By Barbara Hawes

Three Executive Orders (EO) signed in July by President Trump aim to lower the costs of prescription drugs. Many view that as an admirable goal, but the orders are unlikely to produce immediate relief. 

As executive orders, they do not have the force of law behind them. Instead, they direct the Secretary of Health and Human Services (HHS) to take certain actions, which may – or may not – be completed. Employers should, however, be aware of the orders and their potential implications.

Here’s an overview of the three prescription drug executive orders:

EO #1: Passing on rebates to Medicare patients

The first one directs the Secretary of HHS to finalize rules that were proposed last year requiring prescription drug rebates to be passed on more directly to patients, particularly Medicare patients. 

If implemented, this potentially could increase costs for employers. If Medicare pays less, pharmaceutical companies could pass on cost increases to employer plans. However, the EO requires HHS to confirm the change would not increase Medicare premiums before finalizing the rules. That study alone will take time. It’s unlikely that premiums can remain unchanged if the significant value of rebates (currently used to offset claim cost) is passed directly to participants. 

The proposed rule does not apply directly to employer plans, but if the industry changes rebate distribution for Medicare, changes in rebates for employer plans could follow quickly. 

EO #2: Drug importation

The second EO directs the HHS Secretary to allow importation of prescription drugs from other countries “provided such importation poses no additional risk to public safety” and results in lower costs. In fact, the FDA has already proposed rules on this that are not likely to have much impact on employers. The drug tracing requirements, designed to ensure the drugs are safe, may render the importation rules practically unworkable. For now, systematic importation violates federal law.

Even if it eventually becomes legal, there are several practical hurdles, such as:

  • Overseas supplies are likely insufficient to meet U.S. need. 
  • The difficulty of including the overseas-filled prescription in the individual’s patient record raises the risk of potential adverse drug interactions. 
  • In situations like the COVID-19 crisis, supplies may be unavailable or travel may be restricted, leaving the individual without ready access to life-sustaining medication. 

Additional practical hurdles and safety considerations are detailed in our eBook on this topic, which is available here.

EO #3: 340B grants

The final EO (for now) directs the HHS Secretary to make low-cost insulin and injectable epinephrine (which treats life-threatening allergic reactions) available to low-income individuals by requiring that certain Federally Qualified Health Centers pass along these medications at low cost to specified individuals as a condition of receiving federal grant money. This will mostly be available to individuals without health coverage. It could marginally increase costs to employers if the health centers are forced to make up lost revenue from providing these medications at a discount by turning to employer plans.

The fourth announced but unsigned EO

The President announced a forthcoming EO that would require drug companies to charge Medicare only the lowest cost that they charge other countries for the same drug. The order is delayed until August 25 to give pharmaceutical executives an opportunity to weigh in. If this goes forward, it may have the same effect as the other orders: lower costs for Medicare may mean higher costs for employer plans.

The Upshot

Keeping prescription drug costs affordable for all Americans is seen by many as an important public health initiative. Will the policies these EOs lay out actually reduce costs overall or just shift them onto the employer market? It’s an open question, since nothing actually happens until HHS pursues the applicable rules. And even if it does, litigation may delay any impact if drug companies or hospitals take issue with suggested changes and seek to delay or block implementation. Finally, drug importation has significant practical hurdles and risks that limit its real potential to bring cost relief to employer plan sponsors anytime soon.

HUB International’s team of Employee Benefits consultants, including members of its Pharmacy Practice and compliance organization, are available to help you manage the issues facing today’s benefits programs.