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Trump signs executive order on drug pricing, prompting pushback from stakeholders

The "most favored nation" approach would break from GOP free-market orthodoxy by tying Medicare payment to what other nations pay.

Jeff Lagasse, Associate Editor

Photo by Drew Angerer/Getty Images

Pursuing a "most favored nation" approach, President Donald Trump signed an executive order on Sunday aimed at lowering drug prices, which calls for Medicare to pay the same price for certain prescription drugs that other countries pay.

It effectively repeals a previous executive order that was nearly identical in concept, but that Trump held back on to see if he could negotiate a better deal with drug companies. The new executive order expands the list of drugs covered to include both Medicare Parts B and D, the idea being that Medicare would not pay more for drugs than the lower prices paid by other countries.


The order calls on Health and Human Services Secretary Alex Azar to "immediately take appropriate steps to implement his rulemaking plan to test a payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, no more than the most-favored-nation price."

According to the order, the model would test whether the most-favored-nation price policy would mitigate the poor clinical outcomes and increased expenditures associated with high drug costs. Citing the scarce financial resources of vulnerable Americans, and price-related medication avoidance, the administration said it hopes to avoid acute conditions and poor outcomes "that require drastic and expensive medical interventions."

"The need for affordable Medicare Part B drugs is particularly acute now, in the midst of the COVID-19 pandemic, which has led to historic levels of unemployment in the United States, including the loss of 1.2 million jobs among Americans age 65 or older between March and April of 2020," the order reads. "The COVID-19 pandemic has also led to an increase in food prices, straining budgets for many of America's seniors, particularly those who live on fixed incomes. The economic disruptions caused by the COVID-19 pandemic only increase the burdens placed on America's seniors and other Medicare Part B beneficiaries."

The "most favored nation price" means the lowest price, after adjusting for volume and differences in national GDP, for a pharmaceutical product that a manufacturer sells in a member country of the Organization for Economic Cooperation and Development that has a comparable per-capita GDP.


As expected, the move has resulted in pushback from the pharmaceutical industry.

PhRMA president and CEO Stephen J. Ubl, in a statement issued Sunday, said that the proposed action is not a market-based solution.

"The focus of any reforms must be on lowering costs for patients, ensuring patients' access to medicines, addressing the misaligned incentives in the pharmaceutical supply chain and protecting the critical work being done to end COVID-19," said Ubl. "Unfortunately, instead of pursuing these reforms the White House has doubled down on a reckless attack on the very companies working around the clock to beat COVID-19. 

"The Administration has chosen to pursue the most favored nation policy – an irresponsible and unworkable policy that will give foreign governments a say in how America provides access to treatments and cures for seniors and people struggling with devastating diseases," he said. "What's worse is that they are now expanding the policy to include medicines in both Medicare Part B and Part D, an overreach that further threatens America's innovation leadership and puts access to medicines for tens of millions of seniors at risk."

Ubl advocated for using existing trade enforcement tools to protect American innovation.

The executive order also drew reaction Monday from Ways and Means Committee Chairman Richard E. Neal, D-Mass.

"Republicans and President Trump have made their priorities clear – when given the chance, they handed big pharmaceutical companies billions of dollars in tax cuts instead of helping Americans afford their medications," said Neal. "This empty executive order is just another smoke and mirrors charade from the White House, not a real solution to make medicines affordable. If the President seriously wanted to lower drug prices and ensure Americans do not pay more for prescriptions than people in other countries, he would support H.R. 3, legislation the House passed last year that would achieve those very goals."


The Administration has tried a number of different tactics to lower drug prices. By the end of July, Trump had signed four executive orders with that goal, including one that reinstates a previously withdrawn rebate rule – which received pushback from some stakeholders.

The order mandated that pharmacy benefit managers no longer give health plans a portion of the drug savings but give the rebates as discounts to consumers. The administration said the rule would save seniors an estimated $30 billion per year, but insurers and others said it would only increase prices for consumers. Insurers have said they use rebates to decrease premiums for all consumers.

Another executive order would allow the importation of drugs from Canada, while one would reduce the price of insulin.

Twitter: @JELagasse
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