Trump Escalates Drug Pricing War

President Trump has taken on the pharmaceutical industry in a surprise move making significant cuts in reimbursement for drugs covered by Medicare. The White House issued an executive order Sunday, Sept. 13, 2020 implementing a policy to link payments for medicines provided through Medicare to prices charged in other industrial countries. This time, though, the “most-favored-nation” pricing policy affects medicines administered through both Part D drug plans and in doctors’ offices under Medicare Part B—a major escalation from the administration’s earlier proposals affecting only Part B drugs.

In issuing an executive order to establish an International Pricing Index, President Trump looks to avoid a lengthy rule-making process that could take months, or years, to implement. Using this approach to establish this kind of innovative policy change clearly aims to appeal to voters before the looming national elections. Such a broad change is unlikely to go into effect by November 3 but can become a prominent campaign promise.

The Pharmaceutical Research and Manufacturers of America (PhRMA) issued a statement blasting the administration’s “misaligned incentives” and “reckless attack on the very companies working around the clock to beat COVID-19.” The proposal “threatens America’s innovation leadership” as well as access to medicines for millions of seniors, PhRMA states.

Manufacturers are expected to file suit to block implementation of the policy if it goes forward. Meanwhile, other administration drug cost-cutting proposals remain in limbo, including efforts to legalize drug imports from Canada and to ban or limit rebates to pharmacy benefit managers (PBMs). This action by Trump clearly signals that earlier efforts to negotiate a price control deal with companies has failed and that the administration is willing to take on the pharmaceutical industry to bolster the President’s appeal to voters.