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Trump Administration Seeks to Revise Medicare Drug Price Negotiation Law
WASHINGTON (Reuters) – In a recent move, U.S. President Donald Trump directed the Department of Health and Human Services to collaborate with Congress in an effort to reform legislation governing Medicare’s ability to negotiate prices for prescription drugs. This initiative aims to address concerns raised by the pharmaceutical sector, which has been advocating for an extension of the timeline for small molecule drugs—typically pills—that would allow them to be subject to negotiations.
The proposed change would shift the eligibility period for negotiations on these medications to align with the current 13-year waiting period for complex biotech drugs. This timeline is significant, as small molecule drugs represent a large portion of the medication stock available to consumers.
This executive order is part of a broader strategy to lower healthcare expenses and follows the Trump administration’s earlier actions, including a national security review of the pharmaceutical industry—an approach that could potentially lead to targeted tariffs on drug imports.
The ability for Medicare to engage in direct negotiations for specific drugs was previously established under President Joe Biden’s Inflation Reduction Act. Currently, Medicare covers approximately 66 million individuals, with the majority being seniors aged 65 and older.
Pharmaceutical companies have raised concerns regarding the implications of these negotiations, arguing that the legal framework could hinder innovation in drug development. They specifically contest the existing negotiation timeline for most medications, pointing out the disparities in the negotiation eligibility for biologic versus non-biologic drugs.
Under the current law, when competition for a drug is absent, Medicare can negotiate prices for biologic drugs after a period of 13 years post-market launch, whereas this period is only 9 years for pill-based medications. However, Trump’s executive order acknowledges the need for legislative change, as such procedural shifts can’t be executed unilaterally by the administration.
The administration anticipates that revisions to the negotiation framework could lead to even greater savings beyond those achieved during the Biden administration’s initial negotiations, although specific details regarding potential savings were not disclosed during a recent press briefing.
Previously, Biden’s administration successfully negotiated price reductions of up to 79% for the first batch of ten high-cost drugs impacting the Medicare program.
Now, the Trump administration plans to oversee the negotiation of prices for a second group of 15 drugs, encompassing popular treatments such as Novo Nordisk’s Ozempic and Wegovy, which are used for diabetes management and weight loss, alongside Pfizer’s oncology drugs Ibrance and Xtandi.
Additionally, Trump’s order advocates for aligning drug payments made by Medicare with those typically handled by hospitals, where prices can be significantly lower—by as much as 35%. The policy also proposes the implementation of site-neutral payments to ensure that patients are charged uniform rates regardless of their care location.
Furthermore, the directive encourages the Food and Drug Administration (FDA) to expedite state applications for drug importation programs, a concept initially introduced during Trump’s first term. Despite several states applying for such programs, only Florida has received FDA approval to directly import medications from Canada. The order also calls for the FDA to facilitate faster approvals for generics and biosimilars, which provide cost-effective alternatives to branded drugs.
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