On September 13, President Donald Trump issued his “Lowering Drug Prices by Putting America First” executive order, his most recent attempt at tricking the public into believing that his administration will make meaningful changes to prescription drug prices. As usual, the president tried to circumvent Congress and give the appearance of making significant changes through a rushed and lackluster executive order. This column provides an overview of the Trump administration’s attempts to use executive authority to appear to take action on lowering drug prices and explains how this most recent order is nothing but another example of bluster on prescription drug prices without delivering for the American people.
Federal law grants the president significant authority through executive action, but that authority is not unlimited. Put plainly, the president cannot use executive orders to implement policies that conflict with existing law. In this case, the September 13 executive order directs the secretary of the U.S. Department of Health and Human Services (HHS) to undertake rulemaking to test an international reference pricing model. Until that rulemaking is finalized, which includes the opportunity for public input, this order is meaningless. Importantly, the statutory provision that allows the Medicare program to test different payment approaches is part of the Affordable Care Act (ACA), which the Trump administration is currently attempting to overturn via the Supreme Court. Without the ACA, the Trump administration would have no legal pathway for testing this change, underscoring the administration’s lack of serious, good-faith effort on meaningfully lowering drug prices.
The September 13 order is not President Trump’s first attempt at trying to appear that he is in fact working to reduce prescription drug prices through executive action that without further regulatory action is meaningless. In October 2018, the president announced his administration’s “Blueprint To Lower Drug Prices,” which included directing Medicare to begin to use reference pricing for Part B drugs—those administered in a physician’s office or hospital, rather than taken at home. As with this most recent order, however, it was only a superficial attempt to convince the American people that his administration was taking action on sky-high prescription drug prices; after touting the policy for months, HHS eventually declined to issue regulations implementing it.
More recently, President Trump has tried a similar approach: On July 24, he issued four executive orders aimed at reducing drug prices. Like his newest order, these orders would do little to meaningfully lower the prices of prescription drugs. The orders include reviving the administration’s harmful plan to eliminate drug rebates, which would increase seniors’ health insurance premiums, and allowing limited importation of drugs for personal use. None of these orders represent the kind of sweeping reforms needed to lower drug prices.
The September 13 executive order does too little
High drug prices have significantly limited access and adherence to medications across the U.S. health care system. According to the Kaiser Family Foundation, nearly 80 percent of Americans believe that the cost of prescription drugs is unreasonable. Nearly one-third of American adults taking prescription drugs have not taken their drugs as prescribed due to cost, which can have deadly consequences. Compared to peer nations, the United States pays significantly more per capita on prescription drugs.
Trump’s most recent drug pricing executive order doesn’t adequately address these problems and is entirely insufficient as the cornerstone of a plan to rein in out-of-control drug prices. Lowering Medicare prescription drug spending is a clearly necessary component of reducing prescription drug spending and minimizing out-of-pocket costs for seniors, but Medicare is hardly the majority of prescription drug spending. In 2016, the program only made up around 30 percent of prescription drug spending in the United States. If the order is limited solely to the more fleshed out Part B provisions, that number shrinks to only 7 percent, and a study by Avelere of President Trump’s 2018 order to apply international reference pricing to a subset of Medicare Part B drugs found that less than 1 percent of seniors would see reduced out-of-pocket costs.
Even though the newer executive order includes Part D-covered drugs, there is little evidence that the reforms as outlined would provide a meaningful benefit to patients. The average Medicare patient spent $486 out of pocket on prescription drugs in 2017. Worse still, more than 1 million Medicare enrollees—around 1 in 40—spent more than $3,200 out of pocket on prescription drugs during the same year. Because the new order still limits the program to undefined subsets of drugs—the Part B demonstration would only apply to “certain high-cost prescription drugs,” and the Part D demonstration would only apply to drugs with “insufficient competition”—it is impossible to confidently assert that any of this spending would decrease or which patients would benefit and by what amount.
Going through the rulemaking process would clarify what these terms mean, as well as allow opportunity for public input. By choosing to focus solely on Medicare spending and punting all of the key policy and operational questions—including how the program would be enforced—to HHS Secretary Alex Azar, a former pharmaceutical executive, Trump shows that he’s looking for a simple, flashy announcement rather than comprehensive action to lower drug prices for all Americans.
In order to ensure that every patient can afford the prescription drugs they need, the federal government must take meaningful, enforceable action that holds pharmaceutical companies accountable and lowers costs for patients. Requiring the federal government to negotiate prescription drug prices that are available to all patients and allowing it to impose penalties when drug companies refuse to come to the table are what would benefit the American people.
Despite President Trump’s promise in 2016 to “negotiate like crazy” and despite how popular Medicare negotiation is, his administration has repeatedly refused to support legislation that would actually enact these policies, such as H.R. 3, the Elijah E. Cummings Lower Drug Costs Now Act, which would use negotiation to bring down prices for drugs with the greatest savings potential. Promising to veto Medicare negotiation, which nearly 90 percent of voters support, is not an act of a president who truly wants to lower prescription drug prices.
The September 13 executive order comes too late
The inefficacy of this recent executive order is only compounded by the reality that it would be nearly impossible to implement these inadequate policies during President Trump’s first term. Implementing federal regulations takes months, if not years. Issuing such a vague, inconsequential executive order in mid-September only reaffirms the Trump administration’s goal of appearing to take action on lowering prescription drug prices without any follow-through.
Further demonstrating his unwillingness to support meaningful solutions for lowering prescription drug prices is President Trump’s recent announcement that discount cards worth $200 would be sent to around 33 million seniors. Described by White House officials off the record in The Washington Post as a “last-minute” approach to the issue, the program would allegedly be funded through the savings accrued through international reference pricing, despite the fact that this program has not even gone into effect. In reality, the program would be paid for by spending nearly $8 billion from the Medicare trust fund, contradicting Centers for Medicare and Medicaid Services Administrator Seema Verma’s history of opposing spending from the trust fund for far more meaningful changes. In addition to this $8 billion expenditure, the program includes around $20 million in administrative costs to rush to print and mail letters to beneficiaries promising them receipt of the discount cards by November.
The Trump administration has tried and failed to implement such a plan before, which fell apart after White House chief of staff Mark Meadows insisted that pharmaceutical companies would pay for the cards. Even the Pharmaceutical Research and Manufacturers of America (PhRMA), the main trade group for the pharmaceutical industry, thinks that discount cards are virtually meaningless. As a spokesman for the group told The Washington Post, “[O]ne-time savings cards will neither provide lasting help, nor advance the fundamental reforms necessary to help seniors better afford their medicines.” Multiple academics who study Medicare drug policy also panned the program, with one calling it a “poorly designed experiment” unlikely to reveal new insights.
Executive actions can be a meaningful way to lower prescription drug prices, but Trump’s executive orders are hollow promises. Federal law gives the president a number of tools to ensure that patients pay an affordable price for prescription drugs. Unfortunately, President Trump’s most recent attempt to lower drug prices through executive action does too little and comes too late in his term to effect any lasting change.
While bold, progressive legislation in the spirit of H.R. 3 is necessary for the most striking of reductions in prescription drug costs, the Trump administration could have pursued the reforms outlined in the September executive order with enough time to implement them. By waiting until the final five months of the current term, the Trump administration shows what it really cares about: appearing to make a difference on prescription drug prices without delivering for the American people.
Thomas Waldrop is a policy analyst for Health Policy at the Center for American Progress. Nicole Rapfogel is a research assistant for Health Policy at the Center.