President-elect Donald Trump has made it clear that one of his priorities upon taking office is to rescind unspent funds earmarked for climate provisions contained in the Inflation Reduction Act, a key piece of legislation signed by President Biden in 2022. However, notably absent from Trump’s promise to repeal portions of the IRA law is any mention of removing prescription drug price provisions from the Medicare program. This omission suggests that these measures, which are popular among constituents, are unlikely to be on the chopping block. In fact, the new administration may even pursue more significant price cuts in this area.
In a recent announcement, Trump revealed that Mehmet Oz would be the next administrator of the Centers for Medicare and Medicaid Services. He stated that Oz would focus on cutting waste and fraud within the government agency, which accounts for a significant portion of the nation’s healthcare spending. While the specifics of where waste may be cut remain unclear, Trump has established the Department of Government Efficiency to explore ways to reduce government spending and regulatory burdens, potentially leading to recommendations to void sections of the IRA legislation.
Prior to his election victory, Trump had indicated his intention to revoke unspent funds that support projects aimed at reducing greenhouse gas emissions and air pollution, including green banks directly funded under the IRA legislation. Trump has expressed a desire to restore presidential authority to withhold congressionally approved spending that he deems wasteful.
While Republicans in Congress may attempt to repeal the IRA, primarily aimed at combating climate change, it is unlikely that provisions related to prescription drug pricing will be rescinded. This is because reducing pharmaceutical costs has bipartisan support and is favored by a vast majority of Americans.
Trump’s past budget proposals included significant spending cuts to Social Security, Medicaid, and Medicare, though most of these proposed cuts were targeted at payments to hospitals and healthcare providers rather than beneficiary benefits. The administration may look to lower drug prices as a way to save government money while maintaining Medicare benefits for recipients.
If confirmed, Mehmet Oz may leverage existing laws to pursue international price referencing, aligning Medicare drug prices with those paid in other countries, a practice Trump had previously proposed. This approach could lead to substantially lower drug prices within Medicare, potentially below the current negotiation arrangements established by the IRA.
Overall, it seems unlikely that the new Trump administration will roll back Medicare’s authority to negotiate drug prices or revoke key provisions of the IRA related to prescription drug pricing. Instead, the focus may be on further lowering drug prices to save government funds while ensuring Medicare beneficiaries continue to receive essential medications at affordable rates. The Centers for Medicare & Medicaid Services (CMS) estimated in August that the announced maximum fair prices for the first ten negotiated pharmaceuticals would lead to a 22% decrease in net spending in 2023. This projection may be seen as somewhat inflated, given the substantial price gaps between branded medications in the U.S. and other countries. International price referencing has the potential to exert even greater downward pressure on drug prices.
A 2018 analysis led by the Department of Health and Human Services (HHS) highlighted the stark disparity in brand-name drug prices between the U.S. and other high-income nations. The study compared prices of physician-administered drugs and found that U.S. ex-manufacturer prices were, on average, 1.8 times higher than those in comparator countries. This disparity suggests that implementing a most favored nation policy could result in a significant reduction in drug prices across the U.S.
By leveraging international price referencing and negotiating fair prices for pharmaceuticals, CMS and HHS aim to address the issue of high drug costs in the U.S. This approach has the potential to generate substantial savings for the healthcare system and patients alike. As efforts to lower drug prices continue, it is crucial to consider the impact of these policies on access to affordable medication for all Americans.
