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I thought today was going to be a light day.
We’ve hit a lull in the tariff deluge,** earnings reports haven’t picked up in earnest,*** Congress isn’t up to much, the real IRA 2027 fun hasn’t quite kicked off yet,**** everyone is tired from paying taxes yesterday, etc.
Nope.
Late yesterday, Donald Trump dropped a grab-bag executive order on drug prices with something for everyone … and something for everyone to hate. If you haven’t seen it, here’s the order, and here’s the accompanying fact sheet. Both are worth skimming before we go any further.
The coverage has been broad but kind of meh. STAT probably had the best take.
There is too much in the EO, and it is all too disparate, to weave some sort of consistent narrative so, instead, I’m going with a “Ten Thoughts” approach.
So here it is:
Ten Thoughts on Trump’s Executive Order (in declining order of importance).
340B hospitals are going to get gored. For my money, Sec. 5 has the potential to be most impactful simply because it puts down a marker for a fairly easy-to-implement policy change. Back in Trump 1.0, he tried to reduce Medicare payments for 340B hospitals, an effort that ran aground because — by law — HHS needs to conduct an acquisition-cost survey before it can make such changes.
Sec. 5 calls for that study, which — I assume — would then be used to re-implement that Trump 1.0 policy, which came at a cost to 340B hospitals of about $2 billion a year. That money doesn’t flow back to the treasury … it gets invested back into Medicare, but it has the potential to make 340B hospitals the big loser in all of that shuffling.
I wrote a little more about this on LinkedIn yesterday, and there’s a good discussion with Deborah Williams in the comments, including some back-and-forth about how budget-neutrality language might play here. Open to additional commentary from those who can explain the money flows with more authority than I.
The dog that didn’t bark: international reference pricing. Given how much is in the executive order — IRA reform! 340B stuff! OTC switches! Middlemen! — it’s noteworthy that there isn’t anything on trying to drive price parity with other countries. I’m not so naive as to think that this idea is officially dead,***** but I’ll take good news where I can get it.
The topic was raised in the press call, per Axios, but it’s hard to imagine that this is a major priority at this moment … but somehow didn’t get included on the laundry list.
Another dog that didn’t bark was any talk of rebate reform, which was low-key the most revolutionary idea that Trump pushed during his first term. (hat tip to Antonio Ciaccia) Such a policy was deemed to be fairly pricey for the government, which might explain its absence.
PBM payments to benefits consultants are getting scrutiny. Sec. 12 of the order isn’t super-clear about what the administration wants to pull off here, but the fact sheet is more explicit: the government wants policies aimed at “Improving disclosure of fees that pharmaceutical benefit managers (PBMs) pay to brokers for steering employers to utilize their services.”
If you don’t think that is a meaningful effort, go and read this STAT story about how messed up that world is. I continue to think that anything that builds the case for employers being on the hook for bad benefit design moves the world in the right direction.
(There’s other vague middleman language, but in the absence of specifics, it’s probably not worth the time.)
The “pill penalty” is in the crosshairs. This is where most of the headlines went, and it is a big deal, of sorts. To have the President of the United States weigh in in favor of getting rid of the disparate treatment of small molecules is a putting down a huge marker for future debate.
But the implementation here has to be handled by Congress and must be budget-neutral. (That last detail isn’t in the EO, but it was apparently mentioned during the media briefing, per Endpoints.)
Also on Trump’s list: site-neutral payment reform. This is Sec. 11 for those scoring at home (or even if you’re alone). I don’t talk much about site-neutral reform much here, but here’s the KFF primer that includes lots of big numbers if you want to learn more.
The administration has an IRA savings goal. While the pill penalty language was encouraging, the administration remains committed to price controls and calls for “improving the Medicare Drug Pricing Negotiation Program in order to eclipse the 22% in savings achieved in the program’s first year.” Probably not good that the Trump administration is benchmarking off of that 22% number.
The 340B-prices-to-patients gambit is back on the table. Late in Trump 1.0, a policy was floated that would have forced federally qualified health centers to sell insulin and Epipens at their 340B acquisition costs to certain patients. Biden froze the program, which FQHCs didn’t like because it didn’t solve an actual problem and ended up hamstringing their ability to fully leverage 340B. (This 2020 JAMA Health Forum piece gets into some of that.)
I’m curious to see where this goes, because it’s probably a bad idea, but it sounds good on paper. If this gets seized upon as the “right” way to think about 340B, that’s telling for messaging reasons, if nothing else.
Other assorted IRA magic tricks. Per the EO, the guidance for upcoming IRA “negotiations” is supposed to “minimize any negative impacts of the maximum fair price on pharmaceutical innovation.” But that’s not how economics or causality works. The maximum fair prices are directly causing the negative impacts. But it sounds pro-innovation, so they have that going for them, which is nice.
And there is a bit about “how best to stabilize and reduce Medicare Part D premiums.” The most obvious way to do that is to inject a bunch of government money into the system — which is the tack Biden took — but I’m guessing that’s not the solution that Trump is looking for.
Quicker FDA approvals. I’m sure this is an idea that will provoke bitter laughter, given what has happened at the FDA over the past two months. I can’t imagine that we’re going to see a faster FDA (and quite frankly, I’m not sure anyone wants the FDA to be both understaffed and rushed). But the bit about OTC switches caught my eye.
Importation: Still a thing. I continue to maintain that this is a silly idea that polls well but is virtually impossible to implement at scale.
** JNJ earnings were yesterday, and their quarterly brought some interesting comments — and reaction — on tariffs. But nothing was earth-shaking, and I’ll touch on that at some point in the future.
*** United earnings tomorrow, thought
**** There will be some IRA-related items later this week, too. Don’t worry.
***** The official motto of 2025: “If you thought today was nuts, just wait until tomorrow.”
Cost Curve is produced by Reid Strategic, a consultancy that helps companies and organizations in life sciences communicate more clearly and more loudly about issues of value, access, and pricing. We offer a range of services, from strategic planning to tactical execution, designed to shatter the complexity that hampers constructive conversations.
To learn more about how Reid Strategic can help you, email Brian Reid at brian@reidstrategic.com.
