Trump's executive order on drugs seeks to end pharma 'pill penalty'
PhRMA has argued that the Inflation Reduction Act quashed innovation for drugs commonly taken in pill form.
Photo: Kinga Krzeminska/Getty Images
President Donald Trump has signed an executive order on prescription drug prices that walks back the "pill penalty" decried by PhRMA in President Joe Biden's Inflation Reduction Act.
In the executive order released by The White House on Tuesday, the Health and Human Services secretary is told to "work with the Congress to modify the Medicare Drug Price Negotiation Program to align the treatment of small molecule prescription drugs with that of biological products, ending the distortion that undermines relative investment in small molecule prescription drugs, coupled with other reforms to prevent any increase in overall costs to Medicare and its beneficiaries."
Small molecule prescription drugs are those generally taken in pill form.
Current law allows the government to negotiate prices for complex biologic, or biotech, drugs after 13 years on the market, but after nine years for drugs taken as pills and capsules.
Stephen Ubl, president and CEO of PhRMA, and other executives speaking with J.P. Morgan analysts in 2023 said the Inflation Reduction Act created too short a runway for innovation, as price negotiations in Medicare meant that within a short period after product launch, the drug would be subject to price controls. This would stop private capital investment in R&D for small molecule drugs in the United States, Ubl and others said.
In a survey of PhRMA members, 63% said they were moving away from small molecules toward biologics as a result of the law, Ubl said during the call.
The EO would add four years to small biologics to align these drugs to the 13-year wait for more complex biotech drugs before they are subject to Medicare price negotiations.
"Known as the 'pill penalty,' this discrepancy threatens to distort innovation by pushing investment towards expensive biological products, which are often indicated to treat rarer diseases, and away from small molecule prescription drugs, which are generally cheaper and treat larger patient populations," the EO said.
Merith Basey, executive director of Patients For Affordable Drugs, said the small molecule provision in the EO caves to pharmaceutical lobbyists' demands.
"Delaying Medicare negotiation for small-molecule drugs – the most commonly used medications – is a clear giveaway to Big Pharma," Basey said. "It would hand drug companies four additional years to price-gouge patients, one in three of whom can't afford their prescription drugs today. This change isn't about supporting innovation as the industry claims – it's about protecting exorbitant profits."
Trump cannot implement the change through executive order because the negotiation process is outlined in legislation, but his order instructs Secretary of Health and Human Services Robert F. Kennedy Jr. to work with Congress on changing it, according to a Reuters.
WHY THIS MATTERS
The EO continues the Medicare Drug Price Negotiation Program initiated under the Biden administration by saying that RFK Jr., within 60 days, shall propose and seek comment for initial price applicability in 2028 and manufacturer maximum fair price for a program in 2026, 2027 and 2028.
Other steps for Kennedy to take to reduce drug prices are also outlined, without giving specifics. But the EO touts more drug cost savings for consumers than what was implemented under the Biden administration.
"Unsurprisingly, the Biden Administration reversed, walked back, or neglected many of these initiatives, undoing the progress made for American patients," the EO said. "The Biden Administration then signed into law the misnamed Inflation Reduction Act, which included the Medicare Prescription Drug Negotiation Program. While this program has the commendable goal of reducing the drug prices Medicare and its beneficiaries pay, its administratively complex and expensive regime has thus far produced much lower savings than projected."
THE LARGER TREND: REACTION
The EO follows the president's executive order on healthcare price transparency.
Patient Rights Advocate founder and Chair Cynthia Fisher said: "President Trump's actions will give Americans savings in wages and take-home pay from egregious overcharges in drugs, healthcare and coverage. This drug pricing policy and Radical Price Transparency will add savings to wages and families' budgets, and allow workers, enterprises, and the American economy to better compete globally by unleashing fair market prices and competition to lower spending."
Basey said: "This executive order signals that the administration recognizes the urgency of tackling high drug prices, in line with what the majority of Americans are demanding. The first round of Medicare negotiations delivered an average 22% price reduction on 10 high-cost drugs, and is projected to save taxpayers $6 billion, and if the administration can negotiate more aggressive price cuts in the second round, it would be a major win for patients and consumers."
Email the writer: SMorse@himss.org
