Publication
Article
Issues
Author(s):
On April 15, 2025, the White House issued an Executive Order (EO) on drug pricing: Lowering Drug Prices by Once Again Putting America First.1 The EO directs various agencies to take several actions aimed at lowering prescription drug prices. Several of these policy steps focus on improving transparency and competition in the prescription drug pricing and value chain. The EO also seeks to address variations in the way Medicare treats, or reimburses for, certain drugs. For example, it would align the timelines for eligibility for Medicare price negotiation for small-molecule drugs and biologics. It also seeks to address disparities in Medicare payment levels for certain outpatient drugs based on where the medication is delivered.
The EO includes steps to accomplish the following:
Inflation Reduction Act (IRA)
The EO asks the Secretary of the Department of Health and Human Services (HHS) to propose guidance to improve the transparency of the Medicare Part D Price Negotiation Program for prices applicable in 2028 and to minimize any negative effects of the maximum fair price (MFP) on pharmaceutical innovation in the US. The MFP is the price that manufacturers negotiate with the Centers for Medicare & Medicaid Services (CMS) under the IRA. The EO also requests recommendations on how best to stabilize and reduce Part D premiums.
Notably, the EO also asks the Secretary of HHS to work with Congress to align the treatment of small-molecule drugs with that of large-molecule drugs under the Medicare price negotiation program, together with reforms to prevent increases in overall costs to Medicare or enrollees.2 Under the IRA, the prices of oral medications are eligible for negotiation 4 years before those of biologics (9 years post-FDA approval vs 13 years for biologics). This is sometimes referred to as the “small-pill penalty.” The EO states that this differential treatment distorts relative investment in small-molecule drugs. Unlike other aspects of the EO, this change would require federal legislation. Thus, the EO implicitly signals support for a bill that would address this issue, the Ensuring Pathways to Innovative Cures (EPIC) Act of 2025 (H.R. 1492/S. 832).3
Reducing Costs of HighPrice Drugs for Seniors
The EO asks the Secretary of HHS to develop, select, and test a payment model to improve Medicare’s ability to obtain better value for high-priced prescription drugs and biologics, including those not subject to drug price negotiation under the IRA. Experts note that the approach of potentially including a broad selection of Part B and Part D drugs could result in more savings, since Medicare spends more on Part D than Part B.2 Additionally, while the approach and direction of the model are not clear at this point, during his first term, President Trump relied on authority under the Center for Medicare and Medicaid Innovation (CMMI) to propose models that referenced pricing models used by other countries.3 The EO references this past effort to “dramatically narrow the price disparity between the United States and foreign nations over time.”
Surveying and Possibly Changing Reimbursement for Outpatient Drugs at Most 340(b) Hospitals4, 5
The EO requires the HHS Secretary to develop a plan to conduct a survey to determine acquisition costs for covered drugs at hospital outpatient departments. This step raises the question of whether the administration intends to revive a CMS action taken during President Trump’s first term, when CMS reduced payments under the outpatient prospective payment system (OPPS) for certain drugs to most hospitals participating in the 340(b) program (from average sales price [ASP] plus 6% to ASP minus 22.5%). The Supreme Court overturned the reductions because CMS had not first conducted a statutorily required survey of hospitals’ drug acquisition costs.6 After the survey is complete, the EO asks the Secretary to consider and propose adjustments to align Medicare payments with the acquisition costs. Hence, by requiring this survey, the EO may be paving the way for this policy change.
PBM Transparency
The EO calls for increased transparency in the pharmaceutical value chain and asks for regulations to improve employer health plan fiduciary transparency into the direct and indirect compensation received by PBMs.
Accelerate Competition for High-Cost Prescription Drugs
The EO asks for a report with legislative and administrative recommendations to accelerate the approval of generics, biosimilars, combination products, and second-in-class brand-name medications, and to improve the process for reclassifying prescription drugs as over-the-counter medications.
Increasing Prescription Drug Importation to Lower Prices
The EO requests steps to streamline, improve, and ease the process for states to obtain approval under the FDA’s drug importation program.6 Only 1 state, Florida, has received FDA approval for such a program and, as of late 2024, it has not imported drugs under its plan.5
Address Medicare Payment Disparities Between Hospitals and Community Practices (Site-Neutral Payments)
The EO requires the Secretary to evaluate, and, if appropriate, propose regulations to ensure that Medicare program payments are not encouraging drug administration away from less costly physician office settings to more expensive hospital outpatient departments. To date, certain site-neutral payment policies have been implemented, but they have been modest in scope.7
Combating Anticompetitive Behavior by Pharmaceutical Manufacturers
The EO requires the Secretary to conduct joint public listening sessions with the Department of Justice, the Department of Commerce, and the Federal Trade Commission and issue a report with recommendations to reduce anticompetitive behavior from pharmaceutical manufacturers.
Conclusion and Next Steps
The EO reveals a number of the Trump administration’s policy objectives in the area of prescription drug pricing. Details will emerge as agencies move to implement the directives. In 1 case, to address the “small-pill penalty,” the EO recognizes that Congressional action will be needed. It also calls for both legislative and administrative recommendations to accelerate competition for high-cost prescription drugs. The EO includes timelines for each of its required actions, ranging from 90 days to 1 year.8 Therefore, more information about some of the proposed policies will be available soon.
Nicole Tapay, JD, is director of Cancer Care Delivery and Health Policy at the Association of Cancer Care Centers, Rockville, Maryland.
References
1. The White House. Lowering drug prices by once again putting America first, executive order, April 15, 2025. Accessed April 21, 2025. https://www. whitehouse.gov/presidential-actions/2025/04/ lowering-drug-prices-by-once-again-puttingamericans-first/.
2. West M, Joldersma L, Sullivan M et al. Avalere Health. Trump EO lays out a roadmap for drug pricing action. April 21, 2025. Accessed April 21, 2025.
3. Modi P, Temkin E, Handwerker J, Hicks K, Kracov D, Maxwell R. Arnold and Porter. Trump administration issues executive order to lower prescription drug costs. Accessed April 23, 2025. https://www.arnold porter.com/en/perspectives/advisories/2025/04/ trump-admin-eo-to-lower-prescription-drug-costs.
4. Datta M, Wear T, Starks C, Griffin S, Andelman T. Sidley. Drug pricing executive order aims to end Inflation Reduction Act “pill penalty,” resurrect policies from first Trump administration. April 17, 2025. Accessed April 23, 2025. https://www.sidley. com/en/insights/newsupdates/2025/04/ drug-pricing-executive-order-aims-to-end-inflationreduction-act-pill-penalty-resurrect-policies.
5. Sachs R. Administration lays out drug pricing plan through executive order. Health Affairs. 10.1377/ forefront.20250416.418190. April 16, 2025. Accessed April 23, 2025. https://www.healthaffairs.org/ content/forefront/administration-lays-out-drugpricing-plan-through-executive-order
6. Arnold and Porter, citing American Hospital Ass’n v. Becerra, 142 S.Ct. 1896 (2022). See also Health Affairs and Sidley.
7. Levinson Z, Neuman T, Hulver S. Five Things to know about Medicare site-neutral payment reforms. Kaiser Family Foundation. June 14, 2024. Accessed April 23, 2025. https://www.kff.org/medicare/ issue-brief/five-things-to-know-about-medicaresite-neutral-payment-reforms/
8. Abram AK, Bishop SM, Barone C. Akin Gump. The Trump administration turns to drug pricing: Key actions and timelines under the new EO. April 17, 2025. Accessed April 23, 2025. https://www.akingump. com/en/insights/alerts/the-trump-administrationturns-to-drug-pricing-key-actions-and-timelinesunder-the-new-eo
