Donald Trump signed an executive order on Tuesday directing the Department of Health and Human Services to work with Congress on amending a key component of Medicare’s new drug price negotiation authority.
The directive specifically targets a timeline that drugmakers have long criticized. The current law, passed former president Biden’s Inflation Reduction Act, allows Medicare to negotiate prices for pill-based drugs after just nine years on the market, while more complex biologic drugs get 13 years. Pharmaceutical companies are now pushing for that nine-year window to be extended to match the 13-year threshold, arguing that the existing structure threatens innovation, especially in small molecule drug development.
Small molecule drugs, which include most pills and capsules, represent the majority of commonly used medications. By aligning the negotiation timeline with biologics, drugmakers hope to preserve revenue potential during a drug’s peak profitability window.
Trump’s executive order does not directly change the law. The power to adjust Medicare’s negotiation rules lies with Congress. However, by directing HHS Secretary Robert F. Kennedy Jr. to engage lawmakers on the issue, the Trump administration is signaling support for the pharmaceutical industry’s push.
This comes just a day after Trump ordered a national security review of the pharmaceutical supply chain, a move widely seen as laying the groundwork for industry-specific tariffs.
The Biden administration’s first round of negotiations targeted 10 of the most expensive drugs in Medicare, achieving price cuts of up to 79%. The Trump administration will now oversee the second group of medications which includes medications like Ozempic and Wegovy used for diabetes and weight loss, and Pfizer’s cancer treatments Ibrance and Xtandi.
While Biden’s reforms marked a historic shift in how the government approaches drug pricing, Trump’s order hints at a different direction — one more attuned to industry concerns and potentially more favorable to drugmakers’ bottom lines.
White House officials have hinted that future changes under Trump could lead to even greater savings than those achieved by Biden’s team, though no specifics have been provided yet.
The executive order goes beyond drug pricing timelines. Among other things, it also includes a site-neutral payment policy that would prevent hospitals from charging different rates for the same service depending on location, potentially saving patients money and improving billing transparency. Trump’s order also encourages the FDA to approve more state-run programs to import cheaper drugs from countries like Canada and directs the FDA to speed up the approval process for generics and biosimilars.
While the executive order indicates a significant policy stance, the real work now lies in Congress. Changing the Medicare negotiation timeline will require legislative action, something that may prove difficult in a divided and highly politicized environment.