White House Orders Attempt to Regulate Prescription Drug Prices
Under the orders, health care regulators are to address alleged kickbacks, access to "life-saving medications," drug importation, and "most-favored-nation" proposal.
On July 24, 2020, President Trump signed four executive orders addressing hot-button issues such as importation of certain drugs, Anti-Kickback Statute safe harbors for rebates, recent battles over insulin pricing, and a "most-favored-nation" proposal.
Eliminating Alleged "Kickbacks" to "Middlemen"
The first order directs the Department of Health and Human Services ("HHS") to narrow existing regulatory safe harbor protections under the federal Anti-Kickback Statute that benefit health plan sponsors, pharmacies, and pharmacy benefit managers ("PBM") operating the Medicare Part D program. The new order purportedly aims to shift to consumers, rebates paid by pharmaceutical companies to PBMs, by eliminating current regulatory safe harbors protecting such payments. But, prior to taking action, the Secretary of HHS must publicly confirm that the change will not increase federal spending, Medicare beneficiary premiums, or patients' total out-of-pocket costs—a requirement that has prevented similar proposals from succeeding in the past.
"Access to Affordable Life-Saving Medications"
The second order requires HHS to take action to require that Federally Qualified Health Centers ("FQHC") have "established practices to make insulin and injectable epinephrine available" to low-income individuals "at the discounted price" available to the FQHC.
Increasing Drug Importation
The third order will be of particular concern to pharmaceutical companies: drug importation. It directs HHS to expand access to imported prescription drugs from Canada and other countries by: (i) facilitating individual waivers permitting importation that "poses no additional risk to public safety and results in lower costs"; (ii) authorizing re-importation of insulin products in certain circumstances; and (iii) finalizing the rule on Section 804 Importation Programs that would allow importation of certain prescription drugs shipped from Canada.
"Most-Favored-Nation" Proposal
The fourth order would implement a "most-favored-nation" policy, requiring that Medicare pay the same price for some drugs that other countries pay—a proposal that is likely also to be met with intense opposition. The President said he would give the pharmaceutical industry until August 24, 2020, to develop an alternative pricing plan before implementing this order.
These orders have implications for the pharmaceutical and biotech industries as well as other stakeholders. As companies begin planning for 2021 and beyond, they should evaluate how these orders potentially impact drug pricing, related contracts, and compliance with the Anti-Kickback Statute.
