What Plan Sponsors Need To Know
- On July 24th, President Trump signed four executive orders aimed at lowering drug prices in the US. The orders focus on the pass-through of rebates for Medicare Part D; deployment of 340B pricing by Federally Qualified Health Centers (FQHCs) for insulin and epinephrine; drug importation; and an “international price index” for Medicare Part B drugs. The last of these was not released by the White House.
- Commercial plans are unlikely to experience any major impact as a result of the orders. Excluding drug importation, these orders are focused on Medicare, Medicaid and the uninsured.
- Currently, there are limited details surrounding the implementation of these measures from a logistics and timeline perspective. It is unlikely they will be implemented prior to the November election.
On July 24th, President Trump signed executive orders aimed at lowering drug prices in the US. The three that have been released to the public focus on the pass-through of manufacturer discounts for Medicare Part D, deployment of 340B pricing by FQHCs on insulin and epinephrine, and drug importation. The fourth introduces plans to begin establishing an “International Price Index” for Medicare Part B drugs, tentatively in August 2020.
At Confidio, we applaud any effort to lower drug costs for consumers and plan sponsors. However, many of the tactics outlined within the most recent executive orders do not align with feasibly taking action to reduce healthcare costs. Initial review reveals that these orders provide minimal details on how implementation will occur or any proposed timeline. The vague nature of the new rules means they are unlikely to be implemented before the upcoming election.
The proposed actions do not apply to commercial plans except for drug importation; the President’s orders focus on Medicare, Medicaid, and the uninsured. It is worth noting that policies implemented within government-sponsored health plans can trickle into commercial plans; however, with no real plan or timeline for implementing these tactics, that scenario is not an immediate consideration.
This is the second time the Trump administration has proposed reform of rebates, now revisiting their ruling from 2019. The predicted increases in premium costs and government expenses were the primary motives in reversing the previous ruling. Due to the limited details in the executive orders signed last week, it is unclear how the rebate reform order differs from the 2019 ruling.
Criticism has long surrounded the handling of savings and administration of 340B programs. While some of this criticism is valid, these programs do have the ability to offer a significant reduction in drug costs but will only apply to people that receive care from a FQHC.
The order related to drug importation differs somewhat from the proposed rule released in December 2019 (as follow up to the Safe Importation Action Plan released in July of 2019). The previous proposal sets forth 2 pathways for drug importation: One involves importation of Canadian drugs by wholesalers and manufacturers; the other involves importation by manufacturers of their own products that are produced abroad. While the executive order from July 2020 restates the plan to allow states to develop and implement importation plans with a final ruling scheduled for December of 2020 it also promotes re-importation of insulin and waivers for individuals of the prohibition on importation.
These executive orders have put the industry in a wait and see mode as the proposed solutions provide no significant detail or timeline of implementation. Without these details, it is difficult to determine the true impact on drug prices. We will continue to monitor these executive orders and provide more detail on how impactful these measures will be on reducing healthcare costs when more information becomes available.
The executive order directs HHS to deliver the following actions:
- Pass-through of discounts for Medicare Part D Plans – ensure manufacturer discounts are directly distributed to seniors in Medicare Part D plans. HHS reports these discounts exceeded $30 billion and a discount of 26-30% in 2018 for these plans.
- Deployment of 340B pricing on insulin and epinephrine – require all Federally Qualified Health Centers to provide insulin and epinephrine at 340B pricing plus a nominal fee to uninsured, low-income individuals and those with high cost-sharing for these products.
- Drug Importation – establish a rule that provides waivers for individuals to purchase imported drugs at a reduced cost through US approved pharmacies. Additionally, the importation order allows US manufactured insulin products to be reimported for emergency medical care, as deemed necessary by the Secretary of HHS.
- Medicare Part B Pricing – ensure no American senior pays more for Medicare Part B drugs (largely high-cost specialty) than the price offered in any OECD country which is deemed comparable to the US economically. This order is not yet finalized and takes effect only if Congress does not act in the next 30 days.