manufacturer rebates to health plans and pharmacy benefit managers (PBMs). The 2019 proposed rule received more than 25,000 comments during the public comment period, which closed in April 2019.

Specifically, the Executive Order directs the Secretary of HHS to “complete the rulemaking process he commenced seeking to:

(a) exclude from safe harbor protections under the anti-kickback statute, section 1128B(b) of the Social Security Act, 42 U.S.C. 1320a-7b, certain retrospective reductions in price that are not applied at the point-of-sale or other remuneration that drug manufacturers provide to health plan sponsors, pharmacies, or PBMs operating the Medicare Part D program; and

(b) establish new safe harbors that would permit health plan sponsors, pharmacies, and PBMs to apply discounts at the patient’s point-of-sale in order to lower the patient’s out-of-pocket costs, and that would permit the use of certain bona fide PBM service fees.”

Prior to issuing a final rule pursuant to the Executive Order, the Secretary of HHS must publicly confirm that the rule “is not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.” This provision was likely included to address concerns reportedly expressed by the President and some of his senior staff as well as certain stakeholders in public comments to the proposed rule. Those concerns reportedly contributed to a prior decision in July 2019 to withdraw a draft final rule on rebate reform that had been sent to the White House Office of Management and Budget (OMB) in June 2019.

As described in our earlier summary of that proposed rule, the proposal included controversial positions, including what appeared to be conflicting statements about how existing safe harbors and exceptions to the AKS currently apply or do not apply to certain common manufacturer relationships with PBMs. Notably, the Executive Order states that “currently, Federal regulations create a safe harbor for such discounts and preclude treating them as kickbacks under the law” and that “[n]arrowing the safe harbor for these discounts under the anti-kickback statute” will result in cost savings for Medicare Part D patients at the point of sale.

Further, although the draft final rule previously sent to OMB was withdrawn, OIG never formally withdrew the prior proposed rule through a public notice published in the Federal Register. As a result, OIG may take the position that it can, without further opportunity for notice and comment, send a final rule that is responsive to comments already received on the proposed rule to OMB for review and approval. Any final rule, however, would be subject to (and HHS would need to address in some manner) the requirement in the Executive Order that the rule “is not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.” Notwithstanding the Administration’s potential ability to issue a final rule in relatively short order, stakeholders opposed to the rule have suggested they may challenge OIG’s interpretation of the AKS, among other aspects of the proposed rulemaking.

Access to Affordable Life-Saving Medications

This Executive Order directs the Secretary of HHS to take action — to the extent permitted by law — to condition future grants available to Federally Qualified Health Centers (FQHCs) under section 330(e) of the Public Health Service Act on FQHC grantees establishing practices to make insulin and injectable epinephrine available at the 340B discounted price paid by the FQHCs, plus a minimal administration fee, to individuals with low incomes. This Executive Order specifies that such individuals include those who (a) have a high cost-sharing requirement for either insulin or injectable epinephrine, (b) have a high unmet deductible, or (c) have no healthcare insurance. The Executive Order states that the Secretary of HHS would further determine what constitutes “individuals with low incomes.”

Tying Prescription Drug Prices to International Benchmarks

The fourth Executive Order will be held for at least 30 days (until August 24, 2020) and, according to the Trump Administration, pending discussions between the Administration and the pharmaceutical industry. If issued, this Order could tie the price that Medicare pays for certain drugs administered by doctors to prices negotiated by other economically comparable countries and appears similar to an Advance Notice of Proposed Rulemaking with Comment (ANPRM) published in October 2018 by the Centers for Medicare and Medicaid Services (CMS). Under the ANPRM, CMS proposed to exercise its demonstration authority under section 1115A of the Social Security Act to test reimbursement changes for certain separately payable Part B drugs and biologicals using an international pricing index (IPI) model that would result in phasing down Medicare reimbursement for select drugs in certain geographies covered by the model to more closely align with prices paid by certain other developed countries. Similar to certain other proposals reflected in the recent Executive Orders, stakeholders have raised concerns about a possible IPI model, including concerns in connection with potential legal issues that such a model might raise.

For more on other breaking drug pricing related news, visit Sidley’s Global Drug Pricing page.