On Friday, July 24, 2020, the President announced four executive orders with the stated intention of restructuring the prescription drug market and making prescription medications more affordable and accessible. The orders are targeted at reducing patient costs in the 340B program, allowing the importation of prescription drugs, eliminating manufacturer rebates in Medicare, and establishing a “favored nations” reference pricing mechanism for drugs in Medicare Part B.
A full summary of the individual Executive Orders, their potential impact on employers and Business Group recommendations can be found here. More details about the Executive Orders and our “What Your CEO Is Reading” can be found by clicking here.
Business Group’s Perspective
In short, the Executive Orders are focused on a small subset of drugs; do not address the underlying drivers of drug price or offer holistic solutions; focus exclusively on out-of-pocket costs; and may create a “squeeze the balloon” effect, thereby potentially increasing drug prices for large employers. Thus, we encourage the Administration and policymakers to renew their focus on comprehensive solutions that would enable increased competition in the prescription drug market, remove barriers to generic and biosimilar drugs and reward value.
Impact on Employers and What’s Next?
Depending on how quickly these orders can be implemented, it’s hard to determine their immediate impact. All of the orders will require additional rulemaking by various agencies and could be subject to legal challenges. That said, while it is commendable that the Administration is keeping its foot on the accelerator with regard to reforming drug prices-- an important issue for plan sponsors-- drug pricing policies would be most effective if aimed at reducing inflationary practices across both public and private markets. In the Executive Orders’ current form, there would not be meaningful drug price relief to large employer plan sponsors.
Additional Business Group Resources
- Policy Recommendations to Promote Sustainable, Affordable Pricing for Specialty Pharmaceuticals
- Prescription Drug Prices a Top Election Issue