20200729 Executive Order - New executive orders intended to lower drug prices take aim at 340B

New executive orders intended to lower drug prices take aim at 340B

On Friday, June 24, President Trump signed four executive orders aimed at lowering the high cost of drugs in the US. The orders deal with issues including reducing insulin and EpiPen prices, the importation of drugs from Canada, curbing rebates paid to pharmacy benefit managers, and allowing Medicare to implement an international pricing index to “bring drug prices in line with what other countries pay,” according to an article from CNBC.

It’s the first of these four orders – targeting insulin and EpiPen prices – that specifically concerns covered entities and the 340B program. This order essentially requires Federally Qualified Health Centers (FQHCs) to pass on the discounted price they pay for these drugs through the 340B program to patients, ensuring patients receive the drugs at this discounted rate plus a nominal administrative fee.

While the intent of the order – making life-saving medications affordable to low-income patients – is laudable, dictating how covered entities such as FQHCs use their 340B program savings, by mandating that the savings be passed on directly to insured patients for specific drugs, runs contrary to grantee requirements already in place that address this very need, making it appear as though discounts were not already being given. Of note, as part of receiving grant funds, FQHCs already have sliding fee scale infrastructure requirements in place for their patients that fall below 200% of the federal poverty level (FPL).

According to congressional report language, the purpose of the 340B program is to enable covered entities “to stretch scarce federal resources as far as possible, reaching more eligible patients and providing more comprehensive services.” This means not only passing on drug discounts to patients, but also using the savings for initiatives such as improving facilities, purchasing new diagnostic equipment, covering ancillary costs such as medical transportation, and more.

“The 340B program gives small, community-based non-profits like health centers access to discounts that they could not negotiate on their own. By law, regulation, and mission, every penny that health centers save through 340B discounts is used either to make medication affordable for low-income patients, or to support other activities that expand access to care,” said Tom Van Coverden, President and CEO of the National Association of Community Health Centers in a recent statement about the executive order. “Let’s be clear: health centers support actions to make drug prices affordable, especially for life-saving medicines such as insulin and EpiPens. As safety net providers committed to ensuring affordable access for all, health centers are already part of the solution – not the problem.”

Of course, executive orders are merely “first steps in a regulatory process that will likely be protracted,” as Forbes noted in a recent article. “This implies that the Trump Administration would need to finalize regulations and go through follow-up procedural steps that could take many months. Moreover, in the meantime, all four executive orders could be challenged in court.”

Sentry will continue to provide updates as they become available, and as always, will continue to be a trusted partner and advocate to covered entities.