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President Donald Trump is poised to retain a significant aspect of the Medicare drug pricing process that enables negotiations with pharmaceutical manufacturers, despite efforts to roll back other initiatives introduced during Joe Biden’s administration.
While President Trump is not likely to eliminate the drug negotiations altogether, adjustments are expected, potentially without congressional input. “Trump is looking to fine-tune the law rather than completely discard the drug negotiation framework,” remarked Matthew Kupferberg, a partner in Frier Levitt’s Life Sciences Group.
The direction Trump will take remains uncertain. Some healthcare policymakers express concern that he may weaken negotiations to the benefit of the drug industry, while others suggest he might pursue ways to enhance savings for patients and the federal government, attempting to exceed the accomplishments of his predecessor.
The outcome of his decisions could heavily impact the medication costs faced by the 68 million Medicare beneficiaries in the U.S. Additionally, the implications are significant for major pharmaceutical companies such as Novo Nordisk, Bristol Myers Squibb, Pfizer, and Merck, all of which had their products included in recent negotiations.
These negotiations are a central feature of Biden’s Inflation Reduction Act (IRA), aimed at reducing prescription drug prices for seniors and achieving nearly $100 billion in Medicare savings over the coming decade. The pharmaceutical sector has mounted staunch opposition to these negotiations, claiming they threaten profits and stifle innovation in drug development.
Currently, the Trump administration has not provided many details regarding its negotiating approach, aside from an announcement in January regarding a commitment to seek “greater transparency” during the next round of talks while welcoming external feedback on improving the process.
Alterations to the negotiation framework could face challenges in Congress, where Republicans hold narrow majorities. Efforts to contain soaring healthcare costs generally enjoy bipartisan support, as Americans often pay significantly higher prices for medications compared to individuals in other developed nations. This makes any sweeping changes potentially unpopular for Trump.
Therefore, the administration might consider implementing different interpretations of existing laws instead of outright repeals. “The interpretation of the statutory language will be pivotal,” noted Juliette Cubanski, deputy director of the Medicare policy program at KFF, a health policy organization.
The upcoming negotiation cycle will involve a fresh group of 15 drugs, with new pricing set to take effect in 2027—these medications were chosen by the Biden administration in January before Trump assumed office. Drug manufacturers must confirm their participation in the negotiations by the end of February, as opting out could result in substantial financial penalties.
Potential Actions by Trump Administration
To date, Trump has emphasized the necessity for increased transparency in Medicare negotiations for drug prices. Kupferberg explained that this could entail shedding light on the criteria for drug selection and pricing agreements.
During the initial negotiation phase, Medicare solicited public input from a variety of stakeholders, including patients and consumer organizations. However, Kupferberg highlighted that the Trump administration could expand this stakeholder engagement to include insurers and pharmacy benefit managers.
“A broader negotiation approach could be introduced,” he suggested.
Furthermore, the administration might redefine the criteria set forth in the IRA, impacting which products are selected for negotiation and the extent of price reductions achieved, as indicated by Amy Campbell, associate dean for law and health sciences at the University of Illinois Chicago School of Law.
For example, the IRA stipulates that drugs eligible for negotiation must have been on the market for a certain period without generic alternatives, which could be subject to a less stringent interpretation under Trump, potentially benefiting drug manufacturers.
Another aspect of interpretation involves how Medicare determines what constitutes a single drug during negotiations. Currently, various products sharing the same active ingredient can be evaluated as one, which the pharmaceutical industry finds objectionable.
The Biden administration previously included multiple products from Novo Nordisk with the same active ingredient as a single entity during its negotiations. Significant changes to how drugs are grouped could alleviate financial pressure on drugmakers and protect their revenues from decreased pricing.
A substantial consideration is how vigorously Medicare will pursue price negotiations under the Trump administration, particularly concerning the established upper limit for negotiated drug prices by the IRA.
Legislative Hurdles Ahead
Comprehensive alterations to the negotiation process are unlikely to occur without congressional collaboration. The pharmaceutical sector is particularly concerned about what it refers to as the “pill penalty,” which offers biologics extended price negotiation exemptions compared to oral medications.
A bipartisan proposal introduced last year aims to eliminate this discrepancy. If such legislation reaches Trump’s desk, experts like Cubanski believe it would likely receive his signature. However, the feasibility of garnering enough support in Congress remains uncertain.
While some bipartisan initiatives, like pharmacy benefit manager reform, seem to enjoy traction, opinions vary on whether similar enthusiasm exists for adjusting the IRA.
Ongoing Legal Challenges
The Trump administration’s approach to active legal challenges from pharmaceutical companies regarding the Medicare negotiations remains ambiguous. Industry lawsuits arguing that the negotiation process is unconstitutional have yet to see success in legal proceedings.
As of January, nine lawsuits were ongoing, raising questions about how Trump’s government will position itself during these court battles. “Will the Trump administration continue to support the program in legal contexts?” Cubanski posited. “Those inquiries will be crucial moving forward.”
If the administration ceases to defend the negotiations in court, any potential judicial rulings could occur without opposition. However, Kupferberg speculated that the Trump administration would likely prefer to maintain influence over the negotiations rather than allow the process to dissolve entirely due to legal setbacks.
Given the absence of a solid alternative proposal from Trump, retaining control over the current negotiation process appears to be a priority.
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