Trump Executive Order on Drug Pricing Targets Medicare, 340B Reimbursements

On April 15, President Trump signed an executive order directing the U.S. Department of Health and Human Services (HHS) to implement measures aimed at reducing prescription drug costs. The order emphasizes addressing the "pill penalty" in the Inflation Reduction Act (IRA) and calls for enhanced transparency and guidance in the Medicare Drug Price Negotiation Program. Some actions outlined will require legislative approval or formal rulemaking by federal agencies to take effect.

A key focus of the directive is revisiting Medicare reimbursement policies related to 340B drugs. This follows CMS's 2018 rule adjusting hospital outpatient drug payments to average sales price minus 22.5%, a measure intended to better reflect acquisition costs for 340B hospitals. However, the Supreme Court ruled this rate unlawful due to lack of survey data support, prompting CMS to reconsider payment adjustments. Although CMS proposed a new payment reduction based on a 2020 survey, it was not finalized.

The executive order also targets provisions of the IRA affecting Medicare Part D. The IRA's introduction of a $2,000 cap on out-of-pocket spending and increased plan liability raised concerns about premium hikes. To counter this, beginning in 2024, the IRA limits annual growth in base beneficiary premiums to 6%. Additionally, CMS announced a three-year voluntary demonstration program for premium stabilization among stand-alone Part D plans, set to start in 2025. Continuation of this program under the current administration remains uncertain.

Other directives within the order include actions involving the FDA and broader HHS initiatives related to drug pricing and market transparency. The regulatory landscape continues to evolve as agencies and Congress consider next steps in implementing these and related reforms.

This executive order reflects ongoing federal efforts to address pharmaceutical pricing within Medicare and Medicaid frameworks, highlighting complex intersections of healthcare policy, regulatory compliance, and payer-provider dynamics in the U.S. drug market. Legal developments and administrative rulemaking will be critical to tracking how these policies impact stakeholders in the healthcare and insurance sectors.