As President Donald Trump entered office this week, one of his first major policy moves on healthcare was to roll back a Biden administration executive order aimed at lowering prescription drug prices.
In doing so, he appears to have scrapped a below-the-radar federal effort to make more generic drugs available to Medicare patients for just $2 a prescription.
Since the initiative was still in its planning stages, its demise won’t have any impact on seniors’ wallets. But Trump’s decision to jettison the proposed pilot program, which had been expected to yield some modest savings for elderly patients, appears to signal a desire to break with the previous administration on how to handle the hot-button issue of drug prices.
Generic drugs for $2
In late 2022, former President Biden signed an executive order urging federal healthcare regulators to devise new payment models for Medicare and Medicaid that would help lower prescription costs. The move was meant to build on the recent passage of the Inflation Reduction Act, which, for the first time, allowed Medicare to negotiate with manufacturers on drug prices.
In response, the Center for Medicare and Medicaid Innovation proposed a handful of potential projects, one of which would have invited Medicare prescription drug plans to voluntarily offer a standardized list of frequently used generic drugs with a $2 co-pay, making costs easier to predict for doctors and patients. The idea was borrowed partly from large pharmacy chains such as Walmart, which offers customers a straightforward $4 drug list.
“A standardized list with consistent cost-sharing would allow providers to easily identify and prescribe appropriate medications without the worry of high prices for their patient or the stress of an unexpected prior authorization, step therapy, or quantity limit,” Department of Health and Human Services officials wrote in their report summarizing the proposal.
In December, health officials proposed a sample list of 101 drugs, which they estimated would help patients save an average of about $57 a year, or 12% of their out-of-pocket costs. The individual savings were small because generics are typically inexpensive to begin with. But collectively, the list was projected to keep about $2 billion extra in seniors’ pockets a year.
The idea picked up some endorsements from major health industry groups. “Providing low, fixed copayments for common generic drugs, as CMS proposed, could help increase medication adherence and improve health outcomes,” the American Hospital Association wrote in an official comment on the proposal.
However, it also ran into some opposition from generic drug makers, who argued the list would do relatively little to steer patients toward generics, both due to the slim cost savings and because it wouldn’t address the incentives that lead pharmacy benefit managers to nudge doctors and patients toward higher-priced brand name drugs.
“It’s not that the list wouldn’t do something for some patients, but we really want to push for policies that help all patients,” John Murphy, CEO of the Association for Accessible Medicines, a generics industry trade group, told Yahoo Finance. “We don’t want a half solution to be the outlet for CMS to say we did our job and now we can move on to other things.”
By rescinding Biden’s executive order on prescription drugs, Trump may not have officially canceled the $2 drug list. But the move signaled that the idea is likely to be abandoned, along with other proposals CMS crafted in response to Biden’s request, given that they were never implemented.
President Trump rolled back a Biden administration executive order aimed at lowering prescription drug prices, including an effort to make more generic drugs available to Medicare patients for just $2 a prescription. (AP Photo) ·ASSOCIATED PRESS
'A philosophical difference'
Some healthcare experts have criticized Trump’s move.
“I think President Trump is walking away from efforts to reduce drug spending,” said Juliette Cubanski, deputy director of the Program on Medicare Policy at KFF, a healthcare think tank. “In that sense, it does have symbolic importance, even if the practical effect isn’t too substantial in terms of the savings people would have seen.”
Some right-leaning experts have countered that the $2 generics list would have added more bureaucracy to Medicare’s prescription drug program for minimal savings and that it was more a public relations exercise for the administration than a serious push to lower costs.
Edmund Haislmaier, a senior fellow in healthcare policy at the Heritage Foundation, argued that Trump’s decision to cancel the $2 drug list reflected a more hands-off view of how the government should manage parts of Medicare, compared to the Biden administration.
“Substantively, there is a philosophical difference that I think is being expressed here,” he said. “The whole idea of Medicare Part D is that the government would not get into this kind of micromanagement of saying what drugs are on the list and what you can charge in a co-pay. That would be left to the plans, and if people didn’t like it, hey next year you can pick a different plan.”
The White House did not respond to a request for comment on the $2 drug list. Biden’s order on lowering prescription prices was one of dozens of executive actions Trump rolled back on Monday, calling them “deeply unpopular, inflationary, illegal, and radical.”
Rescinding Biden’s executive order won’t affect Medicare’s drug price negotiations or $35 cap on the price of insulin, both of which were enshrined in federal law and would require an act of Congress to repeal.
But by signaling a desire to break with his predecessor’s drug policies, Trump’s move does raise new questions about how aggressively he will approach Medicare’s upcoming round of bargaining with pharmaceutical companies. On its final full day in office, the Biden administration announced the next 15 drugs that the government would seek to negotiate over, which included the blockbuster diabetes medication Ozempic.
Those talks will have high stakes for the federal budget.
“Are they going to drive a hard bargain in these negotiating meetings and try to get steep discounts?” asked Cubanski. “Or are they going to come in with offers no lower than the ceilings that are specified in the law?”
Jordan Weissmann is a senior reporter at Yahoo Finance.
