The White House announced a most favored nations executive order on Sunday, its latest attempt to lower prescription drug costs in the U.S. The new policy, which relies on international price competition, promises to provide Americans with “the same low prices” for prescription medications available in other countries.
But the policy is founded on incorrect assumptions about how other countries would respond, where seniors’ high out-of-pocket costs really come from, and what it would mean for the U.S. to adopt cost-effectiveness standards used by foreign governments.
The order is impressively bipartisan for its shortsightedness. Since it would include drugs covered under Medicare Part B and D, it is both a jacked-up version of the so-called international pricing index — first proposed by the Trump administration in 2018 — and similar to the international reference pricing proposal included in the drug pricing package that House Democrats passed in December 2019. Even Democratic presidential candidate Joe Biden supports international reference pricing in his campaign platform.
Yet none of these reference pricing proposals show how they would directly reduce out-of-pocket costs for seniors at the pharmacy counter. For example, an Avalere study found that fewer than 1% of older adults in Medicare Part B would see a reduction in out-of-pocket costs as a result of the international pricing index model. In all likelihood, the prices of drugs in other countries will be more affected by the executive order than U.S. drug prices.
But there is an even more worrisome component to the plan. International reference pricing policies effectively endorse the use of discriminatory cost-effectiveness standards often used by other governments. Many of the countries referenced in the order, such as the United Kingdom and Canada, make drug reimbursement and coverage decisions based on cost-effectiveness assessments that are measured by the quality-adjusted life-year (QALY). These assessments assign a financial value to the patients for whom a given treatment is intended.
For instance, patients who are sicker, older, or disabled are assigned less value. When applied to health care decision-making by insurance companies, this can mean that these more vulnerable patients are deemed “too expensive” to receive care.
The QALY is a generalized metric that also does not account for health disparities, incorporating a bias that hurts people of color and low-income communities. The National Council on Disability, an independent federal agency, published a report on QALYs that explicitly called on the Trump administration to rescind its earlier international pricing index proposal because it would rely on prices set internationally using discriminatory metrics of value.
QALYs originated in the 1960s, and have been used by the British government as a way to ration health care for its National Health Service. If we embrace a most favored nation reference pricing policy, it means embracing health care rationing as well. This type of rationing in many European countries has not only resulted in access issues but has also translated into higher mortality rates for chronic diseases, such as cancer.
The organization I lead, the Alliance for Aging Research, joined with nearly 50 national aging and patient advocacy organizations in sending a letter to congressional leaders in July. We specifically opposed “international reference pricing or any other proposals that discount the value of a person’s life because of an individual’s disability, age, or chronic illness in coverage or reimbursement decision-making.” To adopt a metric of cost-effectiveness that lacks compassion and that discriminates against the old, the very ill, or those whose circumstances mean they will get a less than ideal benefit from treatment is a perversion of science, not to mention immoral.
Ultimately, the fact that drugs are inaccessible and unaffordable to many seniors is due to private Part D insurers implementing aggressive cost-sharing. This practice makes seniors pay more for drugs their physicians prescribe and sets patients up to fail to stick with their physicians’ recommended course of treatment.
U.S. seniors have paid their whole lives for what they thought was insurance. They expect — and deserve — better than these scams from both parties to fix it.
Sue Peschin is the president and CEO of the Alliance for Aging Research in Washington, D.C.