Trump resurrects “Most Favored Nation” policy for prescription drugs, prompting a plethora of questions and few answers
President Trump has long been irritated by the fact that prescription drugs often cost less in foreign countries than they do in the United States. During his first administration, he attempted to enact a “most favored nation” policy which sought to level the international pricing differential, starting with Medicare Part B drugs. That initiative was challenged by industry, health care provider and patient groups, stopped by federal judges and eventually scrapped by the Biden Administration. On May 12, the President—joined by HHS Secretary Robert F. Kennedy, Jr. and the leaders of CMS, NIH and FDA—issued an executive order outlining his intent to bring biopharmaceutical companies to the negotiating table, demanding that they lower prices or engage in other activities to eliminate price differentials. If companies do not meet Trump’s expectations, CMS could promulgate rules to establish a formal MFN policy. While no official timeline is in place, Trump wants companies to meet with HHS and CMS officials by the middle of June. Unlike last time, Trump seeks to impact the entire health care market, including the private commercial market, to “slash prescription drug prices up to 80%”. While CMS Administrator Dr. Mehmet Oz has said “companies are coming to the table”, it remains difficult to determine exactly what the Administration will define as appropriate progress. The only details that have been provided were included in a May 20 HHS press release. Many observers believe the President’s goal of immediate reductions in drug prices is both logistically impossible and unconstitutional. While the Trump Administration has wielded its executive order abilities widely in its first five months, it’s attempts to push the envelope have run into resistance in the courts. Simply put, the President doesn’t have the broad authority he would like to have to address the complex issues surrounding domestic drug pricing, let alone global drug pricing. A few questions to keep in mind as we move toward mid-June:
- What does success look like for the Trump team?
- If price reductions in a few high-value therapeutic areas (such as GLP-1s—which Trump referred to as “fat shots” during his May 12 press conference—or some cancer drugs) materialize, will that be enough for Trump to claim success?
- Trump wants every price, for every drug where there is an international price differential to be reduced. Given the negotiations that happen with individual companies and foreign countries (many of which have government-run health care systems), how can the Administration expect to see immediate price drops?
- If the Administration doesn’t feel that industry has come to the table to negotiate, what might a new CMS rule look like given the legal issues encountered in 2020?
- How might the Administration’s MFN strategy interact with potential expansion of tariffs on pharmaceuticals?
Meanwhile, for the first time, bipartisan legislation on international reference pricing has been introduced in both the House and the Senate. Regardless of what happens to the latest MFN proposal, there is a growing appetite in Congress to act on this issue. At present, Republican leaders in both the House and Senate have either not indicated support for the MFN strategy or have publicly opposed it. While acknowledging that the price disparity is problematic, GOP congressional leaders believe there are other mechanisms to address the issue (including more aggressive trade negotiations by the Office of the U.S. Trade Representative).
Budget reconciliation bill clears House, but faces a complicated path in the Senate
The House and Senate returned this week, and all eyes are on the fate of the House-passed budget reconciliation bill. The House narrowly passed the President’s “One Big Beautiful Bill Act” by a vote of 215-214 on May 22. The Senate will begin its formal consideration of the bill, which currently contains controversial provisions related to taxes, immigration and Medicaid (among other issues). The 1,000+page bill is likely to be modified by the Senate, but to what extent remains to be seen. Conservative “fiscal hawks” on the GOP side want deeper cuts in federal spending and oppose raising the nation’s debt limit. Other Republican senators have expressed concern about the impact of some Medicaid reforms included in the House bill, including work/community engagement requirements and financial penalties for states that have elected provide health care services to undocumented immigrants through Medicaid. Still others worry that implementation of some of the Medicaid reforms could disproportionately impact rural health care providers, especially rural hospitals. Democratic support for the budget reconciliation bill will not happen, but Republicans don’t need support from Democrats. However, they need at least 50 votes (which would require Vice President J.D. Vance to cast the tie-breaking vote), and Republicans have a relatively slim 53-47 majority. As of today, there are at least six Republican senators who have expressed serious reservations about the House bill. If the Senate can find consensus, it will need to go back to the House for approval (assuming there are changes made, which is inevitable). How House Speaker Mike Johnson and President Trump keep the GOP caucus together will be an exercise in elaborate political maneuvering. Republican leaders still hope to send a bill to the President by July 4, but realistic observers expect the debate to rage on through the summer. U.S. Treasury Secretary Scott Bessent has warned that Congress will need to act before September to avoid a brush with loan defaults. Meanwhile, Moody’s downgraded the US credit rating in May due to the country’s rising debt, fueling concerns from Republican “fiscal hawks”.
Maryland becomes first state to expand Prescription Drug Affordability Board price controls to commercial market
Maryland was the first state to create a Prescription Drug Affordability Board (PDAB) in 2019. Now, with the signature of Maryland Governor Wes Moore (D) on HB 424 in May, it’s taking an aggressive step in expansion. The bill dramatically expands the existing Prescription Drug Affordability Board’s authority. In the past, the board could only set upper-payment limits (UPLs) on prescription drugs purchased by state payers. Now, Maryland’s PDAB can institute price controls in the commercial market, as well. The move makes Maryland the first state to expand a board’s authority in this regard. Previous PDABs that include UPLs could only set limits what state-run programs could pay for drugs that are identified as “unaffordable” by the board. Industry officials and some patient organizations criticized the move, stating that the methodologies used by PDABs are “unproven” and will result in access issues for patients needing medications. According to the National Association of State Health Policy (NASHP), which supports the establishment of PDABs, 14 states are considering legislation this year to create or expand an existing board. Virginia Governor Glenn Youngkin (R) again vetoed a PDAB bill earlier this year, while the Democrat-controlled Michigan Senate passed its PDAB authorization bill in late April. The bill now moves to the Republican-led House for consideration, where it’s expected to face more opposition.
HHS reorganization continues amidst ongoing lawsuits; Will the 340B program move from HRSA to CMS?
While Courts continue to weigh in on staff reductions and reorganization within the U.S. Department of Health & Human Services (HHS), the President’s 2026 budget proposes to shift the 340B drug discount program from the Health Resources and Services Administration (HRSA) to the Centers for Medicare & Medicaid Services (CMS). 340B, which has drastically expanded since its creation in 1992, requires pharmaceutical manufacturers to discount outpatient drugs sold to qualifying hospitals and clinics by a minimum of 23.1% for brand-name drugs. HRSA’s oversight of the program has consistently been criticized by pharmaceutical companies, community health centers and members of Congress. The proposed move to CMS aims to streamline 340B processes and guidance, while taking advantage of CMS’ drug pricing resources and expertise. With the drastic growth in the number of 340B facilities, biopharma companies have complained that HRSA’s guidance has lagged. While the switch from HRSA to CMS is in the President’s budget, it will need approval from Congress before any formal relocation of the 340B program’s administration and oversight.
Health Policy Snippets
- ICER ramps up its scrutiny of drug launch prices. The Institute for Clinical and Economic Review (ICER) is now targeting launch prices and will release its first report in late October. ICER will release its Launch Price and Access Report in October, which will examine the pricing and accessibility of recently approved FDA treatments (drugs approved from 2023-2024). It plans to produce the report on an annual basis. The clinical review organization, which has received immense scrutiny from the pharmaceutical industry and patient groups due to its methodologies to assess clinical effectiveness, also announced that it plans new assessments and policy papers on therapies for several different disease areas, including obesity and multiple sclerosis (MS). The report on secondary progressive MS released on May 29 raised “significant uncertainties” surround the long-term efficacy of Sanofi’s tolebrutinib. ICER will hold a virtual public meeting on the topic June 13.
- FDA turns to AI to expedite product reviews. “Elsa” is going to work earlier than planned at the FDA. Elsa is the name for the AI tool that FDA Commissioner Marty Makary that will accelerate clinical protocols, shorten the time needed for project evaluations and identify targets for inspections. Some industry observers are raising concerns as the use of AI at the FDA ramps up: How will confidentiality be protected? Will companies be notified if AI tools are being used to assess submissions? Will guidance be provided that will allow companies to assemble submissions that would be best reviewed by the AI program? The FDA has reiterated that the agency will use AI to support—not replace—human reviewers.
