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Avalere Statement on Prescription Drug Pricing Executive Orders

Summary

On July 24, the administration released 3 executive orders (EO) and announced the planned publication of a fourth EO, all focused on prescription drug pricing. The EOs reflect a combination of familiar policy goals (e.g., rebate reform, importation, international pricing) and a new 340B initiative, and in combination could have substantial implications for healthcare stakeholders and pharmaceutical markets if implemented.

Specifically, the EOs include action across 4 key areas:

340B

This EO requires Federally Qualified Health Centers (FQHCs) to make insulins and injectable epinephrine available to low-income patients at the 340B price. The EO specifies that this pricing would be available to individuals with low incomes who a) have a high cost-sharing requirement for insulin or injectable epinephrine, b) have a high unmet deductible, or c) are uninsured. “High” cost sharing and unmet deductible will be defined by the Health and Human Services (HHS) Secretary. The FQHCs’ grant funding would be tied to compliance with this policy.

“While low-income and uninsured patients who need insulin may now be able to access their medicines at more affordable prices, the policy is limited,” said Chris Sloan, Associate Principal at Avalere. “To receive the lower prices, patients will need to visit a federally qualified health center, have incomes below a threshold, and prove they have high cost-sharing requirements. Many of the exact eligibility requirements are still to be determined.”

Drug Importation

The second EO allows states, wholesalers, pharmacies, and individuals to import drugs from Canada and other countries through 3 approaches:

  • Finalize the proposed rule released in December 2019 to allow states and tribal governments to import certain drugs from Canada. Biological products, infused drugs (including a peritoneal dialysis solution), intravenously injected drugs, and controlled substances will be excluded from importation. The administration indicated that Florida’s importation plan would be approved.
  • Allow individuals to import drugs as long as the importation is designated by the Food & Drug Administration (FDA) as safe and results in lower costs to patients. The administration noted that individual importation would not be restricted to certain countries or products, as long as it is designated as safe by the FDA.
  • Allow re-importation of insulin manufactured in the US from Canada

“Importation may allow some states and wholesalers to access drugs at lower prices,” said Chad Brooker, Associate Principal at Avalere. “However, there remains significant uncertainty over the level of interest in these new flexibilities, as well as safety and operational aspects.”

Rebate reform in Medicare Part D

The third EO directs HHS to complete the rulemaking process for the proposed rule released in January 2019, which would eliminate the current Anti-Kickback Statute (AKS) safe-harbor protections for rebates in Medicare Part D and implement a new safe harbor to protect point-of-sale price reductions (i.e., “discounted prices) that would be provided directly to patients. Importantly, the EO notes that prior to finalizing the proposed rule, the HHS Secretary must confirm that the rule would not increase federal spending, beneficiary premiums, or patients total out-of-pocket (OOP) costs.

“While there are unanswered process questions related to how rulemaking would be completed, the President’s EO makes clear that the administration is once again focused on fundamentally reshaping the current system of manufacturer rebates in the US,” said Miryam Frieder, Practice Director at Avalere. “Given the requirement that premiums not increase as a result of the proposal, now is the time for stakeholders to engage with their preferred approaches.”

International Pricing Index/Most Favored Nation Model

The final EO ties Medicare prices and reimbursement for Part B drugs in the US to prices paid in foreign countries. At this time, the administration has not yet released the text of this EO, but signaled that the EO would go into effect on August 24, which is intended to allow industry 30 days to present alternative proposals to the administration that could be pursued in place of this EO.

“Further details are crucial to assess the impact of the President’s Part B proposal, especially at a time when the pandemic has already created financial volatility for providers and hindered access to physician-administered drugs,” said Lance Grady, Practice Director at Avalere. “The next month will be a time to assess a spectrum of potential approaches to lowering costs for Medicare beneficiaries.”

We are actively monitoring and analyzing the impacts of these EOs. Please continue to visit Avalere.com for further information.

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