Former President Donald Trump recently signed an executive order aiming to reform rising healthcare costs. This order focuses directly on reducing the prices of prescription drugs for Medicare beneficiaries. Through this substantive initiative, OIRA is attempting to shift the balance of power on how drug pricing negotiations proceed. It’s something that for the first time, under the Inflation Reduction Act of 2022, Medicare is finally allowed to do.
Medicare, the nation’s cost-sharing program that protects around 66 million Americans, mainly those 65 and older, has been under increasing pressure from skyrocketing drug prices. The Biden administration sprang into action to negotiate dramatic price reductions for ten of the highest-cost medications. For one thing, they reached amazing reductions of 79% at the highest level. Under the terms of Trump’s new executive order, Secretary of Health and Human Services Robert F. Kennedy Jr. Together, they will collaborate to draft and advance amendments during the negotiation process.
The order aims to lower healthcare costs. It will start to bring Medicare payments for those drugs in line with what’s happening in hospitals, which typically bill 35% lower prices. The administration has already issued a related national security report, singling out the pharmaceutical industry. This is an encouraging sign that DOT might be moving toward imposing sector-specific tariffs to offset the costs. It’s important to note that the negotiation process for Medicare is playing out as defined by law. So, there’s no way for Trump to make the changes he wants to, at least not solely by a single executive order.
The executive order goes big on the importance of standardized patient payment rates, no matter the place of care. This policy is referred to as site-neutral payments. This would ensure that patients are charged similar rates regardless of where they receive care, potentially reducing disparities in healthcare costs.
In addition to the current negotiations, Trump’s order announces plans to negotiate prices for a second group of 15 medications. Among these are Novo Nordisk’s widely used diabetes and weight-loss treatments, Ozempic and Wegovy, along with Pfizer’s cancer drugs Ibrance and Xtandi. Policy experts expect this move to be an effort to address the financial liability on Medicare and its enrollees even more.
While the Biden administration’s negotiations have already targeted some of the most costly drugs for price reductions, Trump’s order suggests that other proposed changes might yield even greater savings in future negotiations. This constant conversation around drug pricing in America is a positive sign of rising concern about the overall affordability of healthcare.