Health and Science

Trump signs series of executive orders aimed at lowering drug costs

Key Points
  • President Donald Trump signed four executive orders aimed at lowering the high cost of prescription drugs in the United States. 
  • The orders would make sweeping changes to the prescription drug market in the U.S. if they are finalized.
  • Industry trade group PhRMA, the Pharmaceutical Research and Manufacturers of America, called them a "reckless distraction" to the Covid-19 pandemic.
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Trump announces several executive orders aimed at lowering drug costs

President Donald Trump on Friday signed four executive orders aimed at lowering the high cost of prescription drugs in the United States in what would make sweeping changes to the prescription drug market in the U.S. if they are finalized.

Industry trade group PhRMA, the Pharmaceutical Research and Manufacturers of America, called them a "reckless distraction" to the Covid-19 pandemic. The orders, which are subject to the regulatory review process, are designed to bring U.S. drug prices at least on par with their costs overseas. Trump said Americans often pay 80% more for prescription drugs than Germany, Canada and other nations for some of the most expensive medicines. 

"The four orders I'm signing today will completely restructure the prescription drug market in terms of pricing and everything else to make these medications affordable and accessible for all Americans," Trump said at the White House. "Under my administration, we're standing up to the lobbyists and special interests and fighting back against a rigged system."

The orders

The first order targets high insulin prices, requiring federal community health centers to pass discounts they receive on the drug and EpiPens directly to patients. The president said those providers shouldn't receive those discounts while charging their patients "massive, full prices." 

The second order would allow states, pharmacies and wholesalers to import drugs from Canada where they typically cost less than in the U.S. In most circumstances, it is illegal to import medications from other countries for personal use, according to the Food and Drug Administration. 

The pharma industry and regulators have said importing drugs could threaten consumer safety. Supporters, including Sen. Bernie Sanders, say importing drugs from other countries would increase competition and substantially lower prices.

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President Trump signs executive orders aimed at lowering drug prices

The third order is aimed at preventing "middlemen," also known as pharmacy benefit managers, from pocketing "gigantic discounts," Trump said. PhRMA has argued that drug price hikes over the years have been modest and has cited concerns with the nation's rebate system.

Alex Azar, secretary of the Department of Health and Human Services, told reporters on a conference call after the signing ceremony that drug companies currently pay about $150 billion in undisclosed kickbacks to middlemen often in exchange for more favorable insurance coverage for their drugs.

"The new rule would require those kickbacks be passed through to our seniors when they walk into the pharmacy," Azar said, adding that it would reduce prescription drug costs for senior by about 26% to 30% or $30 billion a year.

White House meeting

The fourth order, which Trump said he may not need to implement, would allow Medicare to purchase drugs at the same price other countries pay. The order would specifically allow Medicare to implement a so-called international pricing index to bring drug prices in line with what other nations pay. 

"Everyone will get a fairer and much lower price," Trump said. "Under our ridiculous system, which has been broken for decades, we're not even allowed to negotiate the price of drugs."

Trump signed the fourth order, but said he was holding it until Aug. 24 to give the industry time to "come up with something" to reduce drug prices. Pharmaceutical company executives are scheduled to meet at the White House on Tuesday, he said. 

Prescription drug spending in the U.S. far exceeds that of other high-income countries, increasing to $335 billion in 2018, according to U.S. data. Many Republicans have previously opposed such a proposal, calling it "price controls."

Trump made lowering drug costs one of his key health-care issues early in his term. But drug pricing has taken a backseat over the last year as the Trump administration has shifted its focus to other priorities such as the teen vaping epidemic and now the coronavirus, which continues to rapidly spread through the United States with more than 4 million cases as of Friday, according to data compiled by Johns Hopkins University.

Trump also announced that the U.S. has secured 90% of the world's supply of remdesivir, an antiviral drug used to treat Covid-19. Earlier this week, the president warned that the coronavirus pandemic in the U.S. will probably "get worse before it gets better" and urged the public to wear face masks to help curb the spread of the virus. 

'Reckless distraction'

The pharmaceutical industry immediately pushed back on Trump's proposed rules. 

Dr. Michelle McMurry-Heath, president and CEO of the Biotechnology Innovation Organization, said "adopting foreign price controls by executive fiat will cripple the small, innovative companies developing the vaccines and therapies that will help end this pandemic and get the American people back to work."

PhRMA President and CEO Stephen J. Ubl said Trump was opening the country up for socialized health care. Ubl called the changes to drug prices "a radical and dangerous policy to set prices based on rates paid in countries that he has labeled as socialist, which will harm patients today and into the future."

"The administration's proposal today is a reckless distraction that impedes our ability to respond to the current pandemic – and those we could face in the future," Ubl said in a statement. "It jeopardizes American leadership that rewards risk-taking and innovation and threatens the hope of patients who need better treatments and cures."

The trade group has previously argued that drug price hikes over the years have been modest, and have cited concerns with the nation's rebate system. Those are the discounts drugmakers give to middlemen often in exchange for more favorable insurance coverage for their drugs. The group has favored changes to Medicare, including capping the amount seniors would pay for on their own at the pharmacy counter every year.

Policy analyst Lindsay Greenleaf said there are potential unintended consequences that could actually drive higher Medicare spending on services. The proposal includes reimbursement and administrative changes that could lead more independent doctors to merge with hospitals, which Medicare pays at a higher rate than physician practices.  

"The way that that model was previously proposed, there is a risk of driving consolidation because (individual) providers weren't going to be able to compete as well as they do currently," Greenleaf, who is vice president for policy at ADVI Health, said. 

The SPDR S&P Pharmaceuticals ETF (XPH), which tracks drug stocks, closed down 1.4% on Friday.

Even though Trump issued the executive orders, it may take months for the administration to finalize them. 

-- CNBC's Christina Wilkie, Bertha Coombs and Yelena Dzhanova contributed to this article. 

Correction: This story has been updated to reflect policy analyst Lindsay Greenleaf's assessment that Trump's drug proposal could raise overall Medicare spending on services, not drugs.