Trump Executive Order Seeks to Lower Prescription Drug Costs

05.12.2025
Article  |  Originally published in Valent/True Network Newsletter

On April 15, 2025, President Donald Trump signed an executive order (the “Order”) titled “Lowering Drug Prices by Once Again Putting Americans First.” The Order directs multiple federal agencies to take actions intended to reduce the cost of prescription medications and biologic drugs, increase greater transparency among pharmaceutical manufacturers, and expand access to affordable treatments for patients – including Medicare beneficiaries and low-income individuals.

The Order includes reforms across several key policy areas, as explained in more detail below.

1. Addressing the IRA’s “Pill Penalty” and Lowering Medicare Drug Prices

The Order directs the Department of Health and Human Services (“HHS”) to propose revisions to the Medicare Drug Price Negotiation Program established under the Inflation Reduction Act (“IRA”). Within 60 days, HHS is required to propose new guidance that will improve the transparency of the program. One proposed change would delay price negotiations for small-molecule drugs, such as pills, by four years, aligning their negotiation timelines more closely with biologic drugs like injections and infusions. This adjustment aims to address what critics have called the “pill penalty” and to encourage the development of lower-cost, more accessible treatments.

Additionally, the Order outlines several changes intended to reduce out-of-pocket costs for Medicare and Medicaid recipients. These include stabilizing Medicare Part D premiums, testing new payment models for expensive drugs, aligning hospital drug payments with actual acquisition costs, and discouraging the use of costlier hospital settings when a drug can be administered in a doctor’s office.

2. Accelerating FDA Approval for Lower-Cost Alternatives

The Order directs the Food and Drug Administration (“FDA”) to accelerate the approval process for generic drugs, biosimilars, combination products, and second-in-class brand-name medications. Within 180 days, the FDA Commissioner is required to issue a report outlining administrative and legislative recommendations to expedite these approvals. Additionally, the order directs the FDA to improve the process by which certain prescription drugs can be reclassified as over-the-counter (OTC) medications. The report will include recommendations on how to identify drugs that can be safely and effectively made available to patients without a prescription.

3. Increasing Oversight of Pharmacy Benefit Managers (PBMs)

The Order includes several directives aimed at “reevaluating the role of middlemen.” The Order instructs the Secretary of Labor to propose new transparency rules focusing on how much PBMS – companies that manage drug benefits – are paid. Additionally, within 90 days of the Order, the Assistant to the President for Domestic Policy, in coordination with the Secretary of HHS, the Office of Management and Budget (OMB) Director, and the Assistant to the President for Economic Policy, shall provide joint recommendations to the President on “how best to promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain that delivers lower drug prices for Americans.”

4. Expanding Access to Insulin and Epinephrine for Low-Income Patients

Within 90 days, the Order requires the Secretary of HHS to ensure that new community health center grants are conditioned on the health center establishing practices to make insulin and injectable epinephrine available at or below levels set by the federal 340B drug discount program to certain low-income individuals. This proposal echoes a directive issued during Trump’s first term.

5. Supporting State-Led Prescription Drug Importation

The Order directs the FDA Commissioner to take steps to simplify the Importation Program under Section 804 of the Federal Food, Drug, and Cosmetic Act. This directive is intended to “make it easier for [s]tates to obtain approval without sacrificing safety or quality.”

Employer Takeaways

Although the Order itself does not create immediate legal obligations for employers or group health plans, the ripple effects of these policy shifts—especially related to PBM transparency, drug importation, and formulary management—may impact plan design, contracting, and employee communication strategies. Employers and benefits advisors should monitor any legislative or agency actions related to the Order closely.

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