The incoming Trump administration presents a complex and potentially contradictory stance on healthcare policy, particularly concerning the Inflation Reduction Act (IRA) and its impact on Medicare. While promising to rescind unspent IRA funds allocated for climate initiatives, Trump has notably avoided mentioning the popular prescription drug pricing provisions within the same legislation. This silence strongly suggests that these measures, lauded by a vast majority of Americans, are unlikely to face repeal. In fact, there’s a possibility the new administration may even pursue further drug price reductions, aligning with a previously expressed interest in lowering healthcare costs. This selective approach to the IRA underscores the political calculus of healthcare reform, where popular provisions enjoy a degree of protection even amidst broader policy overhauls.
Trump’s appointment of Mehmet Oz to head the Centers for Medicare and Medicaid Services (CMS) signals a focus on cost-cutting within the agency. While the specifics of what constitutes “waste and fraud” remain unclear, the newly established Department of Government Efficiency (DOGE) is tasked with identifying potential areas for savings, potentially including revisiting sections of the IRA. This focus on efficiency, combined with Trump’s past rhetoric on Medicare spending, suggests that drug pricing reforms within the IRA may be viewed as a tool for achieving cost savings, rather than a target for elimination. This pragmatic approach could see the administration leveraging existing legislation to further its cost-containment goals.
Despite Trump’s previous campaign promises and pronouncements, his past actions regarding Medicare spending paint a more nuanced picture. While publicly vowing to protect Medicare, his presidential budgets consistently proposed substantial cuts to the program, primarily targeting payments to healthcare providers rather than direct beneficiary benefits. This history suggests a willingness to reduce Medicare expenditures, albeit through indirect mechanisms. The drug pricing provisions within the IRA offer a politically palatable avenue for achieving such savings without impacting the benefits received by beneficiaries. This alignment between cost-cutting objectives and the preservation of benefits makes it unlikely that these provisions will be targeted.
The potential for further drug price reductions under the new administration is reinforced by Trump’s past interest in international price referencing, a practice where Medicare drug prices are pegged to those in other comparable countries. This approach, a key component of executive orders issued during his first term, aims to leverage lower drug prices abroad to reduce domestic spending. While the “most favored nation” model faced significant pushback and ultimately failed to gain traction during his previous presidency, the potential for substantial savings could incentivize its revival. This is particularly true given the bipartisan support for lowering drug costs and the administration’s emphasis on reducing government spending.
Although pre-election messaging on reinstating the most favored nation model was mixed, with both promises to “take on Big Pharma” and denials of such plans, the potential for significant cost reductions makes it a compelling option. This is further underscored by HHS Secretary nominee Robert F. Kennedy’s expressed interest in tying U.S. drug prices to European benchmarks. The convergence of cost-containment goals, public support for lower drug prices, and the potential for substantial savings through international referencing suggests a strong possibility that this strategy will be revisited. Such a move could result in even steeper price reductions than those achieved through the current IRA negotiation framework.
The potential impact of international price referencing on Medicare drug costs is substantial. Analysis from HHS indicates that U.S. brand-name drug prices are significantly higher than those in other wealthy nations, with a 2018 study revealing U.S. prices to be 1.8 times the average of comparator countries. Implementing a most favored nation policy could therefore yield significant savings, potentially exceeding the estimated 22% reduction in net spending projected under the IRA’s negotiation framework. While the ultimate direction of the new administration’s drug pricing policy remains to be seen, the confluence of political and economic factors suggests that further reductions, potentially through international benchmarking, are a distinct possibility. This approach would align with both the administration’s cost-cutting agenda and the broader public demand for more affordable medications.
