On Tuesday, President Trump signed an Executive Order (EO) aimed at lowering drug costs. The EO called out drug manufacturers for charging significantly less in other countries than in the U.S. for the same exact drug and for engaging in anti-competitive behavior. The EO also targets the 340B program, directing HHS to “propose any appropriate adjustments.” Additionally, the EO explores the adoption of site neutral payments for drug administration services, which would result in payment reductions.  

Fixing the Inflation Reduction Act
Within 60 days, the Department of Health and Human Services (HHS) must draft a proposal (with public comment period) on ways to reform the Medicare Drug Price Negotiation Program. The guidance must focus on improving transparency, prioritizing negotiation of high-cost drugs, and “minimize any negative impacts of the maximum fair price on pharmaceutical innovation.” Congress is directed to work with HHS to increase investment in molecule prescription drugs and other less costly, widely used pharmaceuticals. 

340B Drug Acquisition Costs
In the EO, the President directs HHS to conduct a survey of hospitals’ outpatient drug acquisition costs and to set Medicare payments based on those costs. 340B Health, an advocacy organization advocating for 340B facilities warns that this could lead to the return of Medicare pay cuts to 340B hospitals. During President Trump’s first term, HHS finalized a policy that cut 340B payments by 22.5% of the average sales price. The U.S. Supreme Court later overturned that policy on the basis that the administration had not conducted the kind of survey proposed in the EO from this week. The new EO also states that future payment adjustments would need to follow similar rules to the 2018 rules.  

Site Neutral Payments 

The EO directs HHS to “ensure that payment within the Medicare program is not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments.” Cutting payments for the administration of drugs in outpatient departments so that they equal the Medicare rates of physician offices has been a popular policy debated in Congress. Drug administration services were also in the list provided by the Medicare Payment Advisory Commission (MedPAC) to Congress for potential site neutral payments.