The Trump administration has embarked on the second cycle of negotiating drug prices under the Inflation Reduction Act (IRA), a process set to influence the cost of medications for 68 million Medicare beneficiaries. This negotiation phase, initiated by the Biden administration in January, includes 15 drugs whose new prices will be effective in 2027. However, the Trump administration's approach to these negotiations could lead to significant changes in the implementation of the IRA provision.
The negotiation process, which involves establishing a "ceiling" price for selected drugs, is a critical component of the IRA. The law stipulates that drugs must have been on the market for at least seven years without generic competitors—or 11 years in the case of biologic products like vaccines—before being eligible for negotiation. The Trump administration has indicated a commitment to "greater transparency" and openness to external stakeholder input throughout this cycle.
Despite this stated transparency, specifics on how the Trump administration will conduct these negotiations remain sparse. The administration may reinterpret key aspects of the law, such as the selection criteria for drugs and whether a drug has adequate market competition to warrant exemption from negotiated prices. Juliette Cubanski commented on this potential variability, noting, "I think it is a question of how they interpret some of the statutory language."
The administration's approach could also influence Medicare's initial price offer for drugs, potentially aligning it closer to the ceiling price. This positioning might weaken Medicare's leverage in securing substantial discounts. Furthermore, the administration's potential modifications could occur without congressional intervention, suggesting a more flexible and dynamic negotiation process.
In January, as part of the second cycle, the Biden administration selected three Novo Nordisk branded medications containing semaglutide as a single product for price talks. Such decisions could be revisited under the Trump administration's potentially "looser standards" regarding market competition assessments. Matthew Kupferberg speculated on this approach, stating, "Trump is looking to nibble around the edges of the law" and suggesting that "it could be a much broader type of negotiation process."
The ongoing legal landscape adds another layer of complexity to these negotiations. As of January, nine lawsuits related to the IRA were active. These legal challenges could influence how the Trump administration proceeds and whether it seeks to alter course from its predecessor.
The stakes are high for both patients and pharmaceutical companies. For patients, particularly Medicare beneficiaries, changes in drug pricing negotiations could significantly affect out-of-pocket costs and medication access. For pharmaceutical companies, alterations could impact revenue streams and market strategies.
The Trump administration's actions could also potentially prompt broader healthcare reforms. Jesse Dresser highlighted the possibility of additional reforms preceding any substantial amendments to the IRA itself: "I could see something like [PBM reform] happening a lot sooner than I could see trying to open up the IRA and tweak it, even if it's something that the administration might ultimately get behind."
While discussions continue within the administration on how best to implement these negotiations, external stakeholders are keenly observing potential shifts in policy direction that could emerge. The outcome of these negotiations will likely have far-reaching consequences for drug pricing dynamics and healthcare policy in the United States.