July 25, 2024, 7:37 p.m.
Even if former President Trump wins the election in November, the federal government’s new authority to negotiate drug prices under Medicare will be hard to dismantle, policy experts say.
The recent tool enacted under the Inflation Reduction Act of 2022 is just getting underway, with the first set of negotiated prices for 10 drugs to be made available in 2026. The authority is a key part of the health care legacy President Biden will be leaving behind.
Former President Trump initially campaigned in 2016 on the idea to let Medicare negotiate drug prices, but he later backed off. His running mate this time around—Sen. J.D. Vance of Ohio—told AARP while running for the Senate in 2022 that Medicare should be allowed to negotiate.
Many Republicans, however, have bashed the Inflation Reduction Act’s negotiation authority as “price controls.” The Heritage Foundation’s Project 2025, which was partly drafted by former Trump administration officials though it has been largely disavowed by the campaign, calls for the repeal of this policy.
Even if Trump and Vance end up opposing the policy, removing it is easier said than done.
Theo Merkel, former special assistant to Trump on economic policy at the National Economic Council, said that even though Trump “has expressed skepticism to the Inflation Reduction Act, and while I can make the case that the Inflation Reduction Act is not the best mechanism for lowering drug prices, I do not expect the former president to unilaterally disarm one of his bigger levers for lowering drug prices unless he has a better alternative.”
Merkel, now director of the Private Health Reform Initiative at the Paragon Health Institute, said the presence of Vance on the ticket doesn’t change that dynamic. “If anything, it just reinforces it,” he said.
Rodney Whitlock, vice president at McDermott+Consulting, said that while Trump and Vance might not want to expand the use of the drug-pricing authority the way Biden does, he’s not convinced they would roll it back, either. “I don’t think that’s there at all, and having a presidential and vice presidential candidate who are not necessarily overly pharma-friendly I think plays to that,” Whitlock said.
The Project 2025 playbook suggests that until the IRA negotiation authority is repealed, an administration that has to implement the tool “must do so in a way that is prudent with its authority, minimizing the harmful effects of the law’s policies and avoiding even worse unintended consequences.”
Conservative policy experts argue the IRA will continue to push up premiums for Medicare beneficiaries. Beneficiaries with stand-alone Part D drug plans were projected to experience a 21 percent increase in premiums for 2024, according to a KFF analysis. The report says this is in response to higher plan costs, including a new out-of-pocket spending cap that was part of the IRA.
But it would be a “tough balancing act” for a potential Trump administration between providing short-term relief to seniors while keeping the pressure on Congress to act, said Joseph Grogan, who served as assistant to then-President Trump and as the director of his Domestic Policy Council.
Grogan, now a non-resident senior scholar at the USC Schaeffer Institute, said the law will become increasingly unpopular and that Democrats will come back to the table to act on the issue.
The higher premiums for Medicare beneficiaries could also create some complications on the campaign trail for Democrats, conservatives said.
“When I look at what the actual results have been, especially the results that will be delivered for seniors before 2026 ... it seems to me that there is a lot more harm to seniors that is going to be done, especially in the near term, and there’s only sort of these messaging and talking points about the benefits that will happen in the future,” Merkel said.
But repealing the IRA could present a math problem for lawmakers.
Joel White, a Republican health care strategist, noted that the “Super Bowl” of tax policy is coming up, with Trump tax cuts and the enhanced Obamacare premium subsidies expiring at the end of 2025. White said the challenge for IRA repeal is that “it was a net reduction in spending in the Medicare program, and no one's found a list of reforms that would fully replace the spending cuts.”
The Congressional Budget Office had estimated that drug-price negotiation would save the government $25 billion. All of the drug-pricing provisions were estimated to reduce the deficit by $237 billion from 2022 to 2031.
“The bigger Medicare picture is we don’t like the approach; we share the goal of lowering costs,” said White, president and CEO of Horizon Government Affairs. “How can we get something credible that could replace that or at least mitigate, really, the negative side effects of price controls?”
To deliver lower drug prices to patients more quickly, White suggested Trump could revisit a policy from his first term that would effectively eliminate rebates negotiated between pharmacy-benefit managers and drug manufacturers. The idea, he said, is that manufacturers would pass those savings to patients at the pharmacy counter.
“Any patient that walks through the door could get a lower price on that drug,” he said. “The Inflation Reduction Act structure says, 'Well, it’s just these 10 drugs in 2026.' … I think Trump and Vance would want to streamline that process to immediately get lower prices to the patient as quickly as possible.”
The rule never took effect and was delayed under the IRA until 2032. A small group of beneficiaries were expected to benefit from the rule—if manufacturers pass discounts on to patients—but out-of-pocket costs would have increased for others, according to a KFF analysis. The analysis also noted the regulation was expected to increase Medicare spending by $170 billion over 10 years, according to a Congressional Budget Office estimate.
Grogan suggested Trump could pursue his most-favored-nation model. Proposed during his presidency, the model would have tied the cost of certain physician-administered drugs to the often lower price paid by other nations, but it was blocked by a federal court from taking effect and later rescinded by the Biden administration.
Grogan also pointed to Trump’s idea of putting a 10 percent tariff on all imported products and 60 percent on products from China. “You start to see tariffs going for drugs that are imported, you can see the contours of something taking shape where drugs manufactured in the United States are going to be cheaper than they would be if they were manufactured overseas,” he said.
Critics of the proposal, however, have expressed concern that such tariffs would increase costs for American consumers.
Not all actions on drug prices are as controversial as the Medicare negotiation tool. Lawmakers on both sides of the aisle have had their eye on pharmacy-benefit managers, which implement drug benefits and negotiate discounts on drugs. Two recent reports from the Federal Trade Commission and the House Oversight and Accountability Committee have accused PBMs of squeezing lower-cost generics out of formularies and driving up health care costs.
Executives from the three top PBMs—Optum Rx, Express Scripts, and CVS Caremark—were grilled about their practices by both Democrats and Republicans at a House Oversight hearing this week.
Ranking member Jamie Raskin talked about how much sway and power PBMs have over patients’ access to drugs—for instance, dictating which drugs are covered and which pharmacies patients can use.
“While we do not have a lot of visibility into the inner workings of PBMs, the work this Committee’s done on PBMs this Congress has provided many examples of how your policies are not necessarily always working for the people that are served,” Raskin said to the PBM executives.
