A Few Quick Thoughts on President Trump’s New Executive Order
On Sunday, September 13, President Trump reissued one of the Executive Orders (EO) on prescription drug pricing originally released in July. In short, the EO directs the Centers for Medicare and Medicaid Services (CMS) to finalize regulations that would establish an international reference pricing scheme for prescription drugs covered under Medicare’s outpatient medical benefit (Part B) and pharmacy benefit (Part D). A few quick thoughts:
The EO does not change any payment policy at this time. There will be no immediate changes to Medicare policy in the short-term. The Administration needs to complete the lengthy rule-making process before implementing any changes. That being said, the Administration does have an open proposed rule on international reference pricing currently under review with the Office of Management and Budget, where it has been patiently waiting since June 20, 2019.
By law, any proposal must be implemented as a model. The Social Security Act is quite clear that Medicare payment for drugs covered under Part B is (generally) 106% of average sales price (ASP). Likewise, the Social Security Act is quite clear that the government cannot interfere in price negotiations between Part D plan sponsors and manufacturers. However, CMS does have authority to implement alternative payment structures though a model run through the Center for Medicare and Medicaid Innovation (CMMI). The EO also specifies that the model should examine whether actual Medicare costs would decrease under reference pricing and whether there would be any negative impacts on patient access. [Side note: the authority to run this model would no longer exist if the Affordable Care Act was repealed wholesale, but that is a blog post for another day.]
It is not clear which drugs would be included in the model. The EO specifies that the model would include “certain high-cost prescription drugs” which implies that there would be some sort of cost threshold involved. But where would the threshold lie? And could the model go further and only include drugs in a certain therapeutic class, or drugs that are used to treat a certain condition?
In October 2018, the Administration released a preliminary outline of a proposal for public comment, so we have a bit of an idea of where CMS may be headed. But that proposal only applied to Part B drugs and did not include drugs covered under Part D. Even if CMS can issue a proposal, with a 60-day public comment period, it would be difficult to turn around and issue a final rule before the completion of President Trump’s first term. Certainly, any implementation would have to wait until the President’s second term, and it is likely that there will be some leadership changes at CMS and the Department of Health and Human Services regardless of the outcome of the November elections. All those changes also have the potential to impact any policy change that would be as high-profile as this. And do not forget that Congress could also intervene and pass legislation on the issue as well.
Stay tuned!
