Trump Moves to Slash Healthcare Costs With New Executive Order

On Tuesday, President Donald Trump instructed his health department to work with Congress to revamp a law allowing Medicare to negotiate the price of prescription drugs. The change was pushed by the pharmaceutical industry.

The drug industry has been trying to push back the date when small-molecule drugs are eligible for price negotiation by four years. These are mostly pills and make up most of the medicines.

This would be in line with the 13-year wait before more complex biotechnological drugs are eligible for Medicare price negotiation.

The wide-ranging executive order signed by Trump aims to reduce healthcare costs. It comes one day after the Trump administration instituted a national security report into the pharmaceutical industry, a precursor to sector-specific tariffs.

The Inflation Reduction Act by President Joe Biden included the ability for Medicare to negotiate directly prices on certain medicines. Medicare covers about 66 million Americans – mostly seniors.

Drugmakers have complained that Medicare’s negotiation powers would hinder innovation. The industry is particularly opposed to the timeframe for negotiation eligibility of most drugs.

The law allows for the government to negotiate the price of complex biologic or biotech drugs that have been on the market for 13 years, but only after 9 years for pills and capsules.

Trump can’t implement the change by executive order because the negotiation process has been outlined in legislation. However, his order instructs Health and Human Services Sec. Robert F. Kennedy Jr. that he should work with Congress to make the necessary changes.

White House officials said on a conference call with reporters before the signing that other proposed changes to negotiation would result in more savings than the ones achieved during the initial round under the Biden Administration. They did not provide specifics.

Biden’s Administration had negotiated price cuts of up to 79% on the first 10 drugs that were deemed the most expensive for Medicare.

The Trump administration is negotiating prices for the second set of 15 drugs, including Novo Nordisk’s popular diabetes and weight loss treatments, Ozempic & Wegovy, and Pfizer’s cancer drugs Ibrance & Xtandi.

Trump’s order seeks to also align Medicare payments for drugs with those of the hospitals, which are often 35% lower. It also calls for standardizing payment rates for patients across locations so that they don’t pay different rates depending on their location. This policy is known as “site-neutral payments”.

Trump instructed the Food and Drug Administration (FDA) to encourage states to apply for more drug importation programs that were started during his first term.

Despite the fact that several other states have also applied, only Florida has received FDA approval to import directly from Canada. The FDA is also directed to expedite the approval of less expensive biosimilar and generic versions of brand medicines.