Administration Issues Executive Order Tying Medicare Drug Costs to International Prices

Merle M. DeLancey Jr.

On Sunday, while everyone was watching the return of NFL football, the Administration was busy fulfilling a promise it made in July to lower drug prices paid by the United States and Medicare beneficiaries by tying pricing to certain foreign countries.

In July, the Administration issued three Executive Orders concerning drug pricing and access to critical therapies. At that time, the Administration also announced that, unless the pharmaceutical industry proposed a plan that would decrease prices paid by Medicare Part B by August 24, the Administration would move forward with its own plan. Apparently, no agreement with the industry was reached because on Sunday the Administration announced its own plan.

In what is being called the “Most Favored Nations” Executive Order, the Administration is re-starting its efforts to reduce the prices the United States pays for drugs under Medicare Parts B and D. The Order uses the “most-favored-nation price” as the benchmark for prices to be paid by the United States. Most-favored-nation price is defined as the lowest price, after adjusting for volume and differences in national gross domestic product, for a pharmaceutical product that the drug manufacturer sells in a comparable member country of the Organisation for Economic Co-operation and Development (“OECD”).

Perhaps most surprising is the increased scope of the Order. The Order goes beyond what was proposed in July by seeking to link not only Medicare Part B drug prices but also Medicare Part D prices to lower prices paid by other countries. With respect to both Medicare Parts, the Department of Health and Human Services’ (“HHS”) “payment model” is to test whether poor clinical outcomes improve as a result of patients paying lower prices—no more than the most-favored-nation prices—for certain high-cost pharmaceuticals and biologics.

While the Order makes for a snappy sound bite, any potential benefits of lower drug prices will not be seen anytime soon. First, HHS will need to complete its rulemaking, which could have its own challenges. For example, in November 2018, HHS published an Advance Notice of Proposed Rulemaking (“ANPR”) proposing to implement an international reference pricing payment model for use by Medicare and Medicaid. Ultimately, nothing became of the ANPR. Even then, implementation of the contemplated programs is precarious. Industry opposition to the Order has been palpable and any HHS plan will likely face legal challenges that could substantially delay implementation.

Executive Order Regarding Domestic Production and Purchase of Essential Medicines: A Lot to Unpack and More Than Meets the Eye

Merle M. DeLancey Jr. and John M. Clerici 

On August 6, 2020, President Trump issued another Executive Order (“EO”) that will likely have dramatic and long-lasting effects on the pharmaceutical industry.[1] The impact of the EO may be far greater than currently anticipated. It is well-considered, well drafted, and structured in a way that is likely to survive if there is a change in Administration. The EO will have a greater and immediate impact on Medical Counter Measures (“MCMs”) for chemical, biological, radiological, and nuclear threats, and emerging infectious diseases than on Essential Medicines. The inclusion of Critical Inputs (i.e., active pharmaceutical ingredients (“API”)) and starting materials potentially makes the impact far reaching, especially when coupled with the significant funding from the federal government to support onshoring efforts as a result of the COVID-19 pandemic. Continue reading “Executive Order Regarding Domestic Production and Purchase of Essential Medicines: A Lot to Unpack and More Than Meets the Eye”

After Acetris Decision, Trade Agreements Act Compliance Questions Abound: Contractors Need Guidance

Merle M. DeLancey Jr., Jay P. Lessler, and James R. Staiger

The Federal Circuit’s recent decision in Acetris has left many contractors scratching their heads and asking questions. To recap, on February 10, 2020, the Federal Circuit held that, under the Federal Acquisition Regulation (“FAR”), to qualify as a “U.S.-made end product” under the Trade Agreements Act (“TAA”), a drug must be either “manufactured” in the United States or “substantially transformed” in the United States. (See Federal Circuit Holds Generic Drugs Manufactured in the U.S. from API Produced in India Qualify for Sale to U.S. under Trade Agreements Act (Acetris Decision).) This is a stark change from the Government’s long-held position that manufacturing and substantial transformation were one in the same.

As a result of the Acetris decision, federal contractors seeking to comply with or maintain compliance with the TAA are facing many questions. Some of the more prominent questions are below. Continue reading “After Acetris Decision, Trade Agreements Act Compliance Questions Abound: Contractors Need Guidance”