The pharmaceutical industry is a critical component of the global economy, impacting public health, national security, and economic stability. Recent developments—including investigations into the national security implications of pharmaceutical imports, executive actions aimed at reducing prescription drug prices, and the evolving role of pharmacy benefit managers (PBMs)—highlight the complex interplay of policy, economics, and healthcare.
Recent government announcements highlight several key areas to watch in 2025, both for their potential impacts on the pharmaceutical industry and to potentially provide insights into how the current administration may plan to effectuate policy change in related areas. These, in turn, may illuminate strategies for industry and stakeholder response and engagement in this rapidly evolving regulatory environment.
Pharmaceutical Trade, National Security Considerations, and Potential Tariffs
The US Department of Commerce (DOC) has initiated an investigation under Section 232 of the Trade Expansion Act of 1962 to assess the national security implications of importing pharmaceuticals and pharmaceutical ingredients into the United States. The potential for export restrictions by foreign nations further complicates the landscape, highlighting the need for increased domestic capacity to reduce reliance on imports. As a result, DOC’s investigation is particularly focused on understanding the current and projected demand for these products, the extent of domestic production capabilities, and the role of foreign supply chains.
Interested parties are invited to submit written comments, data, analyses, or other information concerning several topics relating to foreign and domestic manufacturing and supply chains, which may be designated business confidential and not made public (though a public version of the filing will need to be submitted). Topics include, but are not limited to, projected US demand, the ability of domestic production to meet demand, the role of foreign supply chains in meeting demand, risks of reducing the number of suppliers, feasibility of increasing domestic production, and potential export restrictions that may be imposed if tariffs are implemented. The deadline for submitting any comments is May 7, 2025.
To the extent DOC’s findings lead to the imposition of additional tariffs or quotas, the result of this investigation will have significant implications for the pharmaceutical industry, particularly with respect to the costs of imported pharmaceuticals and/or ingredients or other components.
Executive Order on Lowering Prescription Drug Prices
On April 15, 2025, the US administration released an executive order (EO) entitled Lowering Drug Prices by Once Again Putting Americans First. The wide-ranging order sets in motion a suite of initiatives across the executive branch, including at the Centers for Medicare and Medicaid Services (CMS), the US Food and Drug Administration (FDA), the Federal Trade Commission (FTC), DOC, the Office of Management and Budget, and the US Department of Justice (DOJ). With varying approaches, timelines, and likely impacts, stakeholders should carefully track developments arising out of this EO as they have the potential to have broad impacts across the pharmaceutical industry.
CMS and the Medicare Drug Price Negotiation Program
Along with other reforms targeted at preventing further increases in costs to Medicare and its beneficiaries, the EO included directives specific to implementation of the Inflation Reduction Act of 2022 (IRA) and its impact on Medicare Part D spending, requiring the following stepwise changes:
- Within 60 days of the EO, the secretary of the US Department of Health and Human Services (HHS Secretary) is directed to propose and seek comment on guidance for the Drug Price Negotiation Program (MDPNP) for initial price applicability year 2028 and manufacturer effectuation of maximum fair price during program years 2026, 2027, and 2028
- The stated goals of the guidance are to (1) improve transparency, (2) prioritize the selection of high-cost prescription drugs, and (3) minimize any negative impacts of the maximum fair price on pharmaceutical innovation
- Within 180 days of the EO, recommendations will be provided to the US president on how to best stabilize and reduce Medicare Part D premiums
At the same time, the HHS Secretary is directed to work with the US Congress to modify the MDPNP to align the treatment of small molecule prescription drugs with biological products. Previously, the IRA had granted biologics more time on the market than small molecule drugs before becoming eligible for negotiations under the program. Specifically, only biologics that had been on the market for at least 11 years without biosimilar competition were subject to negotiation, whereas small molecule drugs were only granted seven years on the market without generic competition before being eligible for negotiation. By aligning treatment of small molecule drugs to that of biologics, the EO aims to encourage greater investment in small molecule drugs moving forward.
The EO also calls for the HHS Secretary to (1) within one year implement rulemaking and select for testing a payment model to improve the ability of Medicare to obtain better value for high-cost prescription drugs and biologics including those not subject to the MDPNP, (2) within 180 days publish in the Federal Register a plan to conduct a survey to determine hospital acquisition costs for covered outpatient drugs and to, as appropriate, align Medicare payments with the cost of acquisition, and (c) ensure future grants available under section 330(e) of the Public Health Service Act are conditioned upon health centers establishing practices to make insulin and injectable epinephrine available at or below the discounted price paid by the health center grantees or sub-grantees under the 340B Drug Pricing Program to qualifying low-income individuals. Interested stakeholders should closely monitor developments, as the implementation of any changes could have significant business impacts.
FDA and Drug and Biologic Access
The EO directs FDA to take several actions related to spurring access to drug and biologic products, building off—and potentially expanding—programs and initiatives previously developed by FDA in this space. Specifically, within 180 days, FDA is to develop a report recommending “administrative and legislative recommendations” to accelerate competition for “high-cost prescription drugs,” which is to include recommendations related to the approval of generics, biosimilars, combination products, and “second-in-class” brand name medications. In addition, the report is to address recommendations for improving the process for (and identifying candidates for) shifting prescription drug products to over-the-counter (OTC) status. While these initiatives may work to extend FDA’s existing action plans (the FDA Drug Competition Action Plan and Biosimilars Action Plan) in this space, this EO may also spur an expansion of access-driven initiatives within FDA through the added emphasis on combination products, second-in-class products, and OTC products.
In addition, the EO directs FDA, within 90 days, to take steps to “streamline and improve” the pathway for states to obtain approval to import drug products from Canada under Section 804 of the Federal Food, Drug, and Cosmetic Act “without sacrificing safety or quality.”
HHS/FTC/DOJ/DOC Listening Sessions and Report
The EO directs HHS, FTC, DOJ, and DOC to conduct joint public listening sessions and to issue a report with recommendations “to reduce anti-competitive behavior from pharmaceutical manufacturers” within 180 days of the EO. It will be worth watching whether these efforts expand upon or take any new direction beyond those resulting from similar sessions and coordination efforts that have taken place in recent years.
The Evolving Role of PBMs
Over the last several years, the role of PBMs has come under increasing scrutiny. Initially established as third-party administrators to manage prescription drug programs for health plans, PBMs were intended to facilitate consumer access to affordable pharmaceutical care through negotiated discounts and rebates. However, given the trend toward vertical integration of pharmacies into PBM structures and the role of PBMs in influencing drug costs, legislators are facing pressure to implement regulatory change to address PBMs’ market power and its impact on consumers.
Most recently, in an April 14, 2025 letter to Congress, the National Association of Attorneys General called for legislative action against the consolidation of PBMs, emphasizing the role of PBMs in the healthcare marketplace and advocating for a prohibition on PBMs and their affiliates from owning pharmacies, in the interest of fair competition and transparency. With signatures from a diverse group of State Attorneys General, this initiative has potential to gain bipartisan support and will thus be an important area to watch over the coming months.
And while some have expressed skepticism as to whether this initiative will gain traction, Arkansas, on April 16, 2025, signed into law H.B. 1150, which, effective January 1, 2026, prohibits, subject to certain exceptions (e.g., rare, orphan, or limited distribution drugs), PBMs from acquiring or otherwise holding a pharmacy permit for mail-order pharmacies. The Arkansas State Board of Pharmacy is set to begin revoking or not renewing permits on or after that date.
Key Takeaways
The pharmaceutical industry is at a crossroads, facing a rapidly evolving landscape impacted by potential tariffs, executive actions, and the evolving role of PBMs. These issues require careful navigation to ensure compliance, optimization of operations, and protection of consumer interests. Our lawyers are committed to offering their in-depth knowledge and strategic guidance to stakeholders in the pharmaceutical sector, helping them address these complex challenges and seize opportunities for growth and innovation.