President Donald Trump and his staff are working on an executive order aimed at lowering drug prices. Michael Strazzella, Practice Group Leader of Federal Government Relations, and William Garvin, a shareholder at Buchanan, Ingersoll & Rooney, discuss the implication of efforts to lower pharmaceutical prices on the industry.
Note: Responses have been lightly edited for length and clarity.
Q: What do you expect from a Trump executive order?
William Garvin: My guess would be the Trump administration will take certain actions to reduce drug prices but it will not go into allowing importation of foreign drug products or direct negotiation of drug prices with the federal government.
The most likely outcome is support for value-based pricing agreements, increased focus on speeding up generic drug approvals and allowing the FDA to reprioritize the queue for generic products based on pricing concerns.
Value-based pricing is a new type of agreement where pharmaceutical companies bear the risk of ineffective treatments in coordination with health insurance companies. While there have been some of these contracts, there have been concerns with how these contracts fit within government pricing and existing regulations. Trump's support of these programs will help pharmaceutical and insurance companies draft these types of contracts which would help ensure consumers get value for their money but they may not do much to curb drug pricing.
Increasing the rate of generic drug approvals along with reprioritizing the FDA queue for generic drug applications would also be useful in helping to reduce pharmaceutical costs. These efforts are largely non-controversial and are already being implemented by FDA so pushing for these reforms makes sense but will not dramatically change the dynamics of pharmaceutical pricing.
Q: What implications would this executive order have insurance and pharmaceutical companies?
WG: If the announcement includes support for value-based pricing, I expect there to be much more focus on setting up these contracts between pharmaceutical and insurance companies. If the FDA can speed up generic review time and reprioritize the queue for generic applications, I expect more generic companies to be focused on obtaining approvals for drugs in drug shortages.
Q: How could lower drug prices affect the timeline for the BCRA passage and implementation?
WG: I believe that these two issues appear to be on separate tracks, and that there does not seem to be much interaction. To the extent that Trump can gain some popularity for his efforts to reduce drug pricing, that could give Republicans more support for healthcare reform, but I view this as a low probability event.
Q: Timeline: How soon could we expect the official order?
Michael Strazzella: Department secretaries and other administration officials have begun to meet to determine concrete proposals. However, the absence of concrete proposals will not hinder the President from releasing an executive order outlining basic principles for reform. Noting the President's past aggressive movement on executive orders, the public should be watching daily.
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