Keenan Briefings

Briefings

Trump Releases Revised Executive Order Aimed at Lowering Prescription Drug Prices

September 21, 2020

On September 13, 2020, President Trump released a revised version of the fourth of four executive orders he signed earlier this year, intended to lower the price of prescription drugs. The first three executive orders were summarized in our July 28, 2020 Briefing, “President Trump Signs Four Executive Orders Aimed at Lowering Prescription Drug Prices,” which can be found at: https://www.keenan.com/Resources/Briefings/Briefings-Detail/president-trump-signs-four-executive-orders-aimed-at-lowering-prescription-drug-prices

The revised executive order establishes a “most-favored-nation price” (MFNP) for prescription drug or biological products paid for through Medicare Part B and Part D, defined as the lowest price, after adjusting for volume and differences in national gross domestic product (GDP), for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Co-operation and Development (OECD) that has a comparable GDP.

The order directs the Secretary of Health and Human Services (HHS) to:

  • implement a rulemaking plan to test a payment model pursuant to which Medicare would pay no more than the MFNP for certain high-cost prescription drugs and biological products covered by Medicare Part B; and
  • develop and implement a rulemaking plan for testing a payment model pursuant to which Medicare would pay no more than the MFNP, to the extent feasible, for Part D prescription drugs or biological products where insufficient competition exists and seniors are faced with prices above those in OECD member countries that have a comparable per-capita GDP to the United States.

It is important to note that this executive order does not make any immediate changes that will impact drug prices. It is unclear how quickly HHS will move on rulemaking that has been in process since October of 2018.Once the required rulemaking is finalized, it is likely that pharmaceutical manufacturers will sue to prevent the new rules from being enacted. Even if enacted, this executive order requires only testing of new payment models—which would involve a limited number of Medicare payments and could only last 5 years.

The inclusion of Medicare Part D in this executive order certainly raises the stakes for drug makers. A recent analysis completed by the Kaiser Family Foundation (KFF) noted that a MFNP approach limited to setting prices for prescription drugs covered by Medicare Part B only would only lower prices for about 4 million Medicare beneficiaries, or about 7% of the total drug spending in the United States.Medicare D has 45 million beneficiaries, making this a much more far-reaching policy initiative. However, even the inclusion of Medicare D leaves out the 157 million people with employer-based coverage. It remains to be seen what impact this executive order would have on that marketplace.


Keenan & Associates is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Clients are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the clients’ business activities.