It seems as if a storm is brewing with regard to the U.S. healthcare policy and workers and retirees may soon see vital changes to Medicare drug pricing. The change in Medicare drug pricing threatens to reshape the pharmaceutical landscape. One rather controversial component of former President Joe Biden’s Inflation Reduction Act (IRA), called the “pill penalty,” has become seen as stumping innovation in the most widely used and affordable category of prescription drugs, the small-molecule pills.
President Donald Trump has proposed an executive order with the aim of extending the timeline before small-molecule drugs become subject to Medicare price negotiations. The executive order states that negotiations of the price of small-molecule pills will change from nine years to thirteen years, matching biologics like injectables and IV drugs.
Understanding the pill penalty better
As per the Former President Biden’s pill penalty, biologics tend to enjoy 13 years of market exclusivity before Medicare can negotiate their prices although small-molecule drugs face price controls after just nine years. The four-year discrepancy, according to the Pharmaceutical Research and Manufacturers of America (PhRMA), has led to a sharp 70% decline in investment of these everyday medications since 2021.
According to Joel White, the president of the Council for Affordable Health Coverage, “The Biden IRA has been a nightmare for American patients and is causing skyrocketing out-of-pocket costs on Pill Penalty prescriptions.” Many drug companies also shared their concerns. It was stated by Stephen Ubl, CEO of PhRMA that an estimated 63% of companies resorted to shifting their R&D investment away from pills because biologics were deemed more lucrative. While pills supposed to be affordable and easily accessible for treating large-scale conditions like heart disease, diabetes, and cancer, the abandonment of these pills threatens to replace affordable options with expensive treatments in clinical settings.
Criticisms of the current legislation
The pill penalty was said to control costs; however, critics have often stated that the law was more in favor of discouraging innovation whilst inflating healthcare expenses. The Biden IRA has as such been quite nightmarish for many American citizens.
Due to the affordability of pills many companies resorted to focus on biologics that received approximately 10 times more funding. The companies also stopped focusing on developing small molecular drugs.
The main devastation under former President Biden’s IRA was that patients, especially those with chronic diseases, heart diseases and cancer battled with far fewer treatment options as well as having to deal with treatment options with higher costs. Another devastation for many citizens is the news that Medicare Part B is not free.
What President Trump’s executive order aims to do?
According to a Press release by Thom Tills, U.S. Senator from North Carolina, President Trump’s executive order can’t exactly alter legislation directly; however, the executive order instructed Health and Human Services Secretary, Robert F. Kennedy Jr., to work with Congress to change the Medicare negotiation program to align the treatment of small molecule prescribed drugs with that of biological products. This executive order works focuses on putting to bed the long-term distortion occurring with prescription-based small molecule drugs.
Kennedy Jr. was further instructed by the President to decrease drug prices. Despite the instruction, no specifics were given with regard to how the price reduction should be done. RFK did announce more plans for Medicare this year. The first round of Medicare negotiations resulted in a 22% price reduction on 10 high-cost drugs. If the Trump administration could negotiate further Medicare price cuts, it could be a tremendous win for patients.
Cynthia Fisher, Chair of Patient Rights Advocate, argues that this new approach may increase wages and affordability through transparency and competition. But others warn that without small-molecule innovation, workers and families will be forced into more burdensome care options both physically and financially. One thing is rather clear; the Trump Administration recognizes the importance of tackling hefty drug prices.
With President Trump pushing reforms and Democrats defending the current trajectory, the outcome of this debate could reshape access to medicine for millions of Americans. The change may be painful for workers who realize that they had to accept higher priced molecule drugs for far too long.
