White House Issues Executive Orders Taking Aim at Drug Prices

In a press conference held on Friday, July 24 President Trump announced and signed four Executive Orders aimed at lowering prescription drug prices in the United States.

An Executive Order is an operational directive signed by the President to guide the Executive branch of the federal government. It does not need to be voted upon by Congress, but Congress may create a law that nullifies an Executive Order.

Notably, Executive Orders involving regulatory change do not go into effect immediately. The signing of these bills means that his administration now needs to go through the regulatory process of reforming the current system to implement these orders. That is unlikely to happen before November’s election, and if any of the policies are enacted during this term, they would likely face court challenges as well.

What are the new orders that were signed and what do they do for drug pricing?

Executive Order #1 – “Allow Importation” – State, wholesalers and pharmacies will be permitted to safely and legally import prescription drugs from Canada and other countries where the price is lower.

Americans pay among the highest prices for prescription drugs in the world. People with diabetes in the United States sometimes resort to crossing the border into Canada (or elsewhere) to obtain insulin, something the president made specific reference to in his reasoning for this order. If it were possible to import insulin and pay foreign prices, this could be a significant cost-saving measure for many.

Of special note, this Executive Order requires, under Section 2(b), the Secretary of Health and Human Services to deem that the re-importation of insulin is required for “emergency medical care” and does not pose a public safety risk.

Executive Order #2 – “More Affordable Insulin/ Epipens” – This order will require Federally Qualified Health Centers (FQHCs) to pass discounts they receive on insulin and Epipens to their patients.

FQHCs currently receive heavily discounted prices on certain drugs from manufacturers under the 340B Drug Pricing Program, which provides primary care health services in underserved areas as defined in Section 1905(l)(2)(B) of the Social Security Act. Were this Executive Order to become finalized and go into effect, people who receive care through these centers could see significant reductions in the cost of their insulin, though still likely more than Trump’s claim of “pennies a day.”

Executive Order #3 – “Rebate Rule”– This order takes aim at what Trump referred to as the “middlemen and middlewomen” of drug pricing in the United States—the Pharmacy Benefit Managers (PBMs). This Order states that rebates previously received by the PBMs will be passed on to the patient.

The complex system of insulin pricing in the U.S. has many players, including PBMs who are often referred to as middlemen, negotiating drug prices between payers and manufacturers. Targeting the system of rebates paid to PBMs has long been at the center of Trump’s drug-pricing reform policy, formally announcing plans in early 2019 to take on the issue. In July of that same year however, the administration dropped those plans due to the potential of increases in Medicare Part D premiums, as rebates offer heavy subsidies to the plans. Many thought that would be the end of it, making today’s third executive order surprising. While the EO states that discounts should be passed to the patients, it will require significant restructuring of the Medicare Part D system.

Executive Order #4 – “Most Favored Nation (MFN)” – This order would require Medicare to purchase drugs from manufacturers at the same price that other countries pay, using the International Price Index (IPI) Model. This would only affect those under federal insurance plans, not the majority of Americans living with diabetes on commercial insurance plans.

The announcement of this order also came with a one-month ultimatum of sorts for drug manufacturers. Trump said that implementation will be held until August 24th at 12:00 pm EDT to give manufacturers time to offer alternative solutions. The president also announced that drug manufacturers will be in the White House on Tuesday July 28 to further discuss the issue. This ticking clock is likely the reason that the 4th EO has not been posted to whitehouse.gov.

What does this mean for people with diabetes?

If any of these Executive Orders are enacted, each would have a specific impact on the cost of insulin for a segment of people in the United States.

Unfortunately, each executive order also comes with its own unique set of hurdles. Importing drugs from foreign countries requires U.S. Food and Drug Administration’s (FDA) approval, and cooperation from the countries of export as well. A statement from the Canadian Government on Trump’s announcement is expected soon, however in December of 2019, Health Canada spokesperson Alexander Cohen said: “Our government will protect our supply of and access to medication that Canadians rely on.” Last summer the governor of Florida, Ron DeSantis signed a bill into law that sought to allow the state to import drugs at lower costs from Canada. One year later, and the law has yet to be approved by the FDA. DeSantis spoke at the press conference today, praising the president’s Executive Orders.

Indeed, many of the proposals signed into Executive Orders have existed in some form prior, and have been held up for various reasons for years. According to STAT news, “The Trump administration’s importation plan was originally released in July 2019, while the international pricing plan was initially proposed in October 2018. The administration originally promised the program would be up and running by the spring of 2020.”

The pressure to reform drug pricing in the United States, including insulin, remains high. Campaign promises of the 2016 election to control healthcare costs including drug pricing are far from fulfilled. Whether these Executive Orders will be followed up with changes necessary to bring down drug costs remains to be seen.