By Pension and Benefits Editorial Staff
Eliminating rebate checks to negotiators in drug sales and increasing the importation of drugs from other countries will lower drug prices, according to President Trump’s "Executive Order on Increasing Drug Importation to Lower Prices for American Patients" and "Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen," signed on July 24, 2020. On the same day, President Trump also signed another executive order, "Executive Order on Access to Affordable Life-saving Medications," that aims to lower the prices and increase access to insulin and injectable epinephrine. The executive orders require HHS to take certain actions including requiring federally qualified health centers (FQHCs) who purchase insulins and epinephrine in the federal Medicaid 340B program to pass the savings from discounted drug prices directly on to medically underserved patients.
Drug price discounts. According to the Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen, health plan sponsors and pharmacy benefit managers (PBMs) negotiate significant discounts off of the list prices of drugs, sometimes up to 50 percent of the cost of the drug, for insurance companies. As a result of this process, health plan sponsors and PBMs collect "rebate" checks. Federal regulations create a safe harbor for such discounts and preclude treating the rebate checks as kickbacks under the law.
The executive order asks HHS to complete the rulemaking process to: (1) exclude from safe harbor protections under the anti-kickback statute certain retrospective reductions in price that are not applied at the point-of-sale or other remuneration that drug manufacturers provide to health plan sponsors, pharmacies, or PBMs operating in the Medicare Part D program; and (2) to establish new safe harbors that would permit health plan sponsors, pharmacies, and PBMs to apply discounts at the patient’s point-of-sale in order to lower the patient’s out-of-pocket costs, and that would permit the use of certain PBM service fees.
Importation of drugs. The Executive Order on Increasing Drug Importation to Lower Prices for American Patients states that Americans spend more per capita on pharmaceutical drugs than residents of any other developed country, and that Americans often pay more for the exact same drugs, even when they are produced and shipped from the exact same facilities. Increasing the trade of prescription drugs between nations with lower prices and those with higher ones will minimize international price disparities, according to the order.
To accomplish this, the executive order asks HHS to take action to expand safe access to lower-cost imported prescription drugs by: (1) facilitating grants to individuals of waivers of the prohibition of importation of prescription drugs; (2) authorizing the re-importation of insulin products upon a finding by the Secretary that it is required for emergency medical care; and (3) completing the rulemaking process regarding the proposed rule to implement section 804(b) through (h) of the FDCA, 21 U.S.C. 384(b) through (h), to allow importation of certain prescription drugs from Canada.
Insulin and injectable epinephrine. Under the Executive Order on Access to Affordable Life-saving Medications, HHS must take action to ensure future grants available under section 330(e) of the Public Health Service Act are allowed only when FQHCs have established practices to make insulin and injectable epinephrine available at the discounted price paid by the FQHC grantee or sub-grantee under the 340B Prescription Drug Program to individuals with low incomes who: (1) have a high cost sharing requirement for either insulin or injectable epinephrine; (2) have a high unmet deductible; or (3) have no health insurance.
The executive order states that due to the large increases in list prices for many insulins and some types of injectable epinephrine in recent years, many of these products can be subject to the "penny pricing" policy when distributed to FQHCs. That means that FQHCs may purchase the drug at a price of one penny per unit of measure. The discounts, however, are not always passed through to low-income Americans at the point of sale.
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