US President Signs Executive Order Implementing International Pricing Index Model
On 24 July 2020 the US President signed four executive orders designed to lower medicine prices in the United States (see, attached press release). One of these orders, which has not yet been made publicly available, implements a form of international reference pricing and “take[s] action to ensure that the Medicare program and seniors pay no more for [a series of costly medicines] than any economically comparable OECD country, ending foreign countries’ free loading off the backs of American taxpayers and pharmaceutical investments” (the “International Pricing Index Model” or “IPI Model”).
The IPI Model has been under review for months and a forerunner had already been unveiled back in 2018 (see, Van Bael & Bellis Life Sciences News Alerts of 14 May 2018 and 29 October 2018). However, the original proposal provided for a payment model in which the reimbursement of qualifying medicines would be calculated based on an index of the lower prices paid by 14 European countries, Canada and Japan. US prices were projected to be reduced from 180% of what these other countries pay to 126%.
By contrast, President Trump now seeks to tighten this proposal and set reimbursement at the lowest price available in any of these countries. The President calls this the “most favoured nation” approach.
The executive order will be withheld until 25 August 2020 to give Congress and/or industry time to come up with an alternative. In remarks made when presenting the executive orders (see, attachment), the President made it clear that the IPI Model will cause overseas prices for the targeted medicines to rise and US prices to come down substantially.