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Executive Orders on Drug Prices

Last Friday President Trump signed four executive orders aimed at lowering drug prices. These executive orders are not small tweaks, they are big changes, changes that could have a long-term effect on both the safety and future innovation of your prescription drugs.

Many have already questioned both the timing and rhetoric surrounding the signing of these four executive orders. I will let others delve into those issues. I will go over the executive orders with an emphasis on their likely impact on you.

These changes were not a sudden brainstorm of the White House, they have proposed some form of three of the four approaches to lowering drug prices for over two years. It is worth noting that the President altered some of the earlier approaches in these latest executive orders. If you’d like some background information on who the players are in our healthcare system you can click here to access one of my earlier blogs.

Now, let’s dive into these four executive orders –

Importation – This proposal would give states, pharmacies, and drug wholesalers the right to import drugs from Canada. The administration thinks this would offer lower prices to the states, pharmacies, and drug wholesalers. Our own Congressional Budget Office (the bi-partisan government agency that calculates the economic impact of proposed government legislation, regulations, and executive orders) found, when this approach was first proposed, that there were no savings resulting from this type of importation. Furthermore, the Canadian government said that they would not and could not support this type of importation and would not guarantee the validity of the drugs obtained this way. It is also unsettling to know that this approach would bypass the United States’ established and proven safe supply lines. We know how many scammers have sprung up during the coronavirus pandemic, can you imagine what would happen if these same criminals could infiltrate our prescription drug supply lines through this type of importation? It seems that this approach threatens our safety without offering any savings. This doesn’t sound like a good idea to me.

Rebates – This executive order would resurrect an approach that would move rebates paid by drug companies closer to the patient. While there are perverse incentives in our drug supply line that have produced higher list prices without necessarily lowering the cost to patients, this may not be the best way to solve this problem. The drug supply line is complicated, and this approach would be extremely difficult to implement and there is no guarantee that any of the savings would reach you, the patient. President Trump introduced this approach last year and then rescinded it. It is interesting that it suddenly has reappeared.

International Pricing Index – This is another approach that has been around for years and this latest approach, called “the most favored nation” in the executive order, is even worse than the original proposal. It fixes the price of a drug at the lowest price of one or more of the “favored” nations. This is price fixing at its worst. We are setting a price based on countries with single payer systems, where the government dictates who gets what medicine. The patients in these countries wait years for new medicines. Of the 74 cancer drugs launched between 2011-2018, 95% are available in the United States, compared with 74% in the UK, 49% in Japan, and 8% in Greece. While it is wrong for these countries not to help pay for the research and development of drugs, there are other ways to approach this problem rather than disrupting an industry that has year over year produced lifesaving and life altering drugs and is right now in an all-out effort to find medicines and vaccines to treat the COVID-19 virus. Fixing prices is short sighted and has never worked as a viable economic solution. The industry disruption and the projected reduction in innovation will affect us all. This lack of new drugs might have a direct effect on you or your loved ones. The one thing we shouldn’t limit is our hope for future cures.

Insulin Discounts – This program requires drug manufacturers to give huge discounts to hospitals and community centers who serve the poor. Insulin prices have skyrocketed and has jeopardized the access to this life saving drug. One proposed solution is the Part D Senior Savings Model (see my recent blog here). A program to limit the cost of insulin to the poor and indigent could be added and tested in this model rather than relying on the 340b program to administer this approach. The 340b program, is a government entity that grants huge discounts for providers who serve the poor and indigent. There are solutions to providing diabetics with affordable insulin. An executive order dictating this implementation may not be the best solution, especially at this time.

As you can see, these proposed solutions are not what we need to improve our healthcare. There are workable solutions that could be developed in the arena of bi-partisan cooperation, one of the few areas where this might be the case. An approach that includes more than just the executive branch of our government might produce the workable solutions we are looking for. We need to tell those that represent us in Washington that the four executive orders are not the solutions we need to improve our healthcare.