Lowering Drug Prices by Putting America First
This executive order, signed in September 2020, directs federal health authorities to pursue a “most-favored-nation” (MFN) pricing approach for Medicare to help lower Americans’ prescription drug costs. The core idea is to tie Medicare payments to the lowest price a drug manufacturer charges in OECD countries with comparable GDP per capita, after adjusting for differences in volume and national GDP. The order shifts toward testing MFN-based payment models in Medicare Part B (drugs and biologics administered outside the patient’s care setting) and Part D (self-administered prescription drugs covered by private plans), focusing on high-cost or less-competitive drugs. It revokes a prior related executive order and sets up rulemaking pilots under existing statutory authority to evaluate whether MFN pricing could improve clinical outcomes and reduce federal expenditures. The policy is intended as a mechanism to reduce U.S. drug prices but is framed as a testing program rather than an immediate nationwide price cap.
Key Points
- 1Medicare pricing policy: Medicare should not pay more for costly Part B or Part D drugs/biologics than the MFN price, defined as the lowest price offered in an OECD country with similar per-capita GDP, after adjusting for volume and GDP differences.
- 2Part B testing: The Secretary of Health and Human Services should initiate rulemaking to test a payment model in Part B where Medicare would pay no more than the MFN price for certain high-cost drugs/biologics, to see if lower prices improve patient outcomes and reduce costs.
- 3Part D testing: The Secretary should develop and test a Part D payment model, where feasible and consistent with law, that pays no more than the MFN price for drugs with insufficient competition and prices above OECD MFN levels (adjusted for volume and GDP), to assess potential health and cost outcomes.
- 4Revocation of prior order: This order revokes the Executive Order issued on July 24, 2020, which had also addressed drug pricing in Medicare.
- 5Legal framework and limits: The order states it must be implemented consistent with law, under the authority of existing programs (including the rulemaking pathway cited) and does not create new rights or entitlements. It preserves departmental authority and budget processes.