Marissa Plescia , 2025-04-16 23:20:00
President Donald Trump signed an executive order on prescription drug costs on Tuesday, which includes a potential change to the Medicare Drug Price Negotiation Program that will likely make some pharmaceutical companies happy.
The negotiation program was introduced by the Biden administration via the Inflation Reduction Act. It allows the federal government to negotiate the prices of some of the costliest Medicare Part D drugs directly with drug companies. The first 10 drugs selected for negotiation were announced in August 2023, and the negotiated prices will take effect in 2026. An additional 15 drugs were added in January in the final days of the Biden administration, and these negotiated prices will go into effect in 2027.
Currently, drugs can only be selected for negotiation if they are brand-name drugs or biological products without generic or biosimilar equivalents. Small molecule drugs have to be seven years past their FDA approval or licensure date, while biologics have to be 11 years past this date, according to KFF. Small molecule drugs usually come in the form of pills or tablets and are generally cheaper and easier to manufacture than biologics.
However, the Trump administration is directing Robert F. Kennedy Jr., the secretary of the U.S. Department of Health and Human Services, to work with Congress to modify the program to “align the treatment of small molecule prescription drugs with that of biological products,” according to the executive order.
In other words, the executive order could give small molecule drugs an extra four years before they’re eligible to be selected for the negotiation program. Therefore, both small molecule drugs and biologics would be eligible for selection after 11 years on the market.
Pharmaceutical companies have referred to small molecule drugs’ shorter timeframe for selection as a “pill penalty,” arguing that it could reduce incentives to invest in their development. So extending the timeline would be a win for drug companies. In fact, a spokesperson for PhRMA, a trade group for pharmaceutical companies, applauded the executive order.
“We are encouraged that there is growing support for fixing the [Inflation Reduction Act’s] pill penalty that has already led to a 70% reduction in investment in small molecule medicines that are more convenient and affordable for patients,” said Alex Schriver, senior vice president of public affairs at PhRMA, in an email.
However, the move could be a blow to patients.
“Changing the law to further delay the selection of small molecule drugs for Medicare price negotiation would come at a cost to Medicare and beneficiaries by giving drug companies 4 additional years of setting their own prices on these drugs prior to being eligible for negotiation by the federal government, unless combined with other changes to prevent higher spending,” KFF said in a brief on Wednesday.
What this means for the drugs already selected for negotiation is still unclear, but it doesn’t seem likely that the government will change the drugs already chosen, according to Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF. The current list of drugs were selected based on criteria specified in the law and existing regulations, so the drugs should be final.
However, if this provision had been in place when the current drugs had been chosen for negotiation, then more than half of the drugs would not have been eligible, according to KFF. This includes five of the 10 drugs selected for the first round of negotiations and eight of the 15 drugs selected for the second round of negotiations. Examples are blood thinner Eliquis, weight loss drug Ozempic and breast cancer drug Ibrance.
Patients for Affordable Drugs, a patient advocacy organization, called the provision on the negotiation program “deeply harmful.”
“Delaying Medicare negotiation for small-molecule drugs – the most commonly used medications – is a clear giveaway to Big Pharma. It would hand drug companies four additional years to price-gouge patients, one in three of whom can’t afford their prescription drugs today,” said Merith Basey, executive director of the organization, in a statement. “This change isn’t about supporting innovation as the industry claims – it’s about protecting exorbitant profits.”
Basey did note that patients will be encouraged by other steps taken in this executive order, including efforts to increase competition for generics and biosimilars, reduce insulin costs and improve accountability on pharmacy benefit managers. With the latter provision, the administration aims to improve the disclosure of fees that PBMs pay brokers for directing employers to their services.
The National Community Pharmacists Association, an advocacy organization for community pharmacists, said it is optimistic about the administration’s efforts to crack down on PBMs.
“President Trump has talked several times about the need to rein them in, and we’re pleased he’s looking to do so,” the organization said in a statement. “Independent community pharmacies are competing against a deck that is stacked against them by PBMs who want to stomp out their competition through anticompetitive tactics like paying the pharmacy below its cost to buy drugs and overzealous audits. Ultimately these henchmen for Big Insurance increase prescription costs and reduce access for consumers.”
That said, the “devil will be in the details and in the implementation,” NCPA stated.
Photo: z_wei, Getty Images