Trump targets health care costs with executive order on drug price negotiations, hospital payments

STAT News – Tuesday, April 15, 2025
By Tara Bannow and Anil Oza

President Trump unveiled a wide-ranging executive order on Tuesday that aims to lower drug prices, boost transparency into fees charged by middlemen, and limit Medicare payments for outpatient services provided by hospitals. Much of the order would require further rulemaking or other actions to have any effect.

Medicare drug price negotiation

The administration announced several initiatives intended to reduce health care costs for older adults and people with disabilities who rely on Medicare. Some of them build off of one of former President Biden’s signature achievements, the Medicare drug price negotiation program.

The executive order outlines a plan to expand Medicare drug price negotiation. Created under the Inflation Reduction Act, a 2022 law that combined health care reform with energy initiatives, the program was slow to take off, announcing the second slate of drugs whose prices would be negotiated just before former president Biden left office in January. Trump’s order called the program’s goal “commendable,” but said administrative complexity has hampered its ability to achieve significant savings.

Specifically, the order directs HHS Secretary Robert F. Kennedy Jr. to work with Congress to address what the Trump administration and drugmakers say is an imbalance in the law: that it gives small-molecule drugs fewer years before they’re subject to negotiations, compared to biologics, disincentivizing companies from investing in pills, critics say. (Not everyone thinks it’s a problem.)

Currently, small-molecule drugs aren’t subject to negotiations for nine years, while biologics get 13 years. Republican lawmakers have previously introduced a bill to change that to 13 years for all drugs. In his order, Trump directs Kennedy to work with Congress to align the treatment of small-molecule drugs with biologics under the law. The order says this would end the “distortion that undermines relative investment in small molecule prescription drugs.”

The order also directs Kennedy to seek guidance for improving the program’s transparency and minimizing its effects on pharmaceutical innovation in the U.S. It also directs others within the administration, including the Office of Management and Budget director and assistants to the president for economic and domestic policy, to recommend ways to lower Medicare prescription drug plan premiums.

To the extent CMS would be involved, it would have ample staffers to work on these issues. Even though some agencies within the Department of Health and Human Services are reeling from Trump’s staff cuts, CMS has come out comparatively unscathed. A CMS staffer in the division that negotiates drug prices for Medicare told STAT it’s “business as usual” there.

FDA drug approvals and importation

The executive order calls for the Food and Drug Administration to expand state importation programs, laying out a pathway through the agency that would allow states to import drugs from Canada. It directs the FDA to work with states to improve the process and encourage more of them to apply.

The Trump administration passed an executive order during his first term similarly calling for importing prescription drugs. The Biden administration ultimately approved such a program in Florida, allowing it to import a limited set of drugs. Since then, several other states have submitted proposals for similar programs, including Colorado, New Mexico, and Vermont.

The order also directs the agency to streamline the approval of generic drugs and biosimilars. On a call with reporters, a White House official said Trump made progress clearing the generic backlog during his first term, but that biosimilar adoption still lags. The administration shuttered a division full of generic drug regulatory experts in early April, which could make streamlining generic drug approval more difficult.

The White House official also said to “expect more action” in limiting the need for animal trials. One of FDA Commissioner Marty Makary’s first actions in his role was to announce plans to reduce or even eliminate animal testing for developing drugs by encouraging researchers to use computer modeling and artificial intelligence instead.

The FDA has been hit particularly hard by the Trump administration’s job cuts in recent weeks. Even though drug reviewers and inspectors were spared, more than a dozen current and former FDA employees told STAT drug reviews will likely be affected anyway.

On Tuesday, the White House official told reporters the cuts won’t affect the FDA’s ability to carry out the directives in Trump’s executive order.

Broker fee disclosures

The executive order also instructs the Department of Labor to draft rules that would force consultants to disclose whether the drug industry middlemen known as pharmacy benefit managers pay them to be recommended to the consultants’ clients.

Large employers nationwide pay consulting firms to negotiate drug prices for their employees, but a STAT investigation from 2023 revealed that those firms often make more money from the PBMs and health insurers they are supposed to be scrutinizing.

A 2020 law requires employers to know about any indirect and direct payments their brokers and consultants receive from PBMs, but STAT’s reporting found that compliance has been dismal. The White House official on Tuesday’s call said the Biden administration did not enforce that rule.

340B program

The order contains two provisions that affect the 340B program, a controversial federal initiative that requires drugmakers participating in Medicaid to sell outpatient drugs at deeply discounted rates to health care providers that treat low-income patients. The first would require that federally qualified health centers pass along the discounts they receive on insulin and injectable epinephrine to certain low-income patients.

Drugmakers often criticize 340B by saying that the program allows wealthy hospital systems to pocket the savings instead of using them to help needy patients. Trump’s second provision on 340B seeks to limit providers’ ability to profit from the program by studying and then crafting rules that would align the prices they pay for drugs with Medicare rates. The White House official on Tuesday’s call said hospitals often get heavily discounted drugs, at prices that are sometimes 35% lower than what Medicare pays, and this provision seeks to correct that.

Site-neutral payment reform

Lawmakers have floated a variety of solutions to the thorny issue of site-neutral payment reform, the idea that the rates Medicare pays hospitals’ outpatient facilities for services should be the same as outpatient clinics not owned by hospitals. Most have gone by the wayside after fierce pushback from hospitals.

In his order Tuesday, Trump directed Kennedy to consider rulemaking that would ensure Medicare’s payment policies, such as drug administration, are not inadvertently sending patients to more expensive settings.

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