Trump Administration Issues Executive Order To Lower Prescription Drug Costs

On April 15, 2025, President Trump issued an Executive Order, titled “Lowering Drug Prices by Once Again Putting Americans First” (the Order), the stated aim of which is to lower prescription drug costs for American patients and taxpayers, including by increasing competition and transparency. The Order resurrects several policies from President Trump’s first administration and attempts to “improv[e]” certain Biden-era policies, such as the Inflation Reduction Act (IRA) and associated implementation policies. While the Order sets several policies in motion, nearly all will require further administrative or congressional action.

Revived Policies and Priorities From Trump’s First Term

The Order and its accompanying fact sheet catalogue the “historic efforts” of President Trump’s first term, which it asserts that “the Biden Administration reversed, walked back, or neglected.” Thus, the Order directs the Secretary of Health and Human Services (HHS) to take several actions that mirror policies or priorities from President Trump’s first administration. For example:

• CMMI Payment Model. Within one year, the Order directs the Secretary of HHS to develop and implement a Center for Medicare and Medicaid Innovation (CMMI) model through rulemaking “to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biological products … including those not subject to the Medicare Drug Price Negotiation Program.” Although the specifics of this model are unclear at this time, President Trump relied on CMMI authority for the International Pricing Index and Most Favored Nation models during his first term.

• Hospital Acquisition Costs. Within 180 days, the Order directs the Secretary to publish in the Federal Register a plan to conduct a survey, under Social Security Act (SSA) § 1833(t)(14)(D)(ii), on hospital outpatient department acquisition costs for covered outpatient drugs, and then to propose adjustments to align Medicare payment rates with a drug’s acquisition cost. This survey appears intended to correct a procedural problem that arose when, under President Trump’s prior administration, the Centers for Medicare & Medicaid Services (CMS) reduced outpatient prospective payment system payments for non-pass-through drugs to most 340B hospitals from average sales price (ASP) plus 6% to ASP minus 22.5%. The Supreme Court overturned the reductions because CMS did not first conduct a survey of hospitals’ drug acquisition costs, as required under SSA § 1833(t)(14). American Hospital Ass’n v. Becerra, 142 S.Ct. 1896 (2022).

• 340B Discounts. Within 90 days, the Order requires the Secretary of HHS to ensure that new community health center grants are conditioned on the health center establishing practices to make insulin and injectable epinephrine available at or below the 340B price (plus a minimal administrative fee) to certain low-income individuals. During his prior administration, President Trump issued a similar directive in an executive order. The Health Resources and Services Administration subsequently issued a final rule, which was rescinded at the beginning of the Biden administration.

• Pharmacy Benefit Managers (PBMs). The Order includes several directives intended to “address[] the influence of middlemen,” including: (a) within 90 days, directs the Assistant to the President for Domestic Policy, in coordination with the Secretary of HHS, the Office of Management and Budget (OMB) Director, and the Assistant to the President for Economic Policy to provide joint recommendations to the President on ways to “promote a more competitive, efficient, transparent, and resilient pharmaceutical value chain that delivers lower drug prices for Americans”; and (b) within 180 days, directs the Secretary of Labor to propose regulations under section 408(b)(2)(B) of the Employee Retirement Income Security Act of 1974 to improve transparency into direct and indirect compensation received by PBMs. Although distinct, these policies build off President Trump’s scrutiny of PBMs and rebates during his prior administration.

• Drug Importation. Within 90 days, the Order directs the Commissioner of Food and Drugs to “streamline and improve” the Section 804 Importation Program, which was first implemented and quickly finalized during President Trump’s prior administration. The stated goal of this Order is to make it “easier for States to obtain approval” of Section 804 Importation Program Proposals; doing so may necessitate updating relevant FDA regulations, found at 21 C.F.R. Part 251, which detail the requirements and procedures for such importation programs. Notably, the directive to “expand access to lower cost drugs imported from outside of the country” seems to be at policy odds with the President’s frequent calls for tariffs on pharmaceutical imports and the administration’s launch, earlier in the week, of an investigation of pharmaceutical imports under Section 232 of the Trade Expansion Act of 1962, which is very likely to result in tariffs on imported drugs and active pharmaceutical ingredients. The former will make it easier for states to authorize importation just as the latter increases costs for pharmaceutical companies.

• Increase Competition. The Order directs federal agencies to take actions to increase competition. In particular, within 180 days, FDA is directed to issue a report with two sets of administrative and legislative recommendations. First, to accelerate the approval of “generics, biosimilars, combination products, and second-in-class branded products.” The Order notes that enhancing access to generic drugs and biosimilars was a key strategy for the first Trump administration and promises to focus on these issues again. It is less clear what is meant by acceleration of combination products, which encompass a large variety of innovative and follow-on products. It similarly remains to be seen how FDA may work to facilitate additional (or faster) development of second-in-class branded products, which are typically submitted through section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act — particularly as much of the staff that works on those applications was let go in the April 1, 2025 reduction in force.
  
  Second, the Order directs FDA to improve the process for prescription to over-the-counter switches. This will play out concurrently with the pending reauthorization of the Over-the-counter Monograph User Fee Agreement (OMUFA) and also with the potential roll-out of the delayed Biden era final rule on over-the-counter drugs with additional conditions of use (ACNU). Additionally, the Order directs the Secretary to convene a joint listening session with the U.S. Department of Justice, the U.S. Department of Commerce, and the Federal Trade Commission and to issue a report with recommendations to “reduce anti-competitive behavior from pharmaceutical manufacturers.”

• Site-Neutral Payments. Within 180 days, the Order directs the Secretary of HHS to evaluate, and if appropriate, propose regulations to ensure that Medicare policies are “not encouraging a shift in drug administration volume away from less costly physician office settings to more expensive hospital outpatient departments.” This is consistent with prior Trump administration budget requests, which included site neutral payment proposals.

“Improv[ements]” to Biden-Era Policies

The Order and fact sheet criticize Biden administration policies, including the IRA’s Maximum Fair Price (MFP) Program for being “administratively complex” and “produc[ing] much lower savings than projected.” The Order directs federal agencies to take actions to redirect certain policies under President Biden consistent with President Trump’s priorities. For example:

• Inflation Reduction Act. The Order directs federal agencies and Congress to take several actions to “improv[e]” the IRA, with the fact sheet stating that these actions will “eclipse the 22% in savings achieved in the program’s first year.”
  • Within 60 days, the Order directs the Secretary of HHS to seek comment on proposed guidance for initial price applicability year (IPAY) 2028 and MFP effectuation for IPAYs 2026 through 2028. While CMS has yet to issue guidance on IPAY 2028 — which will include Part B drugs for the first time — it is unclear whether this new guidance will substantially revise policies articulated in CMS’ previous final guidance on MFP effectuation for IPAYs 2026 and 2027. The Order states that the forthcoming guidance should improve transparency, prioritize selection of prescription drugs with high costs to the Medicare program, and minimize impacts of MFPs on U.S. pharmaceutical innovation.
  • Within 180 days, the Order directs the Assistant to the President for Domestic Policy, in coordination with the Secretary of HHS, the OMB Director, and the Assistant to the President for Economic Policy to provide recommendations to the President on how best to stabilize and reduce Medicare Part D premiums.
  • The Order directs the Secretary to work with Congress on legislation that would amend the MFP Program “to align the treatment of small molecule prescription drugs with that of biological products ... coupled with other reforms to prevent any increase in overall costs to Medicare and its beneficiaries.” This is an apparent endorsement of the Ensuring Pathways to Innovative Cures (EPIC) Act of 2025 (H.R. 1492 / S. 832), provided that it is paired with offsetting legislation.

• Medicaid Drug Rebates. Within 180 days, the Order directs the OMB Director, the Assistant to the President for Domestic Policy, and the Assistant to the President for Economic Policy, in coordination with the Secretary of HHS, to provide joint recommendations to the President on “how best to ensure that manufacturers pay accurate Medicaid drug rebates ..., promote innovation in Medicaid drug payment methodologies, link payments for drugs to the value obtained, and support States in managing drug spending.” The fact sheet states that the Order would “build[] off programs to help states get much better deals” on sickle-cell medicines in the Medicaid program, which suggests that this section may be intended, in part, to build off the Biden administration’s Cell and Gene Therapy Access Model.

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This Order initiates several policies that could significantly impact the Life Sciences industry, including pharmaceutical manufacturers and healthcare providers. At Arnold & Porter, our interdisciplinary team will be closely monitoring this Order and the resulting administrative and congressional activity.

We stand ready to advise our clients on potential impacts of this Order and other administrative actions impacting the industry. For instance, the launch of the Section 232 investigation into pharmaceuticals that the administration announced the day before issuing this Order raises questions about how to respond to potential tariffs while facing pressure to lower drug costs domestically.

If you have any questions about the content discussed in this Advisory or would like more information, please reach out to one of the authors or your existing Arnold & Porter contact.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.