February 26, 2021

Volume XI, Number 57

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A Shot Across the Bow of the Pharmaceutical Industry: President Trump Issues a Quartet of Executive Orders on Drug Pricing that Might Eventually (OR NEVER?) Take Effect

On Friday, President Trump announced four executive orders directed at decreasing prescription drug prices by ordering certain actions by the Department of Health and Human Services (“HHS”).  One order – which has received the most negative reaction from the pharmaceutical industry – would create a “most-favored nation” policy to limit the price Medicare Part B pays for certain drugs to the lowest price paid in another Organization for Economic Cooperation and Development country.  The White House did not release the text of this order on Friday and stated that it would not take effect until August 24, or at all if pharmaceutical companies can offer an alternative proposal to substantially reduce drug prices or if Congress acts.

Another of the executive orders would require HHS to exclude from federal Anti-Kickback Statute (“AKS”) safe harbor protection rebates provided by drug manufacturers to pharmacy benefit managers (“PBMs”), health plans, and pharmacies but not passed on to patients.  Instead, HHS would be required to create new safe harbors to allow plans, pharmacies, and PBMs to apply discounts to reduce patients’ out-of-pocket costs, as well as allow for bona fide PBM service fees.  However, the order provides that before taking these actions, HHS must confirm that they would not increase Federal spending, Medicare beneficiary premiums, or patient out-of-pocket costs.  Further, the regulatory revisions demanded by the order could be subject to legal challenge, both as an illegitimate attempt to narrow the AKS’s statutory discount exception and a violation of Medicare Part D’s non-interference clause.

A third executive order would require Federally Qualified Health Centers (“FQHCs”) to pass on discounts on insulin and injectable epinephrine received through the 340B Prescription Drug Program to certain patients.  FQHCs may currently obtain drugs at 340B discounted prices, then sell the drugs to patients at a higher price, subsidizing their often very low margin operations.  The executive order requires HHS – “to the extent permitted by law” – to take action to make continued 340B participation contingent on providing these drugs at the price paid by the FQHC to low income patients who (1) have a high cost sharing requirement for either insulin or injectable epinephrine, (2) have a high unmet deductible, or (3) have no insurance.  The order does not apply to hospitals participating in the 340B program.

Finally, a fourth executive order directs HHS – “as appropriate and consistent with applicable law” – to finalize a rule allowing for importation of certain prescription drugs from Canada and to facilitate waivers of the prohibition on importation of prescription drugs generally, as well as to authorize the re-importation of insulin products as necessary for emergency medical care.

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Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 209
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About this Author

Associate

Ms. Kraus focuses her practice on representing healthcare entities in regulatory compliance matters.  Ms. Kraus advises clients on compliance with federal and state fraud and abuse laws, assists clients in responding to government investigations, and represents clients in False Claims Act litigation.  Ms. Kraus also assists clients with regulatory due diligence in transactional matters, and through advocacy with federal and state regulators, and leverages her background in health policy to help clients maximize opportunities in the changing healthcare landscape...

202-747-2645
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