Health care providers, health plans and insurers, pharmaceutical and prescription drug companies, prescription benefit manager and consumers should prepare for increased regulation of prescription drug benefit management arrangements and other changes in federal rules on prescription drug pricing, coverage and related practices in response to directives in President Trump’s April 15, 2025 Executive Order on Lowering Drug Prices By Once Again Putting Americans First (the “Executive Order”).
Intended to address widely shared concerns about prescription drug availability, cost and coverage, by the Executive Order declares optimization of health care programs, intellectual property protections, and safety regulations to provide access to prescription drugs at lower costs to American patients and taxpayers the policy of the United States. Persons potentially concerned or impacted by these concerns should monitor the affected agencies for calls for stakeholder input, proposed guidance, and other activities in furtherance of the shaping and implementation of these new policy initiatives.
Medicare-Focused Prescription Drug Reforms
To promote this policy, the Executive Order directs the Department of Health and Human Services (“HHS”) and various other federal agencies to take certain steps to implement this policy. The Executive Order includes several directives to HHS and certain other agencies that President Trump intends to lower the cost of prescription drugs within and outside the Medicare program.
By April 15, 2026, the Executive Order directs HHS to develop a better payment model to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biological products covered by Medicare, including those not subject to the Medicare Drug Price Negotiation Program.
In addition, the Executive Order:
- Directs HHS to work with the Congress to modify the Medicare Drug Price Negotiation Program to align the treatment of small molecule prescription drugs with that of biological products so as to end the distortion that undermines relative investment in small molecule prescription drugs, coupled with other reforms to prevent any increase in overall costs to Medicare and its beneficiaries;
- By June 14, 2025,
- Requires HHS to propose changes to the Medicare Drug Price Negotiation Program regulations for the initial price applicability year 2028 and manufacturer implementation of maximum fair price under such program in 2026, 2027, and 2028 to 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; and
- Requires HHS to require health centers receiving Public Health Service Act Section 330(e) grants to establish practices to make insulin and injectable epinephrine available at or below the discounted price paid by the health center grantee or sub-grantee under the 340B Prescription Drug Program (plus a minimal administration fee) to low income individuals who have a high cost-sharing requirement for either insulin or injectable epinephrine; have a high unmet deductible; or have no healthcare insurance.
- Requires the Assistant to the President for Domestic Policy (“APDP”) in coordination with the Secretary, the Director of the Office of Management and Budget (“OMB Director”), and the Assistant to the President for Economic Policy (“APECP”), to provide recommendations to the President on how best to stabilize and reduce Medicare Part D premiums;
- Requires the HHS Secretary to publish a plan to conduct a survey under the Site-of-Service Price Transparency rules of Social Security Act Section 1833(t)(14)(D)(ii) to determine the hospital acquisition cost for covered outpatient drugs at hospital outpatient departments and propose appropriate adjustments to align Medicare payment with the cost of acquisition, consistent with the budget neutrality requirements;
- Requires HHS to evaluate and propose regulations to ensure that payment within the Medicare program is not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments.
Other Prescription Drug Reforms
In addition to these predominantly Medicare-focused programs, the Executive Order also orders federal agencies to
- Requires the Secretary of Labor to propose regulations pursuant to section 408(b)(2)(B) of the Employee Retirement Income Security Act of 1974 to improve employer health plan fiduciary transparency into the direct and indirect compensation received by pharmacy benefit managers by October 12, 2025;
- Requires the APDP, in coordination with the HHS Secretary, the OMB Director, and the APECP, to provide recommendations to the President on how best to promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain that delivers lower drug prices for Americans by June 14, 2025;
- Requires the Food and Drug Administration to streamline and improve the Importation Program under the Federal Food, Drug, and Cosmetic Act to make it easier for States to obtain approval without sacrificing safety or quality;
- Requires the OMB Director, the APDP, and the Assistant to the President for Economic Policy )”APECP, and HHS Secretary to provide joint recommendations on how best to ensure that manufacturers pay accurate Medicaid drug rebates consistent with section 1927 of the Social Security Act, promote innovation in Medicaid drug payment methodologies, link payments for drugs to the value obtained, and support States in managing drug spending;
- Requires the HHS Secretary, through the Commissioner of Food and Drugs, to issue a report providing administrative and legislative recommendations to accelerate approval of generics, biosimilars, combination products, and second-in-class brand name medications; and improve the process through which prescription drugs can be reclassified as over-the-counter medications, including recommendations to optimally identify prescription drugs that can be safely provided to patients over the counter;
- Requires HHS, the Department of Justice, the Department of Commerce, and the Federal Trade Commission to conduct listening sessions and issue a report with recommendations to reduce anti-competitive behavior from pharmaceutical manufacturers.
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