On May 12, President Trump signed an executive order that has the intended effect of significantly lowering the cost of drugs for American patients. According to his own estimates, the resulting savings in such costs could be anywhere from 60 to 90%. The action comes just weeks after the president and his team met with multiple pharmaceutical executives. Below is a summary of the main provisions of the executive order.
Cause of Action
The order asserts that drug manufacturers have historically discounted their products to a significant degree in other nations in order to gain access to those markets. However, they subsidize this approach through the implementation of “enormously high prices in the United States.” The order goes on to say:
These entities today rely on price markups on American consumers, generous public subsidies for research and development primarily through the National Institutes of Health, and robust public financing of prescription drug consumption through Federal and State healthcare programs. Drug manufacturers, rather than seeking to equalize evident price discrimination, agree to other countries’ demands for low prices and simultaneously fight against the ability for public and private payers in the United States to negotiate the best prices for patients. The inflated prices in the United States fuel global innovation while foreign health systems get a free ride.
The order suggests that Americans will “no longer be forced to pay almost three times more for the exact same medicines, often made in the exact same factories.” The new policy, then, is to provide American patients with what the administration is calling “the most-favored-nation price” for these products.
Implementation Measures
To the extent consistent with law, the order directs the Health and Human Services (HHS) secretary (hereinafter, Secretary) to facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price. Here are some additional specifics:
- Within 30 days of the order, the Secretary shall, in coordination with the assistant to the president for domestic policy, the administrator for the Centers for Medicare and Medicaid Services (CMS) and other relevant executive department and agency officials, communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations.
- If, following the above action, significant progress towards most-favored-nation pricing for Americans is not delivered, the Secretary shall propose a rulemaking plan to impose most-favored-nation pricing or other actions specified in the order.
- The secretary of the U.S. Department of Commerce and the heads of other relevant agencies shall review and consider all necessary action regarding the export of pharmaceutical drugs or precursor material that may be fueling the global price discrimination.
- The commissioner of the U.S. Food and Drug Administration shall review and potentially modify or revoke approvals granted for drugs, “for those drugs that maybe be unsafe, ineffective or improperly marketed.”
Industry Reaction
Much of the initial response from the healthcare industry and major news outlets has been to simply report what the order broadly outlines. For example, the American Hospital Association (AHA) had a small blurb briefly describing the executive order without providing either approval or pushback. Business Insider included a positive review of the order as posted by billionaire Mark Cuban, who runs an online pharmacy. Cuban, not normally a cheerleader for the current president, commented that Trump’s action could “save hundreds of billions.” Forbes, on the other hand reported general consternation amongst U.S. drugmakers and suggested the executive order will be subject to lawsuits that could have the effect of rendering the presidential action null and void.
We look forward to seeing whether the order will pass judicial muster, and, if so, whether massive savings in drug costs will actually materialize over the next several months. Should that occur, some will see this as not only helping the individual healthcare consumer but also going a long way toward enhancing the financial stability of the Medicare and Medicaid programs. Now, wouldn’t that be a sweet bonus? Who knows? This just might work.