New Executive Order Aims for Most-Favored Nation Pricing: John Barkett, MBA

John Barkett, MBA, managing director in BRG's Healthcare Transactions and Strategy practice, detailed how the executive order that was signed by President Donald Trump on May 12 will attempt to impose "most favored nation" pricing for medication in the US.

Transcript

Can you explain what the recent executive order entails when it comes to drug pricing?

The executive order has just a couple of sections in it and I'm going to start with the one that I think is the biggest news here. The executive order proposes—and it's very vague exactly what this program will look like—but it says it's trying to enable direct-to-consumer sales to American patients at "most-favored nation" prices. In other words, you should be able to just go and buy a drug at the best price that the rest of the world pays for the drug. Now, there's no new statute that allows the president and the executive branch to put this into effect, so reasonable first question here is, how are they going to do it? If a previous president had this authority, maybe they would have done it already.

So as you read on, you find out that the executive order says, to the extent consistent with law, the president is directing the secretary of Health and Human Services to facilitate a direct-to-consumer purchasing program at "most favored nation" prices. We don't know what that is. We're not sure what law will be cited. And the next section of the executive order tries to explain how it'll be accomplished, but it basically sets up a take it or leave it deal with a pretty big stick for the drug industry. It says, “I'm going to give the secretary 30 days to name the prices that Americans want to pay for drugs and in 30 days, the secretary is going to put out these prices.“ And he says after that, if we don't see—and they use the words "significant progress"—if we don't see significant progress from drug manufacturers to try to offer drugs directly to consumers at those prices, then the Trump administration is going to pursue a series of policies that they're bucketing under the title of "most-favored nation" pricing.

They list 5 policies. One of them is vaguely worded. They call it a rule-making plan to impose "most-favored nation" pricing. We'll come back to that one. The second one is they're going to try to expand drug reimportation. There was a program in the first Trump administration that got off the ground but really hasn't been utilized at all by states and Native American tribes that would enable them to import drugs from Canada. I think what they're proposing here is we'll go look at other countries and see if other countries besides Canada will be willing to import drugs to the US, reimport drugs to the US.

The third one was, we're going to look at anticompetitive practices in the drug industry, and we're going to take a really hard line against those practices. The fourth one was sort of a threat. They're saying, we're going to have the Secretary of Commerce review all the different export programs that US-based manufacturers have to send drugs to other countries. And I think that the point where they say we're going to look at them is that they're kind of threatening that we might disrupt those if you don't do what we say. And the last one maybe is an even bigger threat. It says we're going to have the FDA commissioner take a look and see if any drugs that the FDA has approved are either unsafe or ineffective or being improperly marketed, and they don't really define what that means. It's pretty broad, and they say we might consider reviewing and, if necessary, modifying or revoking the approvals that the FDA gave. All of these things, or many of these things, would be unprecedented, and I'm certain that the legality of them will be tested by manufacturers and potentially others who aren't so sure that the president's allowed to do these things.