July 24, 2020
President Trump signed multiple executive orders aimed at lowering prescription drug prices today, which could have an impact on employer drug costs.
The executive orders may restart debate over using an "International Price Index" for Medicare that ties government reimbursement rates for drugs to the prices paid by other developed countries like Britain and France. This policy was previously stalled by opponents concerned it would create de facto price controls that would hinder innovation and the number of new drugs brought to market.
Shifting costs to employers and other private payers? If the executive orders only apply to the Medicare program, there is a real possibility the pharmacy supply chain may increase commercial prices to offset their lost revenue.
The additional orders address a previously scraped plan to eliminate drug rebates for seniors which narrows the safe harbor for drug rebates under the anti-kickback statute, require community health centers to pass through 340B drug discounts they receive to patients and encourage domestic manufacturing of drugs in the U.S.
Outlook: These orders will need to be finalized through regulation, meaning it could be months before any of the policies take effect. Association's American Health Policy Institute will continue to monitor the outcome of the executive orders and any impact they may have on employers.