In an effort to address one of the main grievances of the pharmaceutical industry, President Trump issued a new executive order on Tuesday that instructs Congress to amend a crucial section of the law permitting Medicare medication price talks.
The order relates to what the industry refers to as the “pill penalty” of the Inflation Reduction Act, which requires Medicare to negotiate prescription prices for small molecule medications—usually pills—earlier than for more complicated biologic medications.
Seven years following Food and Drug Administration (FDA) approval, small molecule medications might be chosen for the drug price negotiation program. The revised price goes into effect in year nine following a two-year negotiation period.
Eleven years following FDA clearance, biologics are available for selection. A two-year negotiating period ensues, and the new pricing goes into effect in year 13.
During a news conference on Tuesday, an administration official told reporters, “This imbalance exacerbates incentives that already too often push companies to invest in large molecule drugs over small molecule alternatives, which often apply to broader populations and impact different types of conditions.”
In a similar vein, industry groups contend that the law tells researchers that it is not worth the risk to produce small molecule medications.
Since the administration cannot make the adjustment alone, it instructed Robert F. Kennedy Jr., secretary of health and human services (HHS), to collaborate with Congress to make it possible.
The House and Senate already have legislation that would achieve that objective.
Since the law’s passage, lobbyists for the drug industry have been working to modify the “pill penalty.”
Trump will maintain one of the Biden administration’s trademark health measures, according to the directive, which was part of a long executive order that addressed a wide range of health care issues.
Officials stated that the decision will increase Medicare beneficiaries’ savings, although they did not provide many specifics.
Additionally, Trump’s directive seeks to bring back aspects of his first-term health program, such as promoting the importation of prescription medications from Canada and providing low-income individuals with insulin and epinephrine discounts.
Additionally, the directive aims to match prescription drug payment rates to the cost of purchasing them for hospitals.
According to authorities on the call, hospitals frequently receive significantly reduced prices for medications, sometimes as much as 35% less than what Medicare is paying.
In addition to prescription medications, the directive directs HHS to look into a policy called site-neutral payments, which would mandate that Medicare pay the same amount for the same service regardless of the location of delivery.
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The goal is to prevent hospitals from receiving more Medicare funding for treatments that can be performed in less costly locations, such as an ambulatory surgery centre or a doctor’s office.
Whether HHS may establish a site-neutral policy through rulemaking in the absence of legislation is uncertain.
Although hospitals have long opposed efforts to equalise payment rates, arguing that doing so would harm rural providers and those that depend heavily on Medicare and Medicaid funding, Congress has been investigating site-neutral compensation for years.
