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Takeaway: White House lawn announcement is probably more politics than policy designed to focus Congress on bi-partisan bills to lower drug prices

On the White House lawn yesterday, President Trump announced that he was working on a “most favored nation clause” for drug prices. His proposal would (we think) mean that Medicare would not pay more than the lowest price paid by another nation or “company.”

The full text of his comments which begin at 1:47 on the video.

“I would love the Democrats to come back and talk about infrastructure, talk about drug pricing. We are going to be announcing something very shortly, a favored nations clause. As you know for years and years other nations pay less for drugs sometimes by 60-70 percent. We are going to working on a favored nations clause where we pay whatever the lowest nation's price is. Why should other nations – like Canada – why should other nations pay much less than us? They have taken advantage of this system for a long time – pharma – but we are working on a favored nations clause so that whatever the lowest nation is anywhere in the world – or company – the lowest nation or company – what happens is we will pay that amount. Working on it right now. We are going to do it in the form of an Executive Order.”

His announcement seems at least partially redundant given the rulemaking underway to pilot an International Pricing Index for Medicare Part B drugs. The White House had no comment in response to follow-up calls from reporters. HHS Secretary Azar’s response was a general show of support for bringing down drug prices.

We suspect that what the president is really trying to do is light a fire under Congress. He was responding to a question about infrastructure legislation, specifically rural broadband. He used that opportunity to call on Democrats to come back to the table and then segued to drug prices and a new Executive Order.

Republicans on Capitol Hill, with the possible exception of Sen. Rick Scott, dislike price-fixing in any form. Senate Finance Committee Chairman Chuck Grassley has announced his opposition to the Part B IPI proposal and he is sure to hate "most favored nation status" for Medicare drugs. Unfortunately, the good Senator and the ranking member have not yet agreed on an alternative. To resolve the impasse, assuming one exists, the president appears to be doubling down on price setting in Part B drugs and threatening to avoid rulemaking altogether with an Executive Order.

In so doing he is ramping up the pressure on House moderates and Republicans to get a drug pricing bill across the finish line, preferably before the August recess. The environment is a complex negotiation where several rules and legislative proposals are chips on the table.

The current state of play includes:

  1. Rule pending at the White House would remove the current safe harbor for drug rebates and replace it with a point of sale concession;
  2. Another pending rule would tie the prices of Medicare Part B drugs to an international pricing index;
  3. House-passed legislation would expand access to generic drugs;
  4. Senate HELP draft bill would address the issue of surprise bills, increase access to generic drugs, impose transparency requirements including one that passes 100% of rebates to health plans, among other things;
  5. Senate Finance draft bill would raise the Medicaid rebate cap, revamp the Part D coverage phases and impose reforms on Part B
  6. Senate Judiciary bills would limit patent thicketing
  7. House Ways and Means draft bill that would reduce Medicare Part D reinsurance, cap out of pocket expenses

The president's announcement and comments made by his advisors suggest the White House would prefer bi-partisan legislation. Their rulemaking, and now a potentially very aggressive Executive Order, are acting as a backstop to spur action by Congress that will generally achieve the same goals while perhaps going further to reform parts of Medicare Parts B and D.

Having already missed a self-imposed July 4 deadline, time is running out for Congress to complete work before the Aug. 5 recess and so it would appear, the president's patience.

Call with questions.

Emily Evans
Managing Director – Health Policy


Thomas Tobin
Managing Director