Insight

Executive order on ‘Most-Favored-Nation’ drug pricing

An Executive Order directs HHS rulemaking for “most favored nations” pricing for Medicare Part B and D drugs

Larry Kocot

Larry Kocot

Principal, Advisory, KPMG LLP

+1 202-533-3674

On September 13, 2020, the President issued the “Executive Order on Lowering Drug Prices by Putting America First,” which includes a revocation of an earlier Executive Order (EO) of the same title that was reportedly signed on July 24th but was never publicly released. This new EO declares that it is US policy that the Medicare program should not pay more for costly Part B or Part D drugs or biologics than the most-favored-nation price. The most-favored-nation (MFN) price is then 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 member country of the Organisation for Economic Co-operation and Development (OECD) that has a comparable per-capita gross domestic product.”

This MFN EO includes sections on two separate payment models: one in Medicare Part B and the other in Part D. The HHS Secretary is instructed to (1) implement his rulemaking plan to test a Part B MFN model, and (2) to the extent consistent with law, to take appropriate steps to develop and implement a rulemaking plan to test a Part D MFN model. There is no detail provided in the EO as to how these models would be implemented or measured.  As a result, the only thing that can be said with certainty about any such models is that they would hinge on Medicare prices pegged to the lowest comparable OECD country price, and that any such approach would be unreservedly opposed by pharmaceutical manufacturers.


 

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