An Overview of the Executive Order on Lowering Drug Prices
On April 15, 2025, President Donald J. Trump signed an Executive Order aimed at reducing prescription drug prices in the United States. This order builds upon initiatives from his first term and seeks to address the high costs of medications for American patients, particularly those covered by Medicare and low-income individuals. The Executive Order outlines several key strategies, including improving the Medicare Drug Pricing Negotiation Program, facilitating drug importation, and enhancing transparency in the pharmaceutical value chain.
Key Provisions and Implications
- Medicare Drug Pricing Negotiation Program & Alignment on Drug Pricing
The Executive Order directs the Department of Health and Human Services (HHS) to propose guidance for the Medicare Drug Price Negotiation Program, aiming to increase transparency and prioritize high-cost medications. This initiative seeks to surpass the 22% savings achieved in the program’s first year under the Biden administration. The order also seeks to align the treatment of small molecule prescription drugs with that of biological products, addressing the so-called “pill penalty” that currently results in earlier price negotiations for small molecule drugs. Currently, the pill penalty allows biologics a longer period, i.e., 13 years, before price negotiations can occur (compared to small molecule drugs, which have price controls for only nine years), potentially hindering investment incentives and impeding drug development in small molecule drugs.
- Drug Importation & Access to Affordable Medications
The order revives efforts to allow states to import lower-cost drugs from Canada, a policy initially introduced during Trump’s first term. This measure is intended to provide states with more affordable options and reduce overall prescription drug costs. Additionally, the order mandates that community health centers offer insulin and injectable epinephrine at significantly reduced prices—i.e., at or below the discounted price paid by the center under the 340B Prescription Drug Program (plus an administration fee)—to low-income and uninsured patients.
- Transparency and Competition in the Pharmaceutical Market
The Executive Order emphasizes the need for transparency in the pharmaceutical market by improving the disclosure of fees paid by pharmacy benefit managers (PBMs) and promoting a competitive drug value chain. This approach aims to reduce the influence of multiple layers of middlemen so that savings are passed on to patients, rather than retained by intermediaries. As many states seek to enact legislation enhancing PBM oversight, the interplay of those state laws and the Executive Order may create industry confusion.
- Potential Impacts on Businesses and Individuals
The Executive Order is poised to have significant implications for both businesses and individuals. For pharmaceutical companies, the changes to the Medicare Drug Pricing Negotiation Program could impact development, particularly concerning small molecule drugs. The increased transparency requirements for PBMs may also impact their business models and fee structures, as well as negotiations with plans.
For individuals, particularly Medicare beneficiaries and low-income patients, the order promises potential cost savings on prescription drugs. The Trump Administration pointed out that the standardization of Medicare payments for drugs, regardless of the care setting, could lower out-of-pocket expenses for patients receiving treatments like chemotherapy.
Legal experts have noted that while the Executive Order includes ambitious goals, its implementation will require collaboration with Congress, particularly for changes to the Medicare negotiation program. The pharmaceutical industry has expressed concerns about the potential impact on innovation and the development of new treatments. It has also historically opposed changes to the Medicare Drug Price Negotiation Program, citing concerns about innovation and market dynamics. As such, litigation is anticipated as stakeholders navigate the implications of the order.
Moreover, the Executive Order's focus on transparency and competition in the pharmaceutical market may lead to increased scrutiny of pharmacy benefit managers and their role in drug pricing. As a result, pharmacy benefit managers should be prepared for issues related to antitrust and regulatory compliance as the order's provisions are implemented.
Overall, President Trump’s Executive Order on lowering drug prices represents a comprehensive effort to address the high cost of medications in the United States. However, its success will depend on legislative support, industry buy-in, and effective implementation. It also remains to be seen how the imposition of various tariffs that will likely impact drug importation will influence some of the order’s goals and purpose. If faced with drug shortages, market demand may negate any positive movement on drug pricing and transparency.
Sources:
- Fact Sheet: President Donald J. Trump Announces Actions to Lower Prescription Drug Prices, The White House, (April 15, 2025), available here.
- Nathaniel, Weixel, Trump executive order backs change to Medicare negotiation pushed by drug industry, The Hill, (April 15, 2025), available here.
- Tami Luhby, Trump signs directive on lowering drug prices even as he seeks tariffs on pharmaceuticals, CNN Politics, (April 15, 2025), available here.
- Dominique Mosbergen and Jared S. Hopkins, Trump Signs Executive Order on Drug Pricing, MSN, (April 15, 2025), available here.
- Rebecca Robbins and Margot Sanger-Katz, Trump Seeks to Lower Drug Prices Through Medicare and Some Imports, The New York Times, (April 15, 2025), available here.
- Ahmed Aboulenein, Trump signs healthcare executive order that includes a win for pharma companies, MarketScreener, (April 15, 2025), available here.
- Jake Johnson, 'Trump Just Caved to Big Pharma—Again': New Order Aims to Delay Drug Price Negotiations, Common Dreams, (April 15, 2025), available here.
- Catherine Stoddard, Trump executive order targets prescription drug prices, Live NOW Fox, (April 15, 2025), available here.
