What to Expect Under the Second Trump Administration
With the upcoming change in administration, the pharmaceutical industry is wondering what to expect over the next four years. How will President Trump’s agency appointments shape future policy? What current laws could change, and what new policies should be expected?
How could these unknowns affect the most important stakeholder of all—the patient?
When clients ask these questions, my answer is: it depends on how aggressively the administration will work to reduce the federal deficit and the degree to which they will focus on fundamentally changing how we currently operate as an industry. A lot of these issues are “wait and see,” but this article summarizes some key elements that should not be forgotten over the next presidential term.
The Trump Administration is unlikely to overturn the Inflation Reduction Act (IRA)
While we have been hearing “Repeal the Affordable Care Act (ACA)” for more than a decade, we do not hear the same about the IRA due to common ground between parties in the law. These include:
- Drug price negotiation: In 2020, President Trump issued an Executive Order titled “Lowering Drug Prices by Putting America First,” aiming to address U.S. drug prices that are significantly higher than those in other developed countries. The EO mandated that the U.S. establish a “most-favored- nation price” policy to stop subsidizing low drug prices experienced globally. While the IRA’s drug price negotiation program is different from President Trump’s since-abandoned approach, it still established government price controls that will ultimately affect both the federal and commercial insurance market.
- Part D out-of-pocket maximum: The IRA established a Part D patient outof-pocket maximum, which was a gap in the original Part D benefit design. Repealing this provision would be nearly impossible given its popularity on both sides of the aisle.
- Implications for standalone Part D plans: The IRA threatens standalone Part D drug plans, as these plans are offered alongside traditional Medicare benefits. Patients on traditional Medicare have two entities paying their bills (Medicare for medical services and a Part D plan for prescription drugs), while those enrolled in Medicare Advantage (MA) plans have the same private entity paying for both medical and pharmacy services. The IRA will reduce Part D profitability; standalone plans will not be able to absorb losses like their MA counterparts and could be forced to exit the market. Dr. Mehmet Oz—the newly nominated CMS Administrator and well-known proponent of MA—would be unlikely to enact measures that promote standalone Part D plans, if he ends up leading the agency.
Despite this common ground, the law poses challenges. While the Congressional Budget Office put a hefty federal price tag on the IRA, actual costs will be considerably higher. For example, CMS chose to subsidize Part D plans to address the significant increase in premiums for three years, starting in 2025. That cost was not expected, and it will be difficult to take that bandage away in the future. Also, Part D plans are already restricting formularies and continue to make utilization management (UM) criteria more stringent to reduce costs. Continued cost-saving efforts that delay or restrict access to care for patients could result in treatment abandonment and increased downstream costs, driving up federal spending.
There are unintended consequences that will be costly to the federal government because of the IRA’s implementation. If the new administration wants to focus on reducing the federal deficit, but is also led by a president that campaigned again on a promise to give Americans the best drug prices in the world, it will be challenging to strike a balance.
“Amazon and Mark Cuban Cost Plus Drugs are challenging the status quo.”
The Trump Administration will need to go beyond the IRA to achieve campaign goals
The IRA is certainly top of mind for the pharmaceutical industry, but there are other critical issues that command equal attention, including:
- The pharmaceutical supply chain: Our industry has a highly complex supply chain with many players. Rebates, administrative fees, and dispensing fees are paid along the way, creating a system that is hard to decode. This lack of transparency has been challenged, but Federal Trade Commission lawsuits against pharmacy benefit managers (PBMs) are progressing slowly, and Congress has continued to punt on the issue of PBM drug price transparency. The first Trump administration issued an Executive Order in 2020 to pass drug rebates to patients at the point of sale, but the Biden Administration did not implement it. How this will evolve post-inauguration remains to be seen. PBM reform and price transparency will happen, either through Washington D.C. or through the changes that are already taking place in the private sector. For example, PBMs are starting to offer more transparent plans (e.g., CVS-CostVantage, ESIClearCareRx, OptumRx- Clear Trend Guarantee), and companies like Amazon and Mark Cuban Cost Plus Drugs are challenging the status quo.
- Taxes on imported drugs: If President Trump chooses to impose tariffs on imports, this could increase imported generic drug costs and potentially result in drug shortages. U.S. companies may be unwilling to invest in domestic manufacturing facilities, given the low profits these products generate. Innovator drug prices could also increase for those products manufactured ex-U.S., drawing increased industry criticism.
- State Medicaid expansion: Medicaid expansion under the ACA has been a topic of debate for more than a decade. The new administration may explore options to slow or stop Medicaid expansion, such as choosing to lower federal matching for expansion populations, forcing states to shrink their programs or use state funding.
- Federal coverage for weight-loss medications: CMS’ newly released Part D proposed rule for 2026 under the Biden Administration proposes covering weight loss medications under Part D. While data show that these products could reduce long-term costly weight-related comorbidities, CMS estimates they will increase federal and state spending by $40B over 10 years. The new administration will be in place to finalize this proposal and may back down on coverage given Robert F. Kennedy (RFK) Jr.’s nomination to lead the Department of Health & Human Services (HHS) and his stance on lifestyle modification for weight loss. The new administration could also choose to cover these drugs but mandate significant discounts or fast-track them into the drug price negotiation program.
- HHS Staffing: If confirmed, RFK Jr.’s cabinet position could result in significant agency cuts, including to the Food & Drug Administration (FDA). These cuts could reduce research grants, population-health initiatives, and the ability for manufacturers to bring new products to market. It will be imperative for the industry to ensure a strong regulatory review and approval body so that Americans have timely access to new and innovative treatments.
“If confirmed, RFK Jr.’s cabinet position could result in significant agency cuts, including to the Food & Drug Administration (FDA).”
Recommendations for Moving Forward in Uncertain Times
As the new administration plants its flag, the pharmaceutical industry will need to advocate more than ever to protect its seat at the table. Manufacturers must demonstrate, and continue to reinforce to policymakers, insurers, and patients the value that prescription medications bring. Some recommendations include:
- Stress the importance of measuring value to policymakers: The IRA explicitly states that CMS cannot use often-criticized metrics, such as quality adjusted life years, as a measure of cost-effectiveness for drug price negotiation. As such, when CMS releases its report this March about the 10 drugs negotiated for 2026, it will hopefully shed light on the value metrics CMS utilized to set prices. It will be important to adjust manufacturer-generated evidence development strategies accordingly, identify gaps in CMS’ definition, and advocate with the agency to ensure that appropriate metrics are used for future negotiation.
- Ensure payers are receiving value for the drugs they cover: Insurers will continue to increase the level of scrutiny when evaluating drugs for coverage. As pharma continues to innovate, treat, and cure diseases, building strong, real-world evidencebased value propositions for payers is crucial. Manufacturers may also need to lobby for contractual arrangements that reward efficacy. While valuebased contracts are not standard, now may be the time for their use to grow.
- Continue to educate patients about the value of the pharmaceutical industry: The pharmaceutical industry must change its public perception and demonstrate its commitment and value to patients. Much of this could be done through educational efforts about the industry as a whole and through patient and consumer advocacy organizations. There is widespread misunderstanding about pharmaceutical companies, the investments they make to bring innovation to patients, how drug prices are set, and what Americans actually pay for treatment.
It will be increasingly important for manufacturers to use real-world data to evaluate how policies, like the IRA, affect patient access to care and increase costs, and use these learnings to inform future solutions.
