President Donald Trump has signed an executive order looking to modify the Inflation Reduction Act’s (IRA’s) drug price negotiation program, among other policy shifts.
The wide-ranging order requires the Department of Health and Human Services to seek public comment on the drug price negotiation program, which effectively requires manufacturers to agree to lower prices for certain drugs, for potential changes in upcoming years.
“The guidance shall improve the transparency of the Medicare drug price negotiation program, prioritize the selection of prescription drugs with high costs to the Medicare program and minimize any negative impacts of the maximum fair price on pharmaceutical innovation within the United States,” the order reads.
This signals a shift away from gross prices to net drug prices under Part D, said former Food and Drug Administration Commissioner Scott Gottlieb in a post on X.
“If CMS uses net price as a ceiling, then negotiated discounts could increase on these drugs,” he explained.
The administration’s goal is to surpass 22% in savings, the results of the first year of the negotiation program, a fact sheet reveals. In the order’s text, the White House slammed the signature Biden-era law and said that the prior administration had “reversed, walked back, or neglected” to continue pharmaceutical policies Trump outlined in his first term.
“While [the drug price negotiation program] has the commendable goal of reducing the drug prices Medicare and its beneficiaries pay, its administratively complex and expensive regime has thus far produced much lower savings than projected,” the order said.
Building off a pledge from Trump to rein in drug middlemen, the executive order instructs his policy team to give him recommendations on pharmacy benefit managers and the “pharmaceutical value chain.”
Secretary of Labor Lori Chavez-DeRemer is expected to propose regulations meant to bolster health plan fiduciary transparency from direct and indirect compensation received by PBMs under the Employee Retirement Income Security Act of 1974. In recent months, large corporations—most recently JPMorgan Chase— have been sued by employees for mismanaging benefits, resulting in higher prescription drug costs.
Specifically, the order will try to force PBMs to share how much they are paying brokers to steer employers to utilize their services, the fact sheet clarifies.
Continuing off a government-wide push to slash the regulatory state and eliminate anti-competitive rules, the order tells HHS Secretary Robert F. Kennedy Jr. to hold public listening sessions on anti-competitive behavior by pharmaceutical manufacturers with the Department of Justice, Department of Commerce and the Federal Trade Commission.
CMS released a request for information last week on how to reduce administrative burden by eliminating rules, memos and data reporting requirements in the Medicare program.
PBM trade group The Pharmaceutical Care Management Association said it is looking forward to continuing to reduce the price of insulin and lower premiums with the Trump administration.
“We are ready to work with the White House, plan sponsors and other stakeholders on solutions that will effectively lower prices and improve outcomes for patients—while protecting the Part D program and beneficiaries from premium hikes and lost access to pharmacy options,” the group said in a statement.
Over the next six months, the administration will provide recommendations on how to “stabilize and reduce” Part D premiums. CMS enacted a voluntary demonstration program last year, designed to limit premium increases and smooth the IRA’s rollout. The program, and the law itself, was roundly criticized by Republicans for being a bailout due to bad policy.
Another criticism of the IRA is the program’s so-called ‘pill penalty.’ The pharma industry slams this provision for mandating small-molecule drugs be eligible for the negotiation program four years earlier than large molecule drugs, therefore incentivizing large molecule drug development. Trump’s order vows to end this “distortion.”
“I applaud President Trump for taking meaningful steps to reverse the IRA’s innovation-killing pill penalty similar to the EPIC Act in Congress, ensure care isn’t pushed out of less costly doctors’ offices, and bring transparency to Americans’ prescription drug benefits,” said Rep. Greg Murphy, R-North Carolina, in a statement.
The provision’s inclusion was not supported by Patients for Affordable Drugs, calling it a “deeply harmful” item that caves to pharmaceutical lobbyists.
“It would hand drug companies four additional years to price-gouge patients, one in three of whom can’t afford their prescription drugs today,” said Executive Director Merith Basey. “This change isn’t about supporting innovation as the industry claims – it’s about protecting exorbitant profits.”
Further, Trump is calling on HHS to design a payment model to “improve the ability of the Medicare program to obtain value for high-cost prescription drugs,” as well as accelerate approval of generic drugs and biosimilars.
The aforementioned six-month timeframe is expected to include a survey published in the Federal Register to outline the hospital acquisition cost for covered outpatient drugs at outpatient departments, which could lead to “appropriate adjustments” to Medicare payment.
His order requires Kennedy to evaluate site-neutral payment reform and whether Medicare payment is “encouraging” a shift in drug administration volume toward costly hospital outpatient departments.
Grants must also be “conditioned” for federally qualified health centers making discounted insulin and injectable epinephrine under the 340B program. Drug pricing consultant Brian Reid guessed the 340B hospital provision may prove to be the most “impactful” in a post analyzing the order.
“340B hospitals are going to get gored,” he said. Trade group America’s Essential Hospitals agreed the order would “devastate” hospitals participating in the 340B program due to the reduced Medicare payments.
The Federation of American Hospitals viewed the executive order as a positive.
“The executive order embraces the first term policy to adjust Medicare outpatient hospital drug payments for the deep 340B discounts,” said President and CEO Chip Kahn in a statement. “This executive order remedies process issues that sidetracked the initiative previously. So, beneficiaries will see lower drug cost sharing while fairness of drug payment will increase.”
Additionally, the administration is trying to ensure drug manufacturers pay accurate Medicaid drug rebates.