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Trump Issues Executive Order Intended to Lower Medicare Drug Costs

Published August 5, 2020

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President Trump issued an executive order on July 24 intended to lower prescription drug prices for Medicare by linking drug costs to the prices paid for the same drug in other countries. The order also allows Medicare beneficiaries to purchase medication imported from Canada. 

The order that ties prescription drugs to international benchmarks, known as the “most-favored-nations rule,” will not go into effect until Aug. 24. Pharmaceutical companies have until then to come up with alternative measures for lowering the costs of their drugs. 

Health officials estimate the move can save Medicare $17 billion in the first five years. Medicare spent $335 billion on prescription drugs in 2018.

Further measures to lower insulin costs and reform drug reimbursement

There were additional action items included in Trump’s recent orders.

One measure involves stripping away legal protections for reimbursements that drug manufacturers make to middlemen and insurance plans that provide drug coverage through Medicare or Medicaid. 

Because these reimbursements are typically based on the price of the drug, drugmakers are incentivized to charge higher drug prices. Trump’s orders would implement a flat-fee reimbursement.

Another aspect of the executive orders requires health centers that use the federal drug discount program to pass on any resulting savings on insulin or insulin pens to patients.

Drugmakers and democrats push back on Trump’s orders

The executive order was not well received by everyone. Drugmakers and democrats had concerns about the effects the executive orders could have.

  • Medicare drug coverage premiums could rise as pharmaceutical companies attempt to recoup the loss of revenue due to reduced prices.

  • Drug manufacturers currently working on a COVID-19 vaccine may have to divert current efforts to develop a vaccine and effective treatments for the disease caused by the novel coronavirus.

Several top pharmaceutical companies requested a White House meeting concerning the issue. The meeting was scheduled for July 28 but was later cancelled after major drug lobbies refused to send representatives.

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