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December 17, 2020

Implications of Recent Federal Actions to Address High Prescription Drug Costs

Ken Perez
Vice President of Healthcare Policy, Omnicell

The United States spends much more on healthcare on a per capita basis than other high-income countries, due in large part to the high cost of prescription drugs, and polls consistently show that high drug costs are the number one healthcare issue for Americans.

An estimated 140 bills on drug prices have been introduced in Congress since January 2019; however, partisan differences have precluded passage of any substantive legislation in this area. The inaction by the legislative branch led President Donald Trump to sign on July 24 four executive orders aimed at reducing drug prices and ensuring access to medications, including

Directing federally qualified health centers to pass along discounts on insulin and epinephrine received from drug makers to medically underserved patients.

Allowing states to develop plans for safe importation of certain drugs, authorizing the re-importation of insulin products made in the U.S., and creating a pathway for personal importation through the use of individual waivers to purchase drugs at lower cost from pre-authorized U.S. pharmacies.

Requiring that “kickbacks” between drug makers and pharmacy benefit managers be passed along to seniors as discounts in Medicare Part D.

Authorizing the Centers for Medicare and Medicaid Services (CMS) to take action to ensure that the Medicare program pays no more for the most-costly Medicare Part B drugs than any economically comparable OECD country.

On Nov. 20, CMS issued an interim final rule for the Most Favored Nation (MFN) Model, a seven-year mandatory model (expiring on Dec. 31, 2027) with a four-year phase-in period that incorporates a system of external reference pricing.

While the MFN Model would reduce the amount Medicare pays providers and therefore the coinsurance amount Medicare beneficiaries pay, it would not impact the prices paid by healthcare providers to distributors, wholesalers or drug manufacturers. Thus, it would squeeze provider profit margins. The American Hospital Association (AHA) opposes the MFN Model, as it estimates that the model will result in an average 65 percent decrease in drug reimbursements to hospitals when it is fully phased in. The Pharmaceutical Research and Manufacturers of America (PhRMA), the drug industry’s top lobbying group, also objects to the MFN Model, presumably because of pharma’s general opposition to government regulation in this area.

While the MFN Model is only a proposal and is unlikely to be implemented due to procedural missteps, it and the other Trump executive orders have elevated the issue of drug spending and have paved the way for the Biden administration to promote other initiatives intended to reduce drug costs.

Interestingly, despite the highly contentious nature of the 2020 presidential election, Trump and former Vice President Joe Biden did not differ as much on the issue of prescription drug costs, thus establishing it as an area of common ground between their respective political parties, and potentially, some policymaking progress in the future.


The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author(s). These views are always subject to change, revision, and rethinking at any time and may not be held in perpetuity.

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