In the pharmaceutical arena, a number of new developments in terms of legislation and executive orders have signaled that sweeping changes may be coming, particularly when it comes to drug pricing.
More specifically, the Trump administration and Republicans in Congress want to roll back some of the 2022 Inflation Reduction Act (IRA) that they (and some industry critics) believe could stifle medical innovation.
Let’s take a deeper dive.
The IRA
The IRA includes several provisions to lower prescription drug costs for people with Medicare and reduce drug spending by the federal government. Starting in 2026 it requires the government to negotiate prices of drugs covered under Medicare Part B and Part D. Specifically a maximum fair price (MFP) needs to be agreed on for drugs that represent the highest total spend for Medicare. Another requirement, one that has been in place since 2023, requires drug companies to pay rebates to Medicare if prices rise faster than inflation for drugs used by Medicare beneficiaries.
A part of the law’s Medicare Drug Price Negotiation program also subjects certain small molecule drugs (such as pills) to price negotiations nine years after their approval. Biologics, including intravenous drugs, are, in contrast, subject to negotiation after 13 years.
Critics contend that this discrepancy between drug types has led to a decline in investments for the pharma industry and discouraged funding for small molecule drugs in particular because the shorter time period before price negotiations kick in can spook investors and prevent them from getting involved in funding the research and development efforts.
They also contend that the prescription drug portions of the IRA provide healthcare policy makers and the federal government with new and unprecedented power to deliberate on and decide on the pricing of pharmaceuticals, explicitly taking at least some of that decision making away from the pharma industry.
These critics are supporting the EPIC Act, described below.
The April EO and EPIC Act
On April 15, the Trump administration issued an executive order that directed the Department of Health and Human Services to work with Congress to fix what he calls the “pill penalty” as described above.
Representative Greg Murphy (R-NC) was the main sponsor of the House version of a bill called the Ensuring Pathways to Innovative Cures Act, alongside Representatives Don Davis (R-NC) and Richard Hudson (R-NC). The bill has bicameral support (with one House Democrat in support) and is an attempt to fix the very problem identified in the EO and to remove the obstacles to continuing R&D investments into small molecule medicines.
The sponsors note that the cost to bring a new drug to market can range from several hundred million to several billion dollars. They contend that “[b]y reducing the ability to recoup losses incurred during drug research and development [through investment], many pharmaceutical companies have stopped pursuing new cures. R&D investments are already shifting away from small molecule medicines and manufacturers have paused clinical trials, harming patients with cancer and rare diseases”.
A University of Chicago policy brief that they cite suggests that “limiting the effective patent life of small molecules through negotiations may be larger than recognized” and indicates that due to the price negotiation period disparity, 188 fewer small molecule medicines will come to market in the next 20 year period, leading to 116 million life-years lost by patients.
The future for the EPIC Act is uncertain as the bill did not make it into the House Republican reconciliation package. But what about another pending piece of legislation dubbed the ORPHAN Act?
The ORPHAN Act
The Optimizing Research Progress Hope And New Cures Act seeks to accelerate the development of new life-saving cures and provide hope to millions of Americans affected by rare diseases.
“We must empower our innovators to continue developing lifesaving rare disease treatments,” said one of the bill’s two main sponsors, Representative Don Davis (R-NC). “By cutting red tape for researchers and scientists, Congress can help lay the foundation for the next generation of cures.”
Under current federal law, a drug or treatment that receives approval from the US Food and Drug Administration (FDA) to exclusively treat one rare disease – commonly known as an “orphan drug” – is eligible for certain incentives, including an exemption from Medicare’s drug negotiation program. Those incentives do not exist if an orphan drug receives FDA approval to treat two or more rare diseases however.
“The result is a disincentive for American innovators to invest in the expensive and time-intensive research necessary to determine if an orphan drug could cure or treat additional rare diseases,” the bill’s authors observe.
The bill will modify existing law by excluding any period in which a drug was an orphan drug from market approval calculations when determining whether the drug qualifies for negotiation. It will also exclude orphan drugs that are approved to treat more than one rare disease or condition from the program.
This bill was introduced in February 2025 and has been referred to house committees for examination.
The May EO and the most Favored Nation pricing model
On May 12, President Trump issued an executive order that directed Health and Human Services (HHS) Secretary Robert F. Kennedy Jr. to negotiate directly with drug companies to lower prices of certain prescription drugs. If an agreement cannot be reached with the companies in question, the government could take additional “aggressive” action to set the prices at a lower rate on par with other countries.
And this month, one week after President Trump signed an executive order to bring back the Most Favored Nation (MFN) idea that he had introduced at the end of his first term, HHS announced it is proceeding with implementing the order on prescription drug pricing.
The goal of the order is to set price targets for pharmaceutical manufacturers for products that do not have generic or biosimilar competition.
HHS Secretary Kennedy and Centers for Medicare and Medicaid Services Administrator Mehmet Oz, MD, set the target price as one that would corresponde with the lowest price in an Organisation for Economic Co-operation and Development (OECD) country with a gross domestic product (GDP) per capita of at least 60% of the US equivalent.
“For too long, Americans have been forced to pay exorbitant prices for the same drugs that are sold overseas for far less,” Kennedy said in a statement, “[t]hat ends today.”
The Trump administration claims establishing the MFN pricing will reduce the price of drugs by 30% to 80%. In his first term, the policy Trump introduced specifically covered Medicare Part B drugs, although it is not yet clear if this new order covers the same drugs.
Per the executive order, the Trump administration will pursue a series of other policies if it doesn’t see significant progress from drug manufacturers in offering drugs to consumers at the price that has been set by HHS.
In an interview with The American Journal of Managed Care, John Barkett, MBA, managing director in BRG’s Healthcare Transactions and Strategy practice, noted that all or many of the policies being put forward, such as reviewing export programs of US-based manufacturers to send drugs to other countries, would be unprecedented.
“I’m certain that the legality of [these policies] will be tested by manufacturers and potentially others who aren’t so sure that the president’s allowed to do these things,” Barkett asserted.