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ASHP Issue Brief: “Most Favored Nations” Drug Pricing Executive Order

Executive Order

September 13, 2020

Background

On Sunday, Sept. 13, President Trump signed a new drug pricing executive order (EO), which is designed to tie Medicare payments for Part B and Part D drugs to the lowest price offered by other countries (e.g., the “Most Favored Nation” (MFN) price). This new EO appears to be a follow on to the drug pricing EOs released last month — the previous MFN EO focused solely on drugs purchased in Medicare Part B, while the new EO extends the policy to Part D drugs.

What Does It Mean?

Pursuant to the new EO, the Department of Health and Human Services (HHS) will test new models for paying for both Part B and Part D drugs at the rates paid by other developed nations. The EO defines “developed nation” to mean “a member country of the Organization for Economic Cooperation and Development (OECD) that has a comparable per-capita gross domestic product” to the U.S. The price paid by the U.S. for the drug will be “the lowest price, after adjusting for volume and differences in national gross domestic product” paid by the chosen country. For Part D drugs, HHS will implement the MFN model for those drugs “where insufficient competition exists and seniors are faced with prices above those in OECD member countries.” Nothing in the order suggests that the U.S. will begin purchasing Medicare drugs directly from manufacturers as many other developed countries do.

The EO itself does not make changes to U.S. drug policy. Instead, it directs HHS Secretary Alex Azar to begin rulemaking to implement the policy. For Part B drugs, this will likely require a rulemaking because the U.S. does not purchase drugs directly from manufacturers for Medicare and Medicaid. To speed up the process, it is possible that HHS will again try to implement the International Index Pricing (IPI) rule that was proposed in 2018 and subsequently dropped in the face of stakeholder opposition. The IPI rule, which ASHP opposed, keyed Medicare Part B prices to prices in other developed countries and created a system of vendors to do all purchasing, effectively removing the drug purchasing functions from hospitals and health systems. For Part D drugs, the EO explicitly directs HHS to begin demonstration projects using Centers for Medicare & Medicaid Innovation (CMMI) authority. Although this will also require stakeholder engagement, it is generally a much less formal process than notice-and-comment rulemaking, which may allow HHS to implement Part D models faster.

What’s Next

ASHP will be closely monitoring HHS and Centers for Medicare & Medicaid Services (CMS) activity on the MFN EO. We anticipate that the agencies will begin to take steps toward implementation prior to the election, although pharmaceutical manufacturers are poised to sue HHS, which may significantly impede implementation. ASHP will keep members updated as new information becomes available. Any questions or concerns about the EO should be directed to Jillanne Schulte Wall, ASHP senior director of Health & Regulatory Policy, at jschulte@ashp.org

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