President Donald Trump on Friday announced four executive orders to advance policies forcing community health centers that receive 340B drug discounts to cut patients' costs for Epi-Pens and insulin, tying Medicare payment for outpatient drugs to international prices, passing drugmaker rebates to patients and allowing personal drug importation.
The executive orders come as Trump's poll numbers are suffering and the GOP is scrambling to solidify its healthcare messaging ahead of the 2020 election. However, the policies still have to advance through the regulatory process and are unlikely to be implemented before the election, if ever.
"For now, these policies should be taken for what they are: campaign fodder. Whether there will be any interest in following through with them should the president be reelected remains to be seen," American Action Forum director of healthcare policy Chris Holt wrote Friday.
The administration's plan to lower patient's out-of-pocket costs for Epi-Pens and insulin would force federal community health centers to pass on their 340B drug discounts to patients, Trump said during a press conference.
HHS' rulemaking power over the 340B program is very limited, said Helen Pfister, partner at Manatt Health. The Trump administration plans to strong-arm community health centers by denying them future grants unless they pass on their discounts to patients.
According to the executive order, federally qualified community health centers would have to give their discounts to patients with high cost-sharing for insulin or Epi-Pens, a high unmet deductible or who are uninsured.
The move wouldn't make much of a dent in drug prices because it wouldn't affect most providers or patients.
The 340B program allows safety-net providers, some disease-specific programs, and publicly owned hospitals with sizable disproportionate-share populations to buy outpatient drugs at steeply reduced prices from manufacturers. Congress created the program in 1992 to fix the newly created Medicaid drug rebate program, which accidentally led pharmaceutical companies to stop offering discounts to safety-net providers.
But the program has expanded dramatically in recent years, drawing the ire of drugmakers and some public officials. HHS' Health Resources and Services Administration found drugs purchased under the program totaled about $16 billion or about 3.6% of all drugs in 2016. In addition, the Government Accountability Office has cited numerous oversight issues, which could lead to duplicate discounts being paid to providers.
The Trump administration and 340B hospitals have also been entangled in an ongoing battle over the administration's attempts to cut 340B payments to hospitals.
International reference pricing
The Trump administration also threatened to advance a proposal that would tie Medicare outpatient drug payments to the lowest international price in a market basket of developed countries if drugmakers don't propose an alternative by Aug. 24.
Ipsita Smolinski, managing director of the consulting firm Capitol Street, said she wasn't sure what preferable alternative drugmakers could put forward.
"I don't think drugmakers can collude with each other to lower their prices by 40% overnight," Smolinski said.
HHS said Friday that the policy would limit Medicare Part B payments to the lowest price charged in "any economically comparable" developed country, which is different than a prior proposal that would have tied payments to an average international price.
Abe Sutton, a former advisor to HHS and the White House Domestic Policy Council, said both an average price and a lowest price guarantee would have a similar overall effect, likely making other developed countries pay more for drugs.
Drugmakers hate the proposal and argue it would harm their capacity to develop new drugs — an argument that industry allies had expected to be more poignant as the nation looks to drugmakers to develop a COVID-19 vaccine during a pandemic.
"The research-based biopharmaceutical industry has been working around the clock to develop therapeutics and vaccines to treat and prevent COVID-19," said Pharmaceutical Research and Manufacturers of America President and CEO Stephen Ubl. "The administration's proposal today is a reckless distraction that impedes our ability to respond to the current pandemic – and those we could face in the future."
The international reference pricing policy could also change the way doctors are paid for administering outpatient drugs, and create a middleman between providers and drugmakers.
HHS' initial draft of the proposal would change physician payment to a set price for administering a drug, instead of a payment as a percentage of a drug's average sales price. HHS said its goal was to hold physicians' revenue harmless in the new model.
The White House has also decided to revive a proposal to pass drugmaker rebates to patients' cost-sharing in Medicare Part D. However, the executive order includes a provision that could prove to be a poison pill.
The White House last summer pulled the regulation after it was determined to be one of the most expensive ever promulgated — the Congressional Budget Office estimated the price tag at at $177 billion from 2020-2029. It was also estimated to raise Medicare beneficiaries' premiums.
But the executive order says the rebate rule can't be advanced unless the HHS secretary gave public confirmation that the rule would not raise premiums, taxpayer spending, or out-of-pocket costs.
Drugmakers love the idea, as the rebates they pay to plans to secure favorable formulary placement would be reflected in patients' copays. Insurance plans and pharmacy benefit managers detest the plan and have fiercely lobbied against it.
The insurer-backed Campaign for Sustainable Rx Pricing claimed the policy's inclusion was a capitulation to drugmakers.
"The reboot of the Rebate Rule would hand Big Pharma a massive bailout paid for on the backs of American seniors and taxpayers," CSRxP Executive Director Lauren Aronson said.
The Trump administration is also exploring allowing some personal importation of prescription drugs, HHS Secretary Alex Azar said.
"Individuals could get their drugs imported from other countries that the FDA would set up a system that would allow the safe importation from systems that have comparable regulatory regimes where FDA would find that to be safe," Azar told reporters Friday.
The administration's current plans would only allow states and drugmakers to import some prescription drugs. The Food and Drug Administration issued a proposed rule in December that would allow states to pursue pilot programs to import drugs from Canada and a draft guidance that would allow drugmakers to import their own products and sell them under different drug codes.
Skeptics have voiced concerns about the safety of the plan, and whether Canada's drug supply could handle funneling drugs to the U.S.
Investors and analysts aren't expecting immediate bottom-line impacts from the orders, as many of the initiatives have to go through lengthy rulemaking processes.
"No matter what came out today, it's tough to get to a world where they are enacted and hitting bottom lines," said Height Capital Markets senior analyst Hunter Hammond.