Trump's 'Sweeping' Drug Pricing Orders Draw Fury, Doubts

By Jeff Overley
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Law360 (July 24, 2020, 11:35 PM EDT) -- Facing pandemic-battered poll numbers and a looming election, President Donald Trump announced executive orders Friday aimed at finally fulfilling a 2016 campaign promise to sharply cut drug prices, but the proposals came with escape clauses that could prevent them from becoming reality.

In remarks at the White House, Trump described four executive orders that would link Medicare reimbursement for some drugs to lower prices paid for the medications overseas, eliminate Anti-Kickback Statute immunity for drugmaker rebates, expand drug imports and obligate certain clinics to pass along so-called 340B discounts to patients.

"Today, I'm signing four sweeping executive orders that will lead to massive reduction in drug costs," the president said. "We've already gotten them down a little bit, but that's not good enough."

Friday's announcement came barely 100 days before the presidential election and only one day after U.S. coronavirus infections eclipsed the 4 million mark. Trump has incurred intense criticism over his handling of the outbreak and has fallen behind in many polls against his presumptive Democratic challenger, former Vice President Joe Biden.

"Trump's failed leadership throughout the pandemic crisis has left him searching for anything to change the conversation," Sen. Ron Wyden, D-Ore., ranking member of the Senate Finance Committee, said Friday. "Today's announcement is more snake oil for Trump to sell on the campaign trail."

One of the orders, which Trump described as "the granddaddy of them all," would enact a "most-favored nation" policy capping prices for the costliest Medicare Part B drugs. The cap would be the lowest price paid in an economically comparable country within the Organization for Economic Cooperation and Development, which consists mainly of European countries. Part B spends billions on biologic drugs that can cost hundreds or even thousands of dollars per dose.

But Trump said that the order would not take effect until Aug. 24 — the start date of a dramatically downsized Republican National Convention — in hopes that "the pharmaceutical companies will come up with something that will substantially reduce drug prices" and make the policy unnecessary.

In a separate statement, the Trump administration said that the most-favored nation order "takes effect in 30 days unless Congress acts." The text of the order had not been made available late Friday, so some details about the order's meaning and effective date were unclear.

The policy, which administration officials began teasing last year, appears even bolder than a proposed "International Pricing Index" that Trump floated in 2018. The IPI has been under review at the Office of Management and Budget for more than a year.

Michelle McMurry-Heath, CEO of the Biotechnology Innovation Organization, responded Friday to the most-favored nation proposal with a scalding statement that accused Trump of mimicking leftist policies he regularly attacks and setting the stage for more pandemic problems and economic misery.

"Adopting foreign price controls by executive fiat will cripple the small, innovative companies developing the vaccines and therapies that will help end this pandemic and get the American people back to work," McMurry-Heath said.

Another major executive order would revive Trump's plan, abandoned more than a year ago, to scrap an Anti-Kickback Statute safe harbor for rebates that drugmakers pay to pharmacy benefit managers, which negotiate on behalf of health insurers in the Medicare Part D prescription drug program.

The Trump administration and some outside experts blame rebates for driving up pharmaceutical sticker prices, which determine out-of-pocket costs for Medicare beneficiaries. But it's projected that insurers would respond to the loss of rebate revenue by jacking up premiums, which in turn could cost Uncle Sam roughly $200 billion in extra premium subsidies over 10 years, according to an earlier administration estimate.

Friday's executive order on rebates contained a significant hedge on that issue, telling the U.S. Department of Health and Human Services that before ditching the safe harbor, it must confirm that the move "is not projected to increase federal spending, Medicare beneficiary premiums or patients' total out-of-pocket costs."

Complicating matters further, attorneys have warned that the rebate change would be vulnerable to a legal challenge, and critics on Friday alluded to possible litigation. 

"There are ... serious legal issues that will need to be considered should the administration seek to finalize a rule on rebate reform," JC Scott, CEO of the Pharmaceutical Care Management Association, which represents pharmacy benefit managers, said in a Friday statement.

A third order on Friday would apply to so-called federally qualified health centers in the 340B program, which guarantees drug discounts to health care providers that serve lower-income areas. Providers in 340B say the discounts help sustain their low-margin operations, but largely Republican critics have alleged abuse of the program and noted that total discounts have grown by billions of dollars in recent years.

Friday's order, which doesn't apply to hospitals in 340B, would require health centers to pass along discounts for insulin and injectable epinephrine, such as Mylan NV's EpiPen.

The pharmaceutical industry generally supports the changes to rebates and 340B but opposes the most-favored nation policy.

The Campaign for Sustainable Rx Pricing — a coalition of insurers, hospitals and pharmacy benefit managers — said Friday that the three orders, taken together, exhibit "a shocking deference to the will of the pharmaceutical industry."

"The White House suggests it will only advance a most-favored nation rule after allowing Big Pharma executives to propose an alternative, while moving forward with the Pharma-backed rebate rule and changes that would weaken the 340B program," the coalition's executive director, Lauren Aronson, said.

Stephen Ubl, CEO of trade group Pharmaceutical Research and Manufacturers of America, issued a statement Friday that addressed the most-favored nation proposal.

"This administration has decided to pursue a radical and dangerous policy to set prices based on rates paid in countries that [Trump] has labeled as socialist," Ubl said.

Before taking office, Trump famously accused Big Pharma of "getting away with murder" on drug prices, and he has notched a handful of wins for consumers. They include a record pace of generic-drug approvals and a ban on "gag clauses" that prevented pharmacists from telling patients when they could save money by not using insurance.

But the president has also backed off a campaign commitment to let Medicare "negotiate like crazy" for better prices. House Democrats passed legislation last year to authorize negotiations, but the White House came out against the bill and it hasn't progressed.

Undaunted, Trump on Friday complained that "under our ridiculous system, we're not even allowed to negotiate the price of prescription drugs."

A fourth executive order on Friday calls on regulators to finalize a rule allowing drug imports from Canada, allow individual waivers for drug imports and authorize the reimportation of insulin manufactured domestically if required for emergency care.

--Editing by Jill Coffey.

For a reprint of this article, please contact reprints@law360.com.

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