Through the issuance of Inauguration Day executive orders, the Trump Administration signaled its apparent intent to tackle drug pricing reforms over the next four years. However, Biden-era policies are likely to limit a comprehensive overhaul of existing reforms in the near term.
Former President Biden Signs the Inflation Reduction Act into Law
In 2022, President Biden signed the Inflation Reduction Act (IRA) into law, beckoning the implementation of sprawling drug pricing reforms, including formalization of the Medicare Drug Price Negotiation Program and the establishment of inflation rebates for certain drug price increases, among other reforms related to Medicare Part B and D drug costs.
Of particular import, the establishment of the Medicare Drug Price Negotiation Program granted the Centers for Medicare & Medicaid Services (CMS) the authority to negotiate with manufacturers the maximum price Medicare will pay for certain high expenditure drug products, with the first round of negotiated prices set to go into effect on January 1, 2026.
Executive Order 14087 – Lowering Prescription Drug Costs for Americans
To further implement the IRA’s drug pricing reforms, in October 2022, President Biden issued Executive Order 14087, requiring the Secretary of Health and Human Services to select and assess certain health care payment and delivery models that may serve to lower drug costs and promote access to innovative drug therapies. Specifically, Biden ordered HHS’s Center for Medicare and Medicaid Innovation (CMMI) to (1) test delivery models that focused on reducing cost-sharing and supporting value-based payment, (2) provide a report to the Assistant to the President for Domestic Policy on the proposed models, and (3) take appropriate action to test the models discussed in the report.
In early 2023, CMMI put forth three experimental pricing models:
- Medicare High-Value Drug List Model: This voluntary model targets chronic conditions common among Medicare beneficiaries (e.g., hyperlipidemia, hypertension). Under this model, Part D plan sponsors could offer a standard list of generic drugs at a maximum copayment of $2 for a 30-day supply.
- Cell and Gene Therapy (CGT) Access Model: This voluntary model would allow state Medicaid agencies to work with CMS to negotiate multistate outcomes-based agreements with manufacturers for gene therapies.
- Accelerated Clinical Evidence Model: Under this mandatory model, CMS would adjust payments to providers for drugs that benefited from accelerated FDA approval under the Accelerated Approval Program (AAP). The intent behind the program is to incentivize manufacturers to conduct and complete all confirmatory safety and efficacy trials post-approval.
CMMI also identified three additional models for further research: (1) accelerating biosimilar adoption, (2) data access changes to support price transparency, and (3) cell and gene therapy access in Medicare Fee-for-Service. None of the proposed models was ready for implementation at the end of the Biden administration.
CMS Gets Ahead of IRA Deadline for Selected Drugs for 2027
On January 17, 2025, prior to President Trump’s inauguration and in anticipation of the IRA’s February 1, 2025 deadline, CMS announced its selection of the 15 Medicare Part D covered drugs subject to the second cycle of price negotiations. With new prices set to take effect on January 1, 2027, the 15 drugs CMS selected for negotiations are: (1) Ozempic; Rybelsus; Wegovy; (2) Trelegy Ellipta; (3) Xtandi; (4) Pomalyst; (5) Ibrance; (6) Ofev; (7) Linzess; (8) Calquence; (9) Austedo; Austedo XR; (10) Breo Ellipta; (11) Tradjenta; (12) Xifaxan; (13) Vraylar; (14) Janumet; Janumet XR; and (15) Otezla.
By announcing the new slate of drugs selected for negotiation, CMS starts the statutory clock for manufacturers of selected drugs to decide whether they will participate in the negotiations and, if so, to begin collecting manufacturer-specific data required of program participants.
Trump Rescinds Biden-Era Executive Order
On January 20, 2025, on his first day back in office, President Trump rescinded many Biden-issued executive orders, including Executive Order No. 14087. Given that the IRA requires applicable drug manufacturers to fulfill certain statutory obligations once a drug is selected for negotiation, the rescission of Executive Order No. 14087 is unlikely to affect the selected drugs for 2027.
Additionally, since many of the drug pricing reforms implemented by the Biden Administration are housed within the IRA (e.g., the $2,000 annual cap on out-of-pocket prescription drug costs, inflation rebates, etc.), congressional action beyond the issuance of executive orders is likely necessary to meaningfully change course and thus obviate the possibility that Biden-era reforms will disappear in the near term. Nevertheless, rescission of this executive order at least suggests that drug price negotiations under the IRA are likely to be a focus of the Trump administration moving forward.
Key Takeaways
Trump’s rescission of Biden administration Executive Order No. 14087 will not impact recent implementation of price caps on insulin and out-of-pocket patient costs.
Trump’s executive order won’t affect Medicare’s Drug Price Negotiation Program and will not impact negotiation of the 15 drugs that CMS announced on January 17, 2025.
Trump’s executive order does not preclude CMMI from moving forward with demonstration of its pricing models. CMMI has distinct legal authority to develop, and could move forward with developing, its experimental pricing models if it chooses to do so. However, with the Trump administration installing new personnel at CMMI, it is unlikely Biden era initiatives will gain traction or be implemented under the Trump administration.
Drug pricing remains a bipartisan issue. And while critical IRA provisions remain unaffected, the future direction of federal health care policy and Medicare’s Drug Price Negotiation Program remain uncertain. President Trump made efforts to address drug pricing during his first administration (e.g., most favorite nations drug pricing, disclosure of drug prices in television ads, etc.) and his executive order signals drug pricing reforms may come sooner than later.
Where CMS Can Go from Here under the Trump Administration
Although a possibility, it is unlikely we will see a wholesale repeal of the IRA.
What is more likely should the Trump administration seek to make changes to the Drug Price Negotiation Program would be for CMS to issue revised guidance and proceed with rulemaking. In this scenario, the Trump administration could potentially pause, change, or eliminate certain price negotiation program requirements (e.g., CMS and manufacturer meeting deadlines, number of meetings, etc.) without congressional intervention.
In what some might characterize as a more aggressive approach, the administration could also instruct its lawyers to walk away from current legal challenges to the IRA, like directives given during Trump’s first administration with respect to constitutional challenges to the Affordable Care Act. The administration has not signaled it will move in this direction.
It is hard to know what direction the administration will take because drug pricing wasn’t a major discussion point on the campaign trail. However, guidance for price applicability year 2028 is anticipated to be released this spring and will likely provide the first hint as to what direction the Trump administration will go.
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