ALEX KACIK Well, welcome to Modern Healthcare's Reporter Roundtable, where we take you beyond the bylines to better understand the news and how it's reported. My name is Alex Kacik. I'm the hospital operations reporter for Modern Healthcare and we're lucky enough to be talking with Rachel Cohrs today; Modern Healthcare's health policy and politics reporter in DC. Her recent drug pricing story offered an exclusive look at an executive order that the Trump administration would have preferred to remain hidden.
Rachel, I'm really excited to be talking to you today, because I think this offers a really unique look in a behind the scenes way into how we go about news gathering. And we'd love to go into the context of how you got this story and how it went about.
RACHEL COHRS So I guess it started on July 24th when President Donald Trump signed four executive orders on different drug pricing topics, and he only released three of them publicly. Usually, an executive order comes out from the White House Press Office pretty quickly after it's signed, but there was one that they refused to release.
So I kind of had that in the back of my mind. And that weekend, I was just kind of reading through health policy news and I ran across a story that had a photo from the actual event of the signing. And I looked at it and it stopped me in my tracks because I realized Trump's holding up the order and you can clearly read it. And luckily, I looked at the caption of the photo and it had the photographer's name on it. So I was kind of doubting myself at that point, and so I had to go back to the CSPAN footage and figure out, did he actually sign all four orders? Did it look like there were photos of them. And I mean, he did clearly sign all four orders. He looked down, put the marker to the paper and then held it up. And you could hear shutters in the CSPAN footage. So I was pretty sure at that point, that somebody had an image of this order that we all were looking for in their camera.
So I just guessed the photographer's email address, shot him an email and said, "Hey, here's the situation. Can you help you out with this?" And he was very gracious and we were able to work out a solution.
ALEX KACIK So could you break down a little bit about when you were able to get that photo, decipher that text, what did you learn about the executive order? Why isn't something A, that the president would want hidden, and then it's not the full context, right? You got snippets here, but what were you able to glean and what are the implications?
RACHEL COHRS It was a bittersweet moment. I was obviously really excited that I could read some of the order, but then I realized that I was missing a page. And I had page one and page three, and a lot of filler text on either side. And I mean, we did end up making the decision to publish, because we had enough policy details that it was worth it, but I think there's more to be had in that order.
But what we did learn about what the policy was, is basically the Trump administration outlined this demonstration project in Medicare part B, as in boy, which applies to outpatient drugs. And they wanted to impart, create this formula, to tie payment in Medicare to prices that a drug makers charge in other countries. And the idea of that, it kind of fits into Trump's larger trade narrative that Americans should get the best deal. So that's kind of the draft policy that we're looking at.
However, a proposed rule, which is kind of the big initial step in the rulemaking process, that has been under review at the White House since I think, June, 2019. So it's been there for more than a year, so it kind of stalled out and there are many reasons for that. Obviously, the policy's kind of controversial. Some conservatives don't like it. It's also kind of hard to operationalize, just because the data on drug prices at all, it's hard to understand what people are actually paying.
So, that brings us to the executive order, what could actually happen. Immediately when Trump signed the order, not a lot. It just kind of lays a blueprint for the rulemaking process. But it's especially interesting, because he's using the order to try to bring drug makers to the negotiating table, to try and find some way to lower drug prices. It's something that he's said he wanted to do on the campaign trail, he's want to do it his whole first term, and the policies that he's put forward so far, have had pretty limited success. So he wanted to bring drug makers to the table.
So I think there's a valid question as to whether they actually want this order implemented or not. And I think that speaks to why they might want to withhold hold it, because in theory, if you want an order implemented, you want people to know what's in it so they could implement it. But that's really not the situation we're looking now. So it's kind of unusual and President Trump did explicitly say, "Drug makers, you have a month. If you come to us with something better, then we can talk." So I think that's kind of why the order is important, why they might not want to disclose the whole text right away.
What we could see from the text that I was able to read, was that the demonstration was limited to outpatient drugs. Because I mean, investors, pharma, they are very, very nervous that some policy like this could expand to pharmacy counter drugs in Medicare part D, as in dog. It's a prospect that's scary to them because it's a much larger part of drugs spending. And obviously, other countries too, are a little nervous about this. Because if they're put on a list of market basket countries, that dramatically affects their negotiations with drug makers.
So we established that it is only for outpatient drugs in this specific order, and that the Trump administration is planning to use a more aggressive version of that formula than they had been thinking about before. But we don't have details about what countries, we don't have any details that, that month-long gap. It wasn't written into the order that we could see. So the devil's in the details here, really. So there's a lot of questions that we still have, but it was the first black and white indication that we've had of the scope of the order and kind of what formula they were looking at using [inaudible 00:06:27].
ALEX KACIK Part of the sticking point here is this research and development argument. Part of the reason pharmaceutical companies will say that they charge more is so they can put more money back into their own systems to try to come up with that next innovative drug. And I imagine they would be defensive over a proposal like this, because it would kind of limit what that R and D element could be. Although that's been widely disputed in how those profits are used from the drug that they make.
RACHEL COHRS It's the big debate and I think drug makers argument against this proposal has been these profits fund their innovation. And it's obvious, I mean, drug makers do have a very important part in our drug development process. Even if that basic research starts in a government lab or at a university or something like that, really taking it to market is a role that a lot of times small biotechs will play, but those biotechs will be gobbled up by the larger drug companies if they have a drug that's performing really well.
So I think there is certainly some truth to that statement, but Alex Azar has a biopharma background as well. He worked for Eli Lilly. So I think he's been challenging the idea that any $1 you take away from pharma profits is $1 taken away from research and development. There's been some criticism of pharma companies, marketing budgets, that kind of thing. And there's very little reliable data on that because they are those budgets aren't necessarily entirely public. So that's a big question of our time and how we pay for drugs and how we develop them and who makes those decisions right now.
But drug makers certainly have a large role to play, but I think you're right in that some people say that they may be exaggerating a bit as to where those cuts or decreased profits would actually come from.
ALEX KACIK What's next? You're still waiting? It sounds like you've checked in to see some of the pharmaceutical company's reaction and then eventually it may make it into some sort of finalized rule?
RACHEL COHRS Right. Yeah. There are so many different ways that this could play out. So the deadline of one month after signing has come and gone, and we still haven't seen any executive order release or proposed rule on the reference pricing idea. Drug makers have engaged with the White House, even though some pharma CEOs have publicly scoffed at the idea. And there hasn't been any big public announcement yet on any resolution from these talks. So we're still kind of waiting in limbo.
I think there's a question of whether they will release the order, because I think we know Chief of Staff, Mark Meadows, doesn't really like this idea very much. I used to talk to him pretty often when he was in Congress about it. And I was just going through my tape and I have him on tape several times saying that he doesn't think this is good policy. But I mean, when people work in an administration, sometimes their views change or they put their personal views aside for the larger goals.
So I think there's a genuine question as to how interested they really are in pursuing this policy. And you're right, at any time executive order or not, they could just choose to propose this rule. So I think it's probably unlikely that we would see a big regulatory proposal, but I mean, they've had a year to work on it, so they might have something ready. And obviously, if a rule is proposed, it doesn't have to be finalized, but it's more of a hassle to kind of withdraw it than if it's not actually proposed in the first place.
So yeah, there's many ways this could play out. And the drugs we're talking about here, we don't know specifically which ones, but outpatient drugs, they treat really devastating illnesses that touch so many people, so I think the big picture here is very important and it was great to be able to contribute to the conversation.
ALEX KACIK Well, Rachel, thank you so much for sharing with us today, to give us a behind the scenes look on how this came together. And we'll definitely look out for more of your reporting going forward.
RACHEL COHRS Yeah. Thanks so much. I'm not finished yet. And I did just want to say that if any of you out there listening, you don't subscribe to Modern Healthcare yet, but you want to be on the email list of those people that we're thinking about when we're putting together those email alerts to figure out who's going to get our most important stories, our deepest analysis, and any exclusives first, this is a great time to subscribe. Obviously, these stories are resource intensive to report.
So if you'd like to subscribe, we'll have a link in the show notes so you can do that. And if you'd like to follow my work on Twitter, I am pretty active there. I share links that are interesting to me, links to my stories and Alex does some great reporting that he also shares there. So you can follow us on Twitter and Modern Healthcare as well, to stay up to date that way.
ALEX KACIK Thanks, Rachel. It was an absolute pleasure to talk and learn more about this story, and thank you so much for your time.