Trump executive order overturns innovative Medicare and Medicaid drug pricing models

Upon taking office as the 47th President of the United States, Donald Trump issued a series of executive orders aimed at rescinding several policies enacted during the Biden administration. Among these actions, President Trump signed an executive order repealing an initiative intended to reduce prescription drug costs for Medicare and Medicaid recipients.

In October 2022, the Biden administration introduced Executive Order 14087, titled, “Lowering Prescription Drug Costs for Americans,” as part of its broader effort to build upon the Inflation Reduction Act (IRA) of 2022. The order directed the Centers for Medicare & Medicaid Services’ (CMS) Center for Medicare and Medicaid Innovation (CMMI) to develop new healthcare payment and delivery models aimed at reducing drug costs and promoting access to innovative therapies. Specifically, the order instructed the Secretary of Health and Human Services (HHS) to consider testing models that would, “lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes high-quality care.”

In response, CMS developed and proposed three novel drug payment models for testing:

1. Cell and Gene Therapy Access Model: This initiative aimed to assist state Medicaid programs in covering high-cost cell and gene therapies through outcomes-based agreements (OBAs). Under this voluntary program, payments would be tied to the effectiveness of therapies in improving patient health outcomes. Notably, progress had already been made; in December 2024, CMS announced agreements with two manufacturers of FDA-approved gene therapies, LYFGENIA™ and CASGEVY™, to participate in the program.
2. Medicare High-Value Drug List Model: This model aimed to reduce out-of-pocket costs for Medicare Part D enrollees by promoting a low, fixed co-payment of $2 for select generic drugs. To support the continued development of the model, as of October 2024 CMS released a preliminary list of 101 generic drugs to be offered at the $2 monthly copay price, targeting common chronic conditions. CMS also issued a Request for Information to gather stakeholder feedback.
3. Accelerating Clinical Evidence Model: This proposal sought to encourage the timely completion of confirmatory trials for drugs receiving accelerated approval by the FDA. Medicare would adjust payments for these drugs to incentivize the generation of post-market safety and efficacy data, ensuring that patients had access to treatments supported by robust evidence. However, to date, progress on this model has been limited since its initial proposal. CMS continues to review data and feedback from the FDA and other stakeholders to refine the model's design and assess its feasibility.

This repeal, along with a broader raft of orders affecting the US health system, has introduced significant uncertainty about the future of these innovative drug pricing efforts. While the IRA’s core provisions remain intact, questions persist about how the administration will address high prescription drug costs moving forward. As stakeholders across the healthcare sector and news agencies globally debate the implications, the path forward for drug pricing reforms and their impact on affordability and innovation remains unclear. The coming months will hopefully provide more clarity on the future direction of US healthcare policy and its wider implications.