Lowering Prices for Patients by Eliminating Kickbacks to Middlemen

Executive Order 13939 of July 24, 2020

Lowering Prices for Patients by Eliminating
Kickbacks to Middlemen

By the authority vested in me as President by the
Constitution and the laws of the United States of
America, it is hereby ordered as follows:

Section 1. Purpose. One of the reasons pharmaceutical
drug prices in the United States are so high is because
of the complex mix of payers and negotiators that often
separates the consumer from the manufacturer in the
drug-purchasing process. The result is that the prices
patients see at the point-of-sale do not reflect the
prices that the patient's insurance companies, and
middlemen hired by the insurance companies, actually
pay for drugs. Instead, these middlemen--health plan
sponsors and pharmacy benefit managers (PBMs)--
negotiate significant discounts off of the list prices,
sometimes up to 50 percent of the cost of the drug.
Medicare patients, whose cost sharing is typically
based on list prices, pay more than they should for
drugs while the middlemen collect large “rebate”
checks. These rebates are the functional equivalent of
kickbacks, and erode savings that could otherwise go to
the Medicare patients taking those drugs. Yet
currently, Federal regulations create a safe harbor for
such discounts and preclude treating them as kickbacks
under the law.

Fixing this problem could save Medicare patients
billions of dollars. The Office of the Inspector
General at the Department of Health and Human Services
has found that patients in the catastrophic phase of
the Medicare Part D program saw their out-of-pocket
costs for high-price drugs increase by 47 percent from
2010 to 2015, from $175 per month to $257 per month.
Narrowing the safe harbor for these discounts under the
anti-kickback statute will allow tens of billions in
dollars of rebates on prescription drugs in the
Medicare Part D program to go directly to patients,
saving many patients hundreds or thousands of dollars
per year at the pharmacy counter.

Sec. 2. Policy. It is the policy of the United States
that discounts offered on prescription drugs should be
passed on to patients.

Sec. 3. Directing Drug Rebates to Patients Instead of
Middlemen. The Secretary of Health and Human Services
shall complete the rulemaking process he commenced
seeking to:

    (a) exclude from safe harbor protections under the
anti-kickback statute, section 1128B(b) of the Social
Security Act, 42 U.S.C. 1320a-7b, certain retrospective
reductions in price that are not applied at the point-
of-sale or other remuneration that drug manufacturers
provide to health plan sponsors, pharmacies, or PBMs in
operating the Medicare Part D program; and
    (b) establish new safe harbors that would permit
health plan sponsors, pharmacies, and PBMs to apply
discounts at the patient's point-of-sale in order to
lower the patient's out-of-pocket costs, and that would
permit the use of certain bona fide PBM service fees.

Sec. 4. Protecting Low Premiums. Prior to taking action
under section 3 of this order, the Secretary of Health
and Human Services shall confirm--and make public such
confirmation--that the action is not projected to
increase Federal spending, Medicare beneficiary
premiums, or patients' total out-of-pocket costs.

Sec. 5. General Provisions. (a) Nothing in this order
shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or
the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget
relating to budgetary, administrative, or legislative proposals.

    (b) This order shall be implemented consistent with
applicable law and subject to the availability of
appropriations.
    (c) This order is not intended to, and does not,
create any right or benefit, substantive or procedural,
enforceable at law or in equity by any party against
the United States, its departments, agencies, or
entities, its officers, employees, or agents, or any
other person.

    (Presidential Sig.)

THE WHITE HOUSE,

    July 24, 2020.