Federal government shuts down: What’s the sticking point and what’s next?
For the first time since 2018, the federal government officially shut down at 12 am on October 1. The 2018 shutdown (which bled into 2019) lasted 35 days. While we see it as unlikely that this shutdown will be as lengthy, the polarization level in Washington, D.C. remains sky high (the Gridiron team hasn’t ever seen it quite this bad!), fueled in part by passage of the “One Big, Beautiful Bill” (OBBB) this summer, the assassination of conservative commentator Charlie Kirk, Democratic criticism of many of President Trump’s actions and policies and narrow Republican majorities in both the House and Senate. Republicans are pushing for a “clean CR (continuing resolution)” which would keep the government afloat until late November. Democrats are demanding that Republicans permanently extend the Affordable Care Act (ACA) premium subsidies, which are set to expire at the end of the year. The subsidies, implemented in 2021, have fueled a massive enrollment spike in health plans offered through the ACA marketplace, with some estimates suggesting 22 million people take advantage of the subsidies to help pay for premiums. With ACA marketplace premiums set to increase dramatically in 2026, perhaps as much as 20%, Democrats say permanent extension of the subsidies is non-negotiable. Republicans argue that the premium subsidy issue should be handled separately from the continuing resolution to keep the government running. The White House and Republican leaders have offered to work with Democrats on a path forward on the issue, but say they won’t do it until the government is funded and operational. Hence, we’re at an impasse. There are signs of a potential emerging compromise, with a handful of Republican senators (including Sens. Dan Sullivan (R-AK), Tommy Tuberville (R-AR) and Lisa Murkowski (R-AK)) strategizing on how to extend the subsidies, but with new income caps and additional fraud protections. Whether the group finds consensus and critical Democratic support in the Senate remains to be seen. House Republicans successfully passed a continuing resolution on September 17 by a vote of 217-212. This resolution has failed multiple times in the Senate, where 60 votes are needed for passage due to the filibuster rule. Only two Democrats (Sens. John Fetterman of Pennsylvania and Catherine Cortez-Mastro of Nevada) and one Independent (Angus King of Maine) voted with Republicans to pass the resolution. That number will need to grow by five since Sen. Rand Paul (R-KY) is also voting “no”, as he traditionally does on continuing resolutions. Which Democrats might be most open to switching their vote and ending the shutdown? Keep an eye on New Hampshire senators Jeanne Shaheen and Maggie Hassan. Shaheen is retiring at the end of her term in 2026, leaving her relatively immune from any anger she might face from the Democratic base if she switches her vote. Others to watch include Sen. Jon Ossoff of Georgia (who will face a tough Republican challenge in 2026) and Elissa Slotkin of Michigan. In terms of immediate health care impact, Medicare’s expanded coverage of telehealth services officially expired on September 30. While the program is likely to eventually be extended and funded, any telehealth services provided now are not covered. CMS did release guidance on October 1 advising providers on how to handle the lapse in coverage. Keep in mind that some telehealth flexibilities existed before the services were vastly expanded during the pandemic. Those services are still covered, as the Medicare program remains fully operational during the government shutdown.
Trump and Pfizer strike drug pricing deal, resulting in a tariff pause and uncertainty over other policies
President Trump claimed a major victory this week in announcing a deal with pharmaceutical giant Pfizer. The deal is allegedly the first of many deals that the White House will announce with major pharmaceutical manufacturers, including many whose CEOs received a letter from the President this summer demanding that they take steps to lower drug prices by addressing international drug price differentials. The Pfizer deal, which the company calls a “landmark voluntary agreement”, meets requirements that Trump outlined in his letter to CEOs: 1) Pfizer will price newly-launched products at parity with the price in other developed countries; 2) It will offer prices comparable to that offered in other developed countries (also known as “Most Favored Nation/MFN” pricing) to state Medicaid programs; 3) Pfizer is the first company to announce it will participate in a direct consumer purchasing platform, to be called TrumpRx, that will allow patients to purchase medicines direct from companies at a significant discount. Pfizer says the specific terms of the agreement are confidential. Pfizer CEO Albert Bourla appeared with President Trump and key Administration officials to announce the program on September 30. President Trump alluded to the fact that Lilly may be the next company to make an announcement and that negotiations with other companies are ongoing. In response to the Pfizer deal (and in anticipation of more announcements), the White House announced on October 1that they are temporarily pausing pharmaceutical tariffs. Trump announced via social media on September 25 that the U.S. would impose a 100% tariff on imported branded and patented pharmaceutical products starting October 1. Trump said companies building U.S. manufacturing plants would be exempt, but few details were released on specifics of the exemption. For now, the threat of broad tariffs remains, but if other major companies announce Pfizer-like agreements, it may be enough for the White House to claim victory. On a related front, a proposed rule is under review at the Office of Management & Budget (OMB) entitled the “Global Benchmark for Efficient Drug Pricing (GLOBE)” model. An OMB review is customary before any proposed rule is released for public comment. While there have been no details provided on what is included in the model, it is expected to be operated by the CMS Center for Medicare & Medicaid Innovation (CMMI) and primarily focus on drug pricing in the Medicare program. It is unclear whether the rule will move forward at this time or not, but the presence of an MFN-type proposed rule adds to the instability facing the biopharma and biotech community.
Major health care issues remain unresolved heading into final months of 2025
Given the government shutdown and the growing “to do list” for Congress, health care advocates are increasingly nervous about the ability to get important programs authorized, reauthorized or funded by the end of 2025. Many observers had hoped that Congress would deal with the government funding issue in September to provide time to develop some sort of “health care package” that could be considered before the end of the year. This package would include many health care provisions that were part of the late 2024 package that blew up after criticism from Elon Musk and then President-Elect Trump. Key provisions include the Medicare telehealth extension (see note above), reauthorization of the rare pediatric disease Priority Review Voucher (PRV) program, community health center funding and a slew of bipartisan health care policies. In mid-September, the House Energy & Commerce Committee unanimously passed the “Give Kids a Chance Act” (H.R. 1262), which includes full pediatric rare disease PRV reauthorization. This action tees up a full House vote on the measure when the right legislative vehicle is before the body.
CMS releases guidance for next round of Medicare drug price negotiations
The Trump Administration continues to move full speed ahead with drug price negotiations in Medicare, while tweaking the negotiation process along the way. On September 30, CMS released final guidance for its 2028 negotiation plans which include expanded exclusions for orphan drugs and a new framework for incorporating Medicare Advantage encounter data into drug selection calculations under Part B. “CMS is working to lower healthcare and prescription drug costs for Americans while ensuring the negotiation process is open, fair and responsive to changes in the market and patient needs,” CMS Administrator Mehmet Oz, MD, said in a September 30 news release. “We’ve listened to stakeholders, and their feedback helped us make the Negotiation Program more transparent, more workable for manufacturers and more responsive to the needs of Medicare beneficiaries. Importantly, language from the Orphan Cures Act (which was included in the OBBB budget bill) is being implemented. CMS affirmed that it has expanded its orphan drug exclusion, allowing more medications to avoid price negotiations. The update is intended to preserve incentives for drugmakers to develop treatments for rare conditions affecting smaller populations. The agency also updated how it will calculate total expenditures for drugs under Medicare Part B, now incorporating both Medicare Advantage encounter data and traditional fee-for-service claims data to create a fairer and more accurate picture of drug spending. Vaccines remain eligible for negotiation, but CMS will base eligibility on the vaccine’s antigen components. CMS will announce up to 15 medications eligible for the third round of price negotiations by February 1, 2026, with negotiated prices set to take effect in 2028. The agency will also announce any drugs selected for the first round of renegotiations at this time.
Health Policy Snippets
- New poll shows more parents delaying childhood vaccines. A recent poll by the Washington Post and the Kaiser Family Foundation finds 1 in 6 parents are delaying vaccines for their children, with experts citing a variety of reasons for the numbers—including the vaccine skepticism articulated by HHS Secretary Robert Kennedy Jr. and the Make America Healthy Again (MAHA) movement. The age and political views of parents may play a role in this choice. Individuals who are most likely to postpone or opt out of vaccines for their kids are Republicans, people who identify with President Trump’s MAHA movement, parents under 35 years old, and parents who homeschool their kids.
- Trump Administration pushes back on industry effort to develop AI regulations in health care. With health care heavy hitters like Mayo Clinic and Duke Health and tech giants like Microsoft and OpenAI working collaboratively to develop a private-sector-led vetting of AI tools for health care, officials from the U.S. Department of Health & Human Services (HHS) have said they aren’t supportive of the effort. The Coalition for Health AI (CHAI) “does not speak for us”, an HHS official said on October 1. HHS fears that CHAI could become a “cartel” in which big companies squelch innovation and startups in the emerging artificial intelligence healthcare space. Republicans have yet to coalesce around a legislative strategy on healthcare AI, reflecting a mix of concern about the general lack of existing regulations and the need to not enact laws that would cripple innovation.
