Trump Executive Order Targets 'Pill Penalty' in Medicare Drug Pricing

President Donald Trump has signed an executive order aimed at addressing the disparity in Medicare drug price negotiations between small-molecule drugs (pills and tablets) and biologics (vaccines and injections). The current Inflation Reduction Act grants biologics 13 years before Medicare can negotiate prices, while pills only receive nine years. This executive order directs the Health and Human Services Secretary to work with Congress to potentially equalize these negotiation periods.

Pharmaceutical companies have criticized the existing 'pill penalty,' arguing that it disadvantages more affordable drugs and limits innovation. However, analysis from the Kaiser Family Foundation suggests extending price negotiation delays for pills could increase Medicare spending significantly, potentially impacting Part D premiums for seniors. A majority of drugs initially selected for Medicare negotiations would be exempt under the proposed changes, representing a large portion of spending.

Notably, companies such as Novo Nordisk would particularly benefit, as high-revenue drugs like Ozempic and Rybelsus could avoid price controls until 2031. However, the executive order also includes measures to import cheaper drugs from Canada and discussions about tariffs on pharmaceutical imports, which could affect drugmakers striving to increase domestic production.

Additionally, the Trump administration is reportedly reconsidering international price benchmarking, a policy that would link U.S. drug prices to those in other developed nations. This proposal faces strong opposition from the pharmaceutical industry.

While the executive order presents potential shifts in the regulatory environment surrounding drug pricing, its implementation and impact remain uncertain, with ongoing debates expected to continue shaping the healthcare market and Medicare policies.