On April 15, 2025, President Trump issued a new Executive Order (Lowering Drug Prices by Once Again Putting Americans First) aimed at lowering prescription drug prices, signaling the administration’s intent to revive and broaden key drug pricing initiatives. The order builds on strategies from Trump’s first term and provides early insight into the administration’s approach to reshape drug pricing policy through regulatory reform and targeted legislation.
Several of the order’s provisions revisit unresolved or controversial areas of pharmaceutical policy, including reforms to the Inflation Reduction Act (IRA), adjustments to Medicare drug pricing structures, and renewed oversight of the 340B Drug Pricing Program.
Hospitals, specifically those participating in the 340B Program, stand to be most impacted by the proposed reforms in President Trump’s April 2025 Executive Order. With potential cuts to outpatient drug reimbursement, site-neutral payment changes, and increased administrative burdens from 340B pricing rules, these providers could face significant financial and operational challenges. To mitigate risks and adapt effectively, impacted entities should act now to assess vulnerabilities, implement compliance strategies, and prepare for possible legislative or regulatory shifts. The following provides an analysis of the Executive Order’s major provisions, with a focus on their potential impact and implications for the 340B Drug Pricing Program.
Modifying the Medicare Drug Negotiation Framework
The Executive Order challenges the current system created by the IRA that lets Medicare negotiate lower prices for certain prescription drugs. The Trump Administration argues that while the goal of lowering prices is good, the process is too complicated and has not saved as much money as expected.
One big concern is the “pill penalty,” which refers to how the law treats different types of drugs based on how long they have been on the market. Small-molecule drugs (usually pills) have to wait seven years after FDA approval before they can be considered for negotiation, and nine years before new prices take effect. In contrast, biologic drugs (usually injections or infusions) have to wait eleven and thirteen years, respectively. Critics say this creates an unfair advantage for biologics and discourages companies from developing cheaper drugs that help more people.
To fix this, the Executive Order asks Congress to make the waiting periods the same for all drugs. It also tells the Department of Health and Human Services (HHS) to update its guidance on how the program works and look for ways to keep Medicare drug premiums stable. Additionally, it calls for the creation of a new system to help Medicare get better deals on expensive drugs that are not covered by the IRA program.
While current drug pricing efforts remain in place, these proposed changes could delay how soon new prices are set.
Hospital Drug Cost Surveys Could Reignite Debate Over Payment Rates
The Executive Order brings back a previously settled issue: whether CMS can lower hospital drug reimbursement rates using data from acquisition cost surveys. After the Supreme Court ruled in favor of 340B hospitals in 2022, CMS was required to issue corrective payments. Now, the Executive Order instructs HHS to create a plan for a new cost survey, likely laying the groundwork for future reimbursement cuts. This signals a possible renewed effort to reduce payments for outpatient drugs, especially at 340B hospitals. If HHS moves forward, these surveys could create significant operational and compliance challenges, particularly relating to the pricing of 340B drugs. CMS has previously issued guidance addressing how the Maximum Fair Price (MFP) under the Inflation Reduction Act interacts with 340B Program purchases. Manufacturers must offer 340B Covered Entities the lower of the 340B ceiling price or the MFP, and reimburse any overpayments. However, CMS has placed the burden of avoiding duplicate discounts on manufacturers and Covered Entities, prompting stakeholder concerns about administrative burdens, cash flow issues, and data sharing.
As a result, 340B Covered Entities should brace for more administrative work and be prepared to respond to in-depth data requests. Any resulting policy changes could have a major impact on reimbursement levels and 340B program sustainability.
How Site-Neutral Payment Reforms Could Affect Drug Administration Reimbursement
Finally, as part of broader cost-control efforts, the Executive Order directs HHS to explore site-neutral payment policies for drug administration, specifically aiming to address the payment gap between hospital outpatient departments and physician offices. If implemented, this change could significantly reduce reimbursement for hospital-based infusion and injection services, which may put financial strain on hospital-based departments while benefitting freestanding physician offices, going against the purpose of the 340B Drug Pricing Program.
Hospitals should prepare for possible revenue loss if CMS moves forward with these changes, particularly if combined with other payment reforms like acquisition cost-based drug reimbursement.
Looking Ahead
In summary, many of the reforms outlined in the Executive Order would require legislative support, particularly those modifying the IRA. Others, however, can be pursued administratively, though resource constraints at HHS may complicate implementation timelines.
The order underscores the Trump Administration’s continued focus on reshaping drug pricing policy, with ripple effects likely to be felt across Medicare, the 340B Program, and commercial markets. Given the sweeping nature of these proposals, stakeholders should prepare for a dynamic regulatory environment and the possibility of renewed litigation in areas where prior disputes remain unresolved.
How Frier Levitt Can Help
The pharmaceutical supply chain is evolving rapidly, driven by swift policy shifts. Measures implemented under the recent Executive Order may bring about substantial reforms across drug pricing and reimbursement frameworks in the near future. These developments could also spark legal challenges as entities respond to the changes.
Frier Levitt can help stakeholders proactively address legal and regulatory complexities while minimizing exposure to enforcement actions or financial loss.
Contact us to speak with an attorney about how the new Executive Order can affect your practice.
Frier Levitt provides strategic, industry-focused legal counsel tailored to your needs. Contact our team today to learn how we can help you.
