Trump could make changes to Medicare drug price negotiations

President Donald Trump likely won’t do away with a landmark process that allows Medicare to negotiate drug prices with manufacturers, even as he moves to erase Joe Biden’s other historic policy accomplishments. 

But Trump will likely make some changes to those price talks, and it may not require help from Congress. 

“Trump is looking to nibble around the edges of the law,” said Matthew Kupferberg, a partner in Frier Levitt’s Life Sciences Group, adding that the president is “not looking to completely abandon the drug negotiation process at this point.”

It’s still unclear which way Trump will lean, however. While some lawmakers and health policy experts said Trump could weaken the negotiations in a way that helps the pharmaceutical industry, other experts said he could double down and try to save patients and the federal government even more money to outdo his predecessor. 

The path he takes could have huge stakes for the prices 68 million Medicare beneficiaries in the U.S. pay for their medications. It will also have big implications for companies like Novo Nordisk, Bristol Myers Squibb, Pfizer and Merck, among others whose drugs were included in the first two rounds of talks.

The negotiations are a key provision of Biden’s Inflation Reduction Act, or IRA, that aims to lower prescription medicine costs for seniors and save the government nearly $100 billion in Medicare spending over the next decade. The pharmaceutical industry fiercely opposes the price talks, arguing in a flurry of lawsuits that they threaten profits and discourage drug innovation.

The Trump administration has offered few specifics on its approach to the negotiations, apart from saying in January that it will aim for “greater transparency” in the ongoing second cycle of the process and hear any ideas for improving it from external stakeholders.

Making significant changes to the law or repealing it altogether would be an uphill battle because it requires help from Congress, where Republicans hold slim majorities. Reining in high health-care costs has strong bipartisan support in a nation where patients pay two-to-three times more for prescription drugs than people in other developed countries, making it a potentially unpopular move for Trump.

So the Trump administration could move to implement the provision differently than Biden did, including by changing how the government interprets the law’s selection criteria for drugs, among other potential changes.

“I think it is a question of how they interpret some of the statutory language,” said Juliette Cubanski, deputy director of the program on Medicare policy at KFF, a health policy organization. 

Cubanski said we can expect a first glimpse at any changes in the coming months.

The Trump administration will start the months-long negotiation process for a second cycle of 15 drugs, which will have new prices go into effect in 2027. The Biden administration selected those medicines in January before Trump took office. Drugmakers have until the end of February to decide whether to participate in the talks, which they likely will because they otherwise face stiff financial penalties.

Trump has so far only indicated the need for more transparency in Medicare drug price negotiations. Kupferberg said that could mean disclosing more information about the government’s rationale for selecting drugs or settling on prices.

During the first round of the talks, Medicare provided opportunities for public input from patients, caregivers and consumer groups. But Kupferberg said the Trump administration could move to bring in other stakeholders beyond manufacturers and patients, like insurers or even middlemen called pharmacy benefit managers. 

“It could be a much broader type of negotiation process,” he said. 

The administration could also reinterpret the guidelines of the law, which could change what products get selected and how much prices fall, according to Amy Campbell, associate dean for law and health sciences at the University of Illinois Chicago School of Law.

For example, the IRA says the drugs selected for negotiations must have been on the market for at least seven years without generic competitors, or 11 years in the case of biologic products such as vaccines. But the Trump administration, when selecting another round of drugs, may have “looser standards” for determining whether a drug has competition in the market and should be exempt from negotiated prices, Campbell said. 

Trump could also revise what Medicare considers one drug for the purpose of negotiations, KFF’s Cubanski said. Currently, different products that share the same active ingredient can be selected as a single product, which the pharmaceutical industry opposes. 

The Biden administration, for example, included three of Novo Nordisk’s branded medications with the same active ingredient – semaglutide – as one product in the second cycle of price talks. That includes the weight loss drug Wegovy, diabetes pill Rybelsus and the obesity injection Ozempic. Of the three, Ozempic makes up the lion’s share of Medicare spending.

Either of those changes to how Medicare selects drugs could benefit drugmakers and lessen the revenue they lose from lower prices. 

The bigger question is how aggressively Medicare will negotiate prices under Trump, Cubanski said. Currently, the final negotiated price for a drug cannot exceed an upper limit, or “ceiling” price, established by the IRA.

Trump could influence whether Medicare’s initial price offer for a drug is closer to the ceiling price, which could weaken the program’s ability to secure a deeper discount. 

Major changes to the price negotiations are much less likely to occur, as they would require help from Congress. For example, one of the pharmaceutical industry’s biggest issues with the process is what drugmakers calls the “pill penalty.” 

The law essentially spares biologics like vaccines from new negotiated prices for 13 years after they receive U.S. approval, compared to just nine years for small-molecule drugs that come in a pill or tablet form. The industry argues that the discrepancy discourages companies from investing in the development of small-molecule drugs, which are more convenient for patients.

Cubanski said bipartisan legislation was introduced last year that proposes eliminating the pill penalty. If that bill makes it through Congress and to Trump’s desk, “I don’t see why he wouldn’t sign it,” Cubanski said. 

She added that there appears to be growing interest in legislative changes to the negotiation program, but “whether you get enough support in Congress is still really an open question.” 

There isn’t the same level of bipartisan support for changes to the IRA as there is for efforts like pharmacy benefit manager reform, said Jesse Dresser, partner in Frier Levitt’s Life Sciences Department. 

“I could see something like [PBM reform] happening a lot sooner than I could see trying to open up the IRA and tweak it, even if it’s something that the administration might ultimately get behind,” Dresser said. 

It’s unclear how Trump will approach the ongoing legal fight between manufacturers and the federal government over the Medicare program.

The pharmaceutical industry’s legal challenges, which argue that the talks are unconstitutional and should be stopped, have so far been unsuccessful in court. Nine lawsuits were ongoing as of January.

“Will the Trump administration continue to defend the program? Or maybe not as aggressively defend the program?” Cubanski said. “I think those are some key questions.” 

If the Trump administration stops defending the program in court, judges could then make decisions on the matter without any opposition, Kupferberg said. But he said he doesn’t believe the administration will want that outcome. 

The Trump administration would likely “want to take control of that process, where the parties work out an agreement or revise and change the interpretation of the law,” Kupferberg said. 

He added that it doesn’t seem like Trump would want the entire negotiation program to disappear based on the lawsuits. That’s because it would leave Trump in the position to come up with a replacement for Medicare drug price negotiations, and we “just haven’t seen one yet” from him, Kupferberg said.