Trump’s plan to reduce drug costs by leveraging Medicare and importing pharmaceuticals

President Trump signed an executive order on Tuesday outlining a series of actions aimed at lowering drug prices, including helping to import drugs from Canada.

The policy was more modest than the drug price reduction proposal Trump offered in his first term.

One of his new directives could potentially raise drug prices, as it calls for changes to the Medicare negotiation programs that could increase government costs.

Such changes may lead to delays in drug qualification for Medicare price cuts, ultimately impacting the cost.

Depending on its structure, the directive could potentially increase Medicare drug spending by billions of dollars compared to current spending under the law. The negotiation program was approved by a Democratic-controlled Congress and supported by former President Joseph R. Biden.

The executive order emphasizes that changes to the Medicare price negotiation program should be accompanied by other reforms to prevent an increase in overall costs for Medicare beneficiaries.

While some directives in the executive order may save money for patients and government programs, the proposals for Medicare negotiations are likely to increase costs without significant savings.

The order also includes provisions to lower co-payments for certain medical treatments and provide discounted insulin and epinephrine injections to low-income individuals.

This executive order marks a significant move by the Trump administration regarding drug pricing.

Following Trump’s decision to consider imposing tariffs on imported drugs, which manufacturers might pass on to consumers, there is concern that this could lead to increased costs and potentially worsen drug shortages.

Some directives in the executive order, such as changes to the Medicare negotiation program, require Congressional approval and have faced opposition from the pharmaceutical industry.

Trump has long expressed dissatisfaction with the high drug prices in the US compared to other countries. While the executive order includes measures to address some pricing issues, it lacks a report on the pricing policies of preferred countries, which could have helped align US drug prices with those of other nations.

These are some of the key aspects of Trump’s executive order concerning drug pricing.

Eliminate “pill penalty”

The order instructs Health Secretary Robert F. Kennedy Jr. to collaborate with Congress on addressing disparities in how certain drugs are treated in Medicare negotiation programs.

It highlights that under current law, different types of drugs have varying eligibility periods for price reductions, with some drugs having longer wait times before price cuts can be applied.

Drugmakers have criticized the existing “pill penalty” in the Medicare program, which they claim hinders innovation and access to new treatments. Legislative efforts are being made to address these differences in treatment of various drug types.

The executive order does not specify the exact timeline for exempting different drug types from Medicare price reductions.

Pharmaceutical industry representatives have expressed willingness to work with the administration and Congress to develop solutions that reduce costs and enhance access to medications for the public.

The negotiations on drug prices overseen by Biden officials are set to result in price reductions taking effect in 2026, while the Trump administration will oversee negotiations for certain drugs in upcoming years.

The White House released a fact sheet on Tuesday stating that the Biden administration aims to generate more savings through its Medicare negotiation program compared to previous years. However, this could be challenging if Congress limits the duration during which Medicare can access lower prices.

Drug imports from Canada

The executive order directs the FDA to streamline the process for importing low-cost drugs from Canada, building on previous efforts initiated during Trump’s first term.

While importing drugs from Canada may offer cost savings, the potential imposition of tariffs by Trump on imported drugs could offset these benefits.

Standardize joint payments at various clinics

The order calls for regulations to ensure consistency in the fees charged by medical practices for administering drugs to patients across different healthcare settings.

Currently, many hospital-owned medical practices bill Medicare higher fees than independent practices for the same services, impacting Medicare beneficiaries who are responsible for a portion of the costs.

Efforts to standardize these payments have faced opposition from hospitals seeking higher payments. Legislation during the Obama administration addressed some of these discrepancies in payment rates.

Promote affordable generic products

Trump has instructed the FDA to expedite the approval process for generic and biosimilar drugs, aiming to increase access to lower-cost alternatives to brand-name drugs.

While there is hope for cost savings through the approval of biosimilars, patient adoption has been slower than anticipated, impacting the overall savings potential.

Affordable insulin for low-income individuals

Trump has reinstated a previous order to provide discounted insulin and epinephrine injections to certain low-income individuals through Community Health Clinics.

While initially proposed in 2020, the implementation of this initiative was halted by the Biden administration citing administrative burdens.