Trump Drug Pricing Order Spurs Doubts With Staff Cuts, Tariffs

President Donald Trump’s executive order to lower prescription drug costs is filled with actions that policy analysts and patient groups say will reward the pharmaceutical industry while doing little to reduce health-care spending nationwide.

The order, which Trump signed April 15, directs the health secretary to work with Congress on policy that could give certain medications more time on the market before they’re subject to Medicare price negotiations. The move addresses a key critique from the pharmaceutical industry: that the Inflation Reduction Act discourages investment in small molecule drugs, like pills.

At the same time, Trump’s order asks the Food and Drug Administration to explore how to streamline the agency’s program allowing states to import drugs from Canada and accelerate approvals of generic drugs and biosimilar products. Both actions are likely to be complicated by sweeping staff cuts at the agency, as well as the administration’s tariffs on Canadian imports.

Taken together, the policies outlined in the order are leaving analysts skeptical of whether the Trump administration has the capacity to deliver on its stated goal of reducing prescription drug prices for Americans.

“It’s this yin and yang that you see going on throughout the administration,” said Kurt Karst, a director at Hyman, Phelps & McNamara PC.

“The question becomes, who is left at the agency, policy wise, with the expertise to be able to provide thoughtful and insightful recommendations,” Karst said.

‘Pill Penalty’

The Biden-era Inflation Reduction Act gave the US authority to negotiate with the pharmaceutical industry over the costs for some of the most expensive medicines covered by Medicare.

The law directs small molecule drugs to be eligible for selection seven years after FDA approval. There is a two-year negotiation period, and the price control goes into effect at year nine. Biologics are eligible for selection 11 years after FDA approval, with the price control going into effect two years later.

Biologics are often large and more-complex molecules that are granted longer market exclusivity by the FDA. Trump’s order doesn’t specify how much longer small-molecule drugs would be exempt from negotiations, but says it aims to “align the treatment of small molecule prescription drugs with that of biological products.”

The Pharmaceutical Research and Manufacturers of America praised the executive order and claimed the so-called “pill penalty” has already led to a 70% reduction in investment in small molecule medicines.

Incubate Coalition, an organization representing venture capital firms, has also pushed for a reset on the negotiations, arguing that the pill penalty will harm return on investments.

“We’re grateful that the president and his team understands that the small molecule penalty is hurting Americans health,” said John Stanford, executive director of Incubate Coalition.

But Merith Basey, executive director of Patients For Affordable Drugs, said in a statement that the change wouldn’t lower costs, but “hand drug companies four additional years to price-gouge patients.”

So-Yeon Kang, an assistant professor at the Georgetown University School of Health, said “extending the period before Medicare can negotiate prices for small molecule drugs could delay cost savings for both patients and Medicare program, ultimately weakening the intended impact of the IRA.”

Drug Imports

Trump’s executive order directs the FDA to, within 90 days, “take steps to streamline and improve the Importation Program under section 804 of the Federal Food, Drug, and Cosmetic Act to make it easier for States to obtain approval without sacrificing safety or quality.”

This pathway, for which the FDA finalized regulations during the first Trump administration, allows for importation in situations where a state shows that doing so will significantly reduce the costs of prescription drugs without imposing additional public health and safety risks.

The pharmaceutical industry and drug pricing policy analysts have repeatedly expressed doubts that importing drugs will substantially lower prescription costs, especially amid the Trump administration’s tariffs on Canadian goods.

On top of that, no state has successfully begun importing prescription drugs from Canada. Florida is the only state with an FDA-approved program but has yet to get its plans off the ground.

Canada has also repeatedly voiced opposition to exporting pharmaceutical products that would threaten the country’s own supply.

“The Canadian market is just not large enough to ever be a broad-based solution to the price problem in the US,” Mark E. Miller, executive vice president of health care at the philanthropy Arnold Ventures, said in an interview.

Importation also depends on “active participation of FDA,” Miller said. He noted this could be a challenge after the health department carried out its large-scale reduction-in-force that targeted 3,500 employees at the FDA, or almost 20% of the agency.

The FDA didn’t immediately respond to a request for comment.

Accelerating Approvals

Industry watchers are also eyeing how the FDA would work to speed up approvals of generics and biosimilars after the Trump administration gutted staff at the agency.

“Who’s going to be doing this at FDA?” Karst said. “How are you going to accelerate, from both an administrative and legislative perspective, approvals of generics and biosimilars if you know the user fee programs are in jeopardy, either because of the financial triggers or because they may not get renegotiated?”

User fees are paid by the industry to FDA to hire more staff and help the agency speed up medical product reviews.

The layoffs largely spared drug, medical device, and food reviewers and inspectors, but those employees are now finding it difficult to meet review goals after the agency fired staff that provided critical support.

The FDA cut back its policy staff, making it tough for reviewers to consult with other experts about technical topics related to approval and inspection functions. Among the policy divisions axed was the Office of Generic Drugs.

“RFK fired some of the FDA’s best leaders and scientists,” Rep. Jake Auchincloss (D-Mass) said in an interview. “Now he’s asking the FDA to help navigate some very complicated reforms alongside industry.”