November
20, 2020 Christopher Holt
Later
today the Trump Administration is expected to announce several regulatory
actions on drug prices, in a move somewhat akin to trying to write a 40-page
term paper the night before it’s due. Among the anticipated items are the
rebate rule—aimed at the rebates that drug manufactures pay to Medicare Part D
prescription drug plans—and the president’s much-touted, little-explained “most
favored nation” (MFN) proposal. It is worth looking at each of these.
The
president has long been focused on drug prices. As a candidate in 2016,
Trump argued for Medicare to negotiate prices for prescription
drugs, a longstanding liberal policy priority that ignores how Medicare’s
prescription drug program works. Then, President-elect Trump complained that pharmaceutical companies “are getting
away with murder” in relation to the disparity in prices paid in the United
States versus other nations. And as recently as July and September, the president
signed several executive orders (EOs) on drug prices laying the groundwork for
today’s expected announcements.
The
president’s underlying concern that Americans pay more for therapies is
legitimate. Most other nations actively limit the prices of drugs, but there
are real tradeoffs. Patients in other countries face limited access to the
newest therapies, and when they do gain access it is months or even years after
American patients. Foreign countries are able to limit drug prices for two
reasons: First, they are often less committed to the free-market principles
critical to maintaining innovation, and second, they are willing to turn down
treatments that could address unmet health needs among their populations. American
politicians and patients have been unwilling to forego lifesaving medical
treatments to save money.
On
the merits of these two rules, it’s a mixed bag. The rebate rule would
force Medicare Part D plans to pass through any rebates received from drug
manufacturers directly to beneficiaries. Currently plan sponsors keep the
rebates, arguing that they use the rebates to lower premiums for all
beneficiaries enrolled in the plan. Passing the rebates through to
patients, however, would dramatically help patients with expensive drug bills,
while only modestly increasing premiums for all beneficiaries.
Overall,
the rebate rule makes sense, but there are a few issues. First, it may
increase federal spending, because Medicare Part D premiums are federally
subsidized and could increase, but the president’s EO in July instructed the
Department of Health and Human Services (HHS) to modify the proposal so as not
to increase federal spending. It’s not clear how HHS can accomplish that while
keeping the substance of the underlying policy. An additional wrinkle—explained
by the American Action Forum’s Dan Bosch here—is that the administration appears to have withdrawn the
original proposed rebate rule. So, the administration would first need to issue
a proposed rule. Trump will leave office in January, however, and there
isn’t time to follow the legal process for rulemaking, so it appears the
administration will just skip most of the steps and call it good.
The
other major action will be the MFN rule. Tara Hayes and I detailed what little is known about this rule earlier in
the week, as well as its potential impact on innovation. According to the
president’s executive order, the rule would require Medicare to pay no
more for drugs than the lowest price paid by other members of
the Organisation for Economic Co-operation and Development. This is a
fancy way of saying that the U.S. government will piggyback on the
price-setting schemes of foreign countries, and this policy should be a
nonstarter.
In
addition to the problems with the policy itself, once again the
administration has let the clock wind down too far. The MFN rule has not
been previously proposed, so technically a proposed rule must be issued before
a final rule. But short on time, the administration is expected to issue
an interim final rule (IFR) in an attempt again to sidestep the rulemaking
process. As luck would have it, Bosch also has an explainer on IFRs and why this one is likely to run into
legal challenges.
To
summarize, having run out of time the administration is trying to force a
number of significant regulatory efforts through at the last minute, bypassing
the established rulemaking process. It’s an ironic end for an administration
that touts deregulatory actions among its top accomplishments.
WORTH A
LOOK
The Wall Street Journal: Opioid Deaths in Canada Were
Falling, Then Came Coronavirus
Modern Healthcare: FDA allows 1st rapid virus test that
gives results at home
https://www.americanactionforum.org/weekly-checkup/the-problems-with-trumps-expected-drug-policy-rules/#ixzz6eeuOTEwc
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