Executive Orders Aimed at Drug Costs Miss the Mark

Trying to regain momentum in the election polls, President Trump released four executive orders that he claims will “completely restructure” the prescription drug market. However, most analysts agree that there is not much new and nothing revolutionary in these orders. The most potentially impactful of these orders is a rehash from a prior Presidential Blueprint in May 2018.

1. One order requires middlemen to pass along all discounts received to Medicare patients. Good idea, except for the provision that requires the Secretary of the Department of Health and Human Services (HHS) to confirm the order will not increase costs. This confirmation is improbable at best and as a result, this one is likely DOA. In its prior iteration, critics predicted the change would likely increase costs significantly for Medicare recipients.
2. Another order requires that prices for drugs administered to patients by a Medicare Part B provider be based on an index of the price charged in a basket of reference countries overseas. But this one has a delay until August 24, 2020, to see if the pharmaceutical industry comes up with something better. The concept has been proposed before and didn’t move because of strong objection by the pharmaceutical lobby.
3. Importation from Canada is permitted in yet another order; however, the Canadian market is so small it could not likely support any meaningful volume from the U.S. The Trump administration estimates savings from the international pricing provisions, if enacted, at 2.5% or $17 billion. At their best, they are a drop in the bucket.
4. The president also included an order to require federally-qualified health providers under 340B programs to pass discounts they receive on insulin and EpiPens directly to their patients. This might provide some small pricing relief to a narrow population.

These orders are aimed at drug manufacturers at the very moment in history that we are looking to encourage innovation to shorten the COVID-19 vaccine development timeframe – and save the economy.

Not only are these executive orders tried and failed but they are also ill-timed. Not sure what his advisors are thinking, but if this effort shows up in the polls, it will likely go the wrong way for the president.

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