How Trump's New Drug Pricing EO Differs From Past Attempts: John Barkett, MBA

John Barkett, MBA, managing director in Berkeley Research Group's Healthcare Transactions and Strategy practice, explained how the current executive order, signed by President Donald Trump on May 12, is different than a previous attempt at establishing "most favored nation" pricing in 2020.

Transcript

How is this executive order different than other attempts at "most favored nation" pricing?

The 2020 attempt was a demonstration coming out of the CMS Innovation Center [Center for Medicare and Medicaid Innovation] that would have required mandatory participation by manufacturers of the top 50 drugs, by spend, that are paid for by Medicare Part B—so physician-administered drugs. It was rushed out the door. They didn't follow the rules of the Administrative Procedures Act, and the courts found that they didn't follow those rules. After a year, [Joseph] Biden was now president, and the Biden administration unwound that model after a year to comply with what the courts were saying. Then they didn't pursue the same type of model.

Trump issued or signed an executive order in the middle of April that alluded to a model. He didn't call it "most favored nations" then but alluded to a model that would be put into effect that would allow for Medicare to pay lower prices for top spending drugs. Then in this most recent executive order this past Monday, they were a little bit more specific this time. He again, I'll read this to you one more time, because it's still kind of vague: "The Secretary shall propose rulemaking to impose most favored nation pricing." Again, they didn't directly reference the Innovation Center model in the [May 12] executive order, like they did on the [April 15] one, but it feels like they're referencing the same concept.

Now, why aren't they being more direct about it? It takes time to develop an Innovation Center model. You have to write a whole prospectus. You have to get the actuary to sign off that it's likely to save money. You have to get the general counsel's office to agree that it complies with the statute and what can and can't be done. You need to staff it right. You sometimes need to talk to participants in advance to make sure that they can actually enable it and implement it.

In the 4/15 executive order, when they were talking about this model, they said, "We're going to give the secretary a year to take steps to implement this model." It sounds like maybe they've learned the lessons from the rushed attempt at the end of the first administration, and they're taking their time to roll this one out. Make sure they dot their i's and cross their t's so they can roll this one out in a compliant fashion.

There are a lot of open questions about this. They keep saying they're going to do this through rulemaking, and what that tells you is that this is going to be a mandatory model. Innovation Center models that are voluntary don't have to go through a proper rulemaking—notice and comment rulemaking process. But if it's a mandatory model, then it does.

When they proposed it last time, it was nationwide, and it was mandatory. It's not really clear. These innovations or models are supposed to test new payment reforms. It's not clear if you're really testing anything if you're just rolling it out nationwide and saying everybody has to follow it, what are you really testing? For every prescription filled of a certain drug, that's going to be paid at this lower price. There are definitely questions about implementation and how they'll roll it out that folks will have.

I'll just note one other thing about this. The way this would work is it would pay for drugs at a most favored nation price. The administration will have to make a decision about whether or not it wants to focus on Part B drugs, like it did last time—these are physician-administered drugs—or if it wants to focus on Part B and Part D drugs. My suspicion is that if they can find the statutory authority to focus on Part D drugs, and that's a big if, because I'm not sure they can, but if they can, they will then run into implementation challenges.

How do you have the government's price flow through Part D plans and Medicare Advantage plans to be effectuated at the pharmacy when a prescription is filled? It's a little easier to do it when it's Medicare paying providers who are administering drugs to patients. I think the path of least resistance here would be to focus on Part B drugs again, but we'll see.

Anyway, that's a lot, and there's a lot of inferring going on here, because all we have is that model from last time. We have some statements made last year during the campaign where they said they wanted to run it back, which is giving people the idea that, okay, maybe they're going to go back to that same style model. But they're also giving themselves a decent amount of time to work through it, and who knows what they'll come up with. Thus far, this administration has, to put it euphemistically, they've been very creative in their policy making. We'll see what comes out of it.