The Medicare $2 Drug List Model included drugs to treat diabetes, high cholesterol and thyroid issues.
On January 20, 2025, President Donald Trump revoked Executive Order 14087, titled “Lowering Prescription Drug Costs for Americans,” which had promoted analyzing new healthcare payment models that would lower prescription costs for Medicare and Medicaid beneficiaries. 87 Fed Reg. 63399 (Oct. 19, 2022).
The repeal of the executive order will now lead to some uncertainty regarding costs for prescription drugs covered by Medicare, so pharmacists should expect questions about access to certain drugs and pricing, including rebates and reimbursement from pharmacy benefit managers (PBMs).
The Trump administration expressed interest in addressing prescription drug pricing, but the administration’s approach has not been announced.
Executive Order Complements the Inflation Reduction Act of 2022
The executive order was signed by President Joe Biden in an attempt to lower the cost of prescription drugs covered by Medicare. The order was implemented to complement the healthcare cost provisions of Public Law 117-169, commonly referred to as the Inflation Reduction Act of 2022 (IRA). The IRA requires certain pharmaceutical manufacturers to remit Medicare rebates to the government if the manufacturers increase the prices of drugs used by Medicare beneficiaries more than the rate of inflation.
The IRA also permits the Secretary of the Health and Human Services (HHS) to negotiate prices for selected high-cost prescription drugs for Medicare beneficiaries:
- In the first round, the HHS negotiated lower prices for 10 drugs.
- Last week, the HHS announced that it planned to negotiate prices for an additional 15 drugs, including certain weight-loss drugs.
In addition to revoking the executive order, President Trump also ordered federal agencies to immediately pause the spending of money for the IRA and to review payments associated with the IRA.
Analysis of Drug Payment and Delivery Models
The order had aimed to:
- Have Medicare prescription plans offer generics for a maximum of a $2 copayment for a monthly supply,
- Improve Medicare recipient access to cell and gene therapy often used to treat conditions such as cancer, and
- Speed up the process for access to effective new treatments by streamlining the evidence-gathering process for new drugs.
Per the executive order, the HHS was to: (1) analyze “new health care payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs” and (2) include models “that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes high-quality care.” 87 Fed Reg. 63399.
In January 2023, the HHS selected three drug payment and delivery models for further review, including a model titled “Medicare High-Value Drug List Model” that would have allowed Medicare Part D sponsors to offer a “Medicare-defined standard set of approximately 150 high-value generic drugs with a maximum co-payment of $2 for a month’s supply.” The Medicare $2 Drug List Model included drugs to treat diabetes, high cholesterol and thyroid issues.
Potential Impact of Revoking the Order
Although the executive order was revoked, the existing laws and regulations governing prescription drug pricing and Medicare and Medicaid policies remain in effect.
The potential impact of revoking the order includes: (1) uncertain out-of-pocket copayment models and (2) uncertain drug pricing policies, including rebates and reimbursements received by pharmacies.
For More Information
If you have any questions about this Alert, please contact Jonathan L. Swichar, Sheila Raftery Wiggins, Bradley A. Wasser, any of the attorneys in our Pharmacy Litigation Group or the attorney in the firm with whom you are regularly in contact.
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