On Friday, July 24, Donald Trump signed three Executive Orders addressing the high prices of prescription drugs, and threatened to sign a fourth if drug manufacturers do not put forward acceptable proposals for reducing prices. For the most part, these Orders recycle proposals previously issued by the Department of Health and Human Services (HHS), and their implementation will require rulemaking by that agency. Nevertheless, it is significant that Trump has now very publicly thrown his weight behind these approaches, all of which are likely to carry momentum regardless of the results of the November election. The three executive orders and the possible fourth are described below.
Executive Order on Importation of Drugs
One Executive Order directs HHS to complete its rulemaking process to permit the importation of certain drugs from Canada – something that HHS is doing anyway. HHS issued a proposed rule in December 2019 that would implement Section 804 of the Federal Food, Drug, and Cosmetic Act (FDC Act) to allow FDA-authorized entities to import certain prescription drugs from Canada. We reported on this proposed rule here. HHS’s regulatory agenda identifies December 2020 as the expected time of finalization.
The Executive Order also directs HHS to grant waivers of the prohibition on importation of prescription drugs for the personal use of individuals, provided that the importation poses no additional risks to public safety and results in lower costs to American patients. This is merely a reiteration of FDC Act section 804(j)(2), which authorizes such waivers with the same provisos. HHS has never yet certified that waivers under Section 804(j)(2) pose no additional risks to public safety and result in lower costs to American patients. In fact, when HHS issued the proposed rule described above in December 2019, it specifically declined to implement Section 804(j), citing problems with rogue on-line Canadian pharmacies. It is unclear whether HHS is prepared to change its outlook now. If it is, HHS would presumably issue another proposed regulation to implement Section 804(j) and set forth the procedures for obtaining waivers.
Finally, this Executive Order authorizes HHS to permit the re-importation of insulin under FDC Act Section 801(d) upon a finding by HHS that it is required for emergency medical care. Once again this merely reiterates FDC Act Section 801(d), which has provided HHS with such authority since 1997.
Executive Order on PBM Rebates
On February 6, 2019, the Office of the Inspector General (OIG) of HHS published a proposed rule designed to eliminate the current antikickback law safe harbor protection for rebates paid by drug manufacturers to pharmacy benefit managers (PBMs), and replace it with a new safe harbor protecting manufacturer discounts provided to federal program beneficiaries at the point of sale. We reported on that proposal here. HHS withdrew this proposed regulation on July 10, 2019 following a May report by the Congressional Budget Office (CBO) that the rule, if finalized, would increase federal spending by about $177 billion over a ten-year period while increasing premiums for Medicare Part D enrollees.
This Executive Order directs HHS to revive and complete the rulemaking process, but only after confirming “that the action is not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.” In light of the CBO’s findings in May 2019, it appears doubtful whether such confirmation is possible.
Executive Order on Dispensing of Insulin and Epinephrine by FQHCs
The third Executive Order provides that Federally Qualified Health Centers (FQHCs) must provide insulin and self-injectable epinephrine to low income individuals at discounted prices. FQHCs, which are community-based health care providers that receive funds from HHS to provide primary care services in underserved areas, currently purchase these drugs (among many others) at a statutory discount under the 340B Drug Discount Program. However, FQHCs are not currently required to provide these drugs to patients at the discounted price. The Executive Order directs HHS to ensure that FQHCs make these drugs available to their patients at their cost plus a minimal administration fee.
Possible Executive Order on International Reference Pricing
The fourth Executive Order will peg drug payment by Medicare (and perhaps other payors) to prices in foreign countries. This Order once again recycles a previous HHS proposal – this time, an October 30, 2018 Advance Notice of Proposed Rulemaking (ANPRM), which we reported on here. The 2018 ANPRM would provide for drug payment rates under Medicare Part B to be based on an international pricing index derived from prices in 14 foreign countries. To date, the ANPRM has not reached the proposed regulation stage. A similar international reference price approach is included in H.R. 3, the drug pricing bill passed by the House on December 12, 2019.
The details of this Executive Order are not known, because Donald Trump did not actually sign and issue it. Instead, he threatened to sign it on August 24 at noon (“not 12:01”) unless drug manufacturers put forward proposals to significantly reduce drug prices before then. In his remarks, Trump said he will be meeting with the heads of the major drug manufacturers on Tuesday, July 28, to discuss pricing.