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May 15, 2025 – While much of Washington, DC’s attention this week has been focused on congressional action around budget reconciliation, including proposed changes to the Medicaid program, the White House also made news with release of a new executive order (EO) aimed at bringing “most favored nation” (MFN) pricing to prescription drugs. To help discuss the ins and outs of the most recent EO, I am joined by my colleagues Amy Kelbick and Lynn Nonnemaker.
First, if this sounds familiar, that is because it is. During President Trump’s first administration, the Centers for Medicare & Medicaid (CMS) proposed a mandatory “model” that would have set the Medicare reimbursement rate for a list of 50 high-cost drugs covered under Part B at the lowest adjusted price among a set of developed nations. That initiative never got off the ground because of successful court cases that determined the administration had failed to follow proper process in proposing the model. CMS officially rescinded the rule in August 2021.
The new EO, while similar in concept to its predecessor CMS proposal, goes much further. It seeks to reduce prices for all consumers and would apply to all pharmaceuticals, not just certain high-cost drugs. Specifically, the EO includes several directives:
EOs don’t actually effectuate new policies, but rather provide directions to federal agencies to carry out certain priorities articulated in the EO. In this EO, the president calls on several of his cabinet secretaries to take action, and we will have to wait and see how each agency responds to the directive. Since the policies in the EO have the potential to be extremely far-reaching and impact all drugs marketed and sold in the United States, some federal agencies could face challenges during the implementation process. For example, it could be difficult to establish an MFN price target within 30 days for a very large set of drugs. We may see efforts to refine the drugs affected by the EO, at least initially, to allow officials to target drugs with large cost disparities between the United States and other countries, and to assess the process and impact of the effort before expanding.
In addition to capturing a broad set of drugs, the EO also seeks to address pricing across payers. One of the more intriguing provisions in the EO is the effort to facilitate direct-to-consumer purchasing programs, with the cost set at the MFN price. It isn’t clear whether, or how, prescription drug coverage would interact with such programs. Several drug manufacturers have established drug-to-consumer purchasing programs for GLP-1 drugs targeting weight loss, but those programs largely target consumers whose insurance does not cover the drugs. If an individual has coverage for a drug and cost sharing below the MFN price, they would have little incentive to purchase from the direct-to-consumer program. On the other hand, if payers reduce coverage for drugs offered through such programs and individuals are forced to access such drugs directly, individuals’ out-of-pocket costs would likely go up.
The EO doesn’t specify which countries would be included in any calculation of MFN prices, beyond referencing “comparably developed nations.” We should expect more information in the coming weeks and months about how the administration intends to carry out the EO’s directives.
Another interesting provision of the EO allows for drug importation if the HHS secretary certifies that drug importation is safe and would result in lower drug costs. Drug importation has been allowed since 2000, but only if the HHS secretary certifies such importation to be safe. Prior to 2020, no secretary had made such a certification. Under the prior Trump administration, then-Secretary Alex Azar was the first to certify importation as safe, although under a limited set of circumstances. The new EO seeks to expand the certification and allow for broad importation by individuals. It is not clear whether current HHS Secretary Kennedy will be willing to certify that personal importation is safe.
What all of this could mean for drug prices is a bit unclear at this point, in part because several of the actions outlined in the EO are voluntary, with few incentives for manufacturers to comply. For example, it is not clear how manufacturers will respond to the directive to make their drugs available directly to consumers at MFN prices.
We can expect to see and hear more about this effort soon, both from the Trump administration as it takes further action on the EO’s directives, and from stakeholders affected by those actions. One constituency almost certain to be vocal is the drug manufacturing sector, which may claim that policies that reduce drug prices will have consequences for research and development of new drug therapies. Other affected stakeholders include state Medicaid programs, which could see larger rebates under Medicaid best price rules, and hospitals and providers that participate in the 340B drug program, as the introduction of MFN prices would likely affect the discounts available under 340B. As always, M+ will be here ready to help you understand and navigate details.
Until next week, this is Jeffrey (and Amy and Lynn) saying, enjoy reading regs with your eggs.
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