Our Take: Trump renews efforts to lower drug prices ahead of election
Jul 27, 2020
On Friday afternoon, President Trump issued four executive orders that he said would lead to “massive” reductions in prescription drug prices. The orders, which are subject to regulatory review before they can become policy, would:
- Require federally qualified health centers to pass along to patients the savings they receive on insulin and epinephrine purchased through the 340B program (Hospitals were not mentioned.)
- Allow states, wholesalers, and pharmacies to import lower-priced, FDA-approved drugs from Canada and other countries — as long as the imported drugs do not pose “additional risk to public safety”
- Give drug rebates directly to Medicare and Medicaid beneficiaries, bypassing pharmacy benefit managers and commercial insurers
- Lower Medicare payments for certain Part B drugs so the prices would be similar to what other countries pay (i.e., tie the Medicare prices to an international pricing index)
The fourth order is not set to take effect until Aug. 24. The reason, Trump said, is to give manufacturers time to propose alternative methods for lowering costs. Meanwhile, he is planning to meet with executives from drug companies on Tuesday.
Our Take: “This is going to end up being political noise.” That’s what Alexander Karnal, a partner at investment firm Deerfield Management Co., told Bloomberg.
For one thing, many of the policy changes outlined in these executive orders were proposed two years ago; some were included in the Department of Health and Human Services (HHS)’s Blueprint to Lower Drug Prices. As an example, when the Trump administration sought to implement an international pricing index back in 2018, not only did the pharmaceutical industry push back, but certain conservatives went so far as to argue that such a system would be a form of price fixing. If the proposals weren’t successful then, why should we think they will be now?
Moreover, there’s a good chance that some of the language used in the executive orders could prevent them from becoming policy. For instance, the order regarding the Part D rebates states that before any changes are made, HHS has to make sure that beneficiaries’ premiums wouldn’t increase as a result of the changes. But the federal government’s own actuaries have estimated that premiums would increase by as much as 25%.
And let’s just say that the timing of these executive orders is … interesting, for several reasons:
First, with the election just over three months away and the polls showing Trump losing ground to former Vice President Joe Biden, it’s possible that this is an orchestrated move to increase Trump’s re-election odds. After all, the vast majority of voters, be they Republican, Democrat, Independent, Libertarian, or some other affiliation, are likely to agree that there’s a need to address high drug prices. While it would be virtually impossible to push these executive orders through the process required to become policy, if Trump can even give the appearance of finally fulfilling his campaign promise to tackle high drug prices, then that might be enough to sway some disenchanted voters back in his direction. If nothing else, it would solidify the support he currently has. Further, the polls suggest that Trump’s standing among older voters has taken a hit during the pandemic, with COVID-19 disproportionately affecting seniors. He could be hoping to win points with that demographic by issuing the executive orders.
(Incidentally, we would like to remind readers that the House passed a bill, HR 3, in December 2019 that would allow CMS to negotiate lower prescription drug prices for Medicare beneficiaries. Other legislation to address prescription drug pricing has been proposed as well, such as the Prescription Drug Price Relief Act, which Sen. Bernie Sanders, I-Vt., introduced in January 2019. That legislation called for drug manufacturers to lower their costs to a level similar to what some other countries pay — similar to one of the executive orders issued on Friday. But with both sides of the aisle wanting to receive credit for pulling off the feat of lowering drug costs, the proposals quickly became mired in the political muck that has stymied much of what could have been accomplished in a less partisan environment.)
Second, at a time when the federal government is signing billion-dollar contracts with drugmakers — not only to come up with a viable vaccine for COVID-19 at “Warp Speed,” but also to supply the U.S. with large quantities of said vaccine — and with Trump surely hoping that an effective vaccine will become available before the election rolls around, he could find himself walking a fine line between praising Pharma for its work on potential vaccines and painting the industry as a villain for charging consumers such high prices for the medications they need.
Third, as we’ve reported previously, Trump isn’t backing down on his efforts to do away with the Affordable Care Act. A month ago, he made it clear that he wants the Supreme Court to strike down the law in its entirety, despite suggestions from some of his advisers and allies that leaving many more millions of Americans without insurance in the midst of a public health emergency might not have the best optics. Even though SCOTUS won’t rule on the ACA until after the election, it behooves Trump to shift the public’s attention. Making it seem that he’s taking steps to lower drug prices is a good way to do that — even if it does end up being political noise.
What else you need to know
Pfizer and BioNTech secured an order worth $1.95 billion for 100 million doses of their mRNA-based COVID-19 vaccine from the U.S. government, the companies announced Wednesday. They signed an agreement with the Department of Health and Human Services (HHS) and the Department of Defense to begin delivering 300 million doses of a COVID-19 vaccine in 2021, if one is approved, and the federal government could acquire as many as 600 million doses. “Americans will receive the vaccine for free consistent with U.S. government’s commitment for free access for COVID-19 vaccines,” the companies stated in their joint news release. Earlier in the week, Pfizer and BioNTech signed an agreement with the U.K. government for 30 million doses of the vaccine, to be supplied over the next two years. No price was mentioned for that deal.
Walmart will bring its health super centers to Florida next year, starting with Jacksonville, according to a post on the retailer’s website. Florida has the second-highest number of Walmart stores in the U.S., after Texas. Since September, four of the large, low-cost centers known as Walmart Health have opened in Georgia and Arkansas, with more slated to open in Georgia later this year, Healthcare Dive reported. Walmart Health super centers have an on-site lab and offer primary and urgent care, dental, optical, and hearing services, and therapy and behavioral health services “at low, transparent pricing … regardless of insurance.” The ubiquitous retailer also has 19 smaller in-store Care Clinics that offer a narrower range of services.
Universal Health Services (UHS) and Bayada Home Health Care signed a definitive agreement under which they will create a joint venture to expand UHS’ home health care offerings, including services to help patients recover from illnesses, injuries, and recent hospitalizations. UHS has its headquarters in King of Prussia, Pa., and operates 26 acute care hospitals, 328 behavioral health clinics, and multiple other facilities and services in the U.S. and the U.K. Bayada, which has offices in 23 states and in numerous international locations, is based in the Philadelphia area. Financial terms of the agreement were not disclosed.
HHS began distributing $10 billion in additional CARES Act funding to hospitals in “hot spots” last week. According to a news release, HHS said this second round of payments would be made to more than 1,000 hospitals across the country. (The first round of funding, totaling $12 billion, was distributed to 395 hospitals.) Fierce Healthcare reported that hospitals in Illinois, New York, and Pennsylvania would receive the largest amounts, at $740 million, $683.6 million, and $654.6 million, respectively. HHS used data that hospitals submitted regarding their COVID-19 inpatient admissions from Jan. 1 through June 10 to determine eligibility and allotments for the most recent tranche of funding.
A bipartisan bill was introduced in the House Thursday that would make permanent some of the changes CMS has implemented to expand access to telehealth for Medicare beneficiaries during the pandemic. Specifically, among other things, the proposed legislation would eliminate many of the restrictions on the use of telehealth in terms of geographic location and site of origin — e.g., permitting rural and federally qualified health clinics to provide telehealth services. The bill does not address changes to telehealth that have been made in Medicaid programs or by commercial payers.
HHS Secretary Alex Azar renewed the public health emergency declaration for the coronavirus pandemic on Thursday. Like the renewal in April, this one is anticipated to last for 90 days. The move ensures that regulatory changes made to help providers deliver care during the pandemic, such as CMS’ easing of restrictions on telehealth, will continue for at least the duration of the extension.
What we’re reading
Covid-19 — Implications for the health care system. NEJM, 7.22.20
Critical considerations for condition-based alternative payment models: A multi-stakeholder perspective. Health Affairs, 7.17.20
Serosurveillance and the COVID-19 Epidemic in the US: Undetected, uncertain, and out of control. JAMA, 7.21.20