Lowering Drug Prices by Putting America First
Signed: July 24, 2020
Published: September 18, 2020
Document Number: 2020-20887
📋Summary
This executive order directs the Department of Health and Human Services to move toward a Medicare Part B payment approach that would not pay more for certain high-cost drugs and biologics than the lowest comparable price paid in similar wealthy countries. It mainly affects Medicare Part B beneficiaries (often seniors), taxpayers who help fund Medicare, drug manufacturers, and providers who bill Medicare for these drugs. It defines a “most-favored-nation” price as the lowest manufacturer price in certain OECD countries, adjusted for factors like purchase volume and differences in national income. The order tells HHS to promptly pursue rulemaking to test this payment model and evaluate whether lower prices improve health outcomes and reduce spending linked to high drug costs.
💼Business Impact
This order most directly affects **drug manufacturers (especially high-cost Part B biologics), physician practices and hospital outpatient departments that buy-and-bill Part B drugs, specialty distributors, and Medicare-focused providers** (oncology, rheumatology, ophthalmology, infusion centers). If implemented through HHS rulemaking/testing, it could **cap Medicare Part B reimbursement at a “most-favored-nation” (international reference) price**, pressuring manufacturers’ U.S. pricing and potentially changing provider margins, product availability, and contracting strategies; it also creates opportunities for **lower patient cost-sharing** and for providers to differentiate on cost-efficient treatment pathways. **Compliance/operational implications:** expect new **billing/reimbursement rules under a Medicare payment model**, documentation and claims changes, and tighter scrutiny of acquisition cost vs. reimbursement for buy-and-bill drugs; manufacturers may need to adjust **pricing, distribution, and contracting** to avoid supply disruptions or margin compression for provider customers. **Immediate actions:** (1) identify your top Part B drugs by spend and margin exposure, (2) model reimbursement scenarios tied to OECD “lowest price” benchmarks and assess inventory/contract risk, (3) engage manufacturers/distributors and your billing team early to
Full Text
Executive Order 13947 of July 24, 2020
Lowering Drug Prices by Putting America First
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered as follows:
Section 1 . Purpose. Americans pay more per capita for prescription drugs than residents of any other developed country in the world. It is unacceptable that Americans pay more for the exact same drugs, often made in the exact same places. Other countries' governments regulate drug prices by negotiating with drug manufacturers to secure bargain prices, leaving Americans to make up the difference—effectively subsidizing innovation and lower-cost drugs for the rest of the world. The Council of Economic Advisers has found that Americans finance much of the biopharmaceutical innovation that the world depends on, allowing foreign governments, many of which are the sole healthcare payers in their respective countries, to enjoy bargain prices for such innovations. Americans should not bear extra burdens to compensate for the shortfalls that result from the nationalized public healthcare systems of wealthy countries abroad.
In addition to being unfair, high drug prices in the United States also have serious economic and health consequences for patients in need of treatment. High prices cause Americans to divert too much of their scarce resources to pharmaceutical treatments and away from other productive uses. High prices are also a reason many patients skip doses of their medications, take less than the recommended doses, or abandon treatment altogether. The consequences of these behaviors can be severe. For example, patients may develop acute conditions that result in poor clinical outcomes or that require drastic and expensive medical interventions.
In most markets, the largest buyers pay the lowest prices, but this has not been true for prescription drugs. The Federal Government is the largest payer for prescription drugs in the world, but it pays more than many smaller buyers, including other developed nations. When the Federal Government purchases a drug covered by Medicare Part B—the cost of which is shared by American seniors who take the drug and American taxpayers—it should insist on, at a minimum, the lowest price at which the manufacturer sells that drug to any other developed nation.
The need for affordable Medicare Part B drugs is particularly acute now, in the midst of the COVID-19 pandemic, which has led to historic levels of unemployment in the United States, including the loss of 1.2 million jobs among Americans age 65 or older between March and April of 2020. The COVID-19 pandemic has also led to an increase in food prices, straining budgets for many of America's seniors, particularly those who live on fixed incomes. The economic disruptions caused by the COVID-19 pandemic only increase the burdens placed on America's seniors and other Medicare Part B beneficiaries.
Sec. 2 . Policy. (a) It is the policy of the United States that the Medicare program should not pay more for costly Part B prescription drugs or biological products than the most-favored-nation price.
(b) The “most-favored-nation price” shall mean the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a member country of the Organization for Economic Cooperation and Development that has a comparable per-capita gross domestic product. ( printed page 59172)
Sec. 3 . Ensuring the Most-Favored-Nation Price in Medicare Part B. To the extent consistent with law, the Secretary of Health and Human Services shall immediately take appropriate steps to implement his rulemaking plan to test a payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs and biological products covered by Medicare Part B, no more than the most-favored-nation price. The model would test whether, for patients who require pharmaceutical treatment, paying no more than the most-favored-nation price would mitigate poor clinical outcomes and increased expenditures associated with high drug costs.
Sec. 4 . General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:
(i) the authority granted by law to an executive department or agency, or the head thereof; or
(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
THE WHITE HOUSE,
July 24, 2020.