Healthcare & Life Sciences: Drug Pricing Digest — Number 45

Inflation Reduction Act, Healthcare Reform, and General Developments

Renewed Focus on International Reference Pricing

Congress has been considering significant cuts to Medicaid to pay for President Trump’s so-called “big, beautiful bill” that would implement the president’s policy goals in a broad range of areas, mostly unrelated to healthcare. Reportedly, President Trump is now suggesting that a form of international reference pricing, known as most favored nation (MFN) pricing, could be used to reduce drug costs in the Medicaid program, thereby reducing the need to cut Medicaid funding while still achieving overall spending reduction targets. While no details have emerged so far, in general, an MFN pricing approach could tie the Medicaid reimbursement for a drug to the lowest price of the drug in any of a number of reference countries.

Meanwhile, other stakeholders, including a Trump administration-aligned think tank, are arguing that prices outside the US should be increased to be more in line with US prices. Reportedly, companies are engaging in advocacy efforts with that goal, particularly in Europe.

During the first Trump administration, the Centers for Medicare & Medicaid Services (CMS) sought to implement MFN pricing in Medicare Part B through a payment model. This initiative was struck down in court on procedural grounds and never took effect.

The recent Trump drug pricing executive order called for a “rulemaking plan” to implement a payment model “to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biological products,” which some commentators suggested is an oblique reference to international reference or MFN pricing. The executive order was discussed in issue No. 44 of this digest.

Sources: Politico Pro (first, second, third, fourth), Pink Sheet (first, second), InsideHealth.

Continued Spotlight on Drug Pricing Executive Order, Reform Legislation

Stakeholders continued to discuss the Trump administration’s drug pricing executive order, and how the executive order overlaps with five drug pricing bills championed by Senate Judiciary Committee Chairman Chuck Grassley.

Sources: InsideHealth, Life Sciences IP Review.

Check out the latest episode of the Latham Drug Pricing Podcast: Washington, D.C. partners Chris Schott, Ben Haas, and Bill McConagha discuss the various FDA matters the executive order touches upon, such as importation from Canada and accelerated approval of generics and biosimilars, and then analyze how the executive order aligns with the Grassley-sponsored drug pricing bills.

President Trump Releases Discretionary Budget Request

The White House has released President Trump’s FY 2026 Discretionary Budget Request. This so-called “skinny” or summary budget precedes the full budget request, which is expected to be released later this month. There had been earlier reports of budget details, as discussed in issue No. 44 of this digest.

An overview states that “defense spending increases by 13 percent, and appropriations for the Department of Homeland Security increase by nearly 65 percent,” while “nondefense spending is reduced by $163 billion or 22.6 percent.” For example, as stated in the budget request, funding for CMS will be reduced by $674 million, but “this cut will have no impact on providing benefits to Medicare and Medicaid beneficiaries” and instead “eliminates funding that had been used to carry out non-statutory, wasteful, and woke activities.” As explained in the overview, President Trump anticipates that the defense and homeland security budget increases “would be made possible through budget reconciliation, which would allow them to be enacted with simple majorities in the Congress, and not be held hostage by Democrats for wasteful nondefense spending increases as was the case in President Trump’s first term.”

Sources: InsideHealth (first, second), Politico Pro (first, second), Stat, New York Times, Washington Post.

Tariffs on Pharmaceuticals

Stakeholders continue to evaluate the possible impacts of tariffs on pharmaceuticals, including a reduced rate of medical innovation, supply chain disruptions, and reduced patient access to therapies. Some manufacturers appear to be responding by expanding their US manufacturing capacity.

Sources: BioWorld (first, second, third), Bloomberg Law (first, second), Pharma Intelligence, Reuters, Fortune, Endpoints News, 340B Report.

For more updates on Trump administration initiatives, visit our blog Beyond the First 100 Days.

Litigation Against the Ira Continues

Drug manufacturer litigation against the negotiation program established by the Inflation Reduction Act (IRA) continues, with the Department of Health and Human Services (HHS) stating in a court filing in the US District Court for the District of Columbia that it “did not err in selecting multiple forms of the same drug for negotiation.” In a separate case in the US District Court for the Western District of Texas, HHS defended the IRA’s excise tax penalty, stating that the tax “is not a ‘fine’ covered by the Eighth Amendment because it is not ‘punishment for some offense.’”

Sources: Bloomberg (first, second).

HHS Reorganization Impact

Stakeholders continue to evaluate the implications of the HHS reorganization and reduction in force, including the possible shift of 340B program oversight from the Health Resources & Servies Administration (HRSA) to CMS.

Source: Pink Sheet.

Medicaid Drug Rebate Program (MDRP)

CMS Provides Update on CGT Access Model

The Cell and Gene Therapy (CGT) Access Model, which we discussed in issue No. 43 of this digest, is proceeding. CMS announced that 35 states have applied to participate, “representing approximately 84% of Medicaid beneficiaries with sickle cell disease.” CMS intends to publish the list of participating states in June.

Source: Bloomberg Law.

340B Program

Chair of Senate Help Committee Releases 340B Report

Senator Bill Cassidy, M.D., chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, released a report after an investigation of the 340B program. A press release quotes Senator Cassidy as stating that the investigation “underscores that there are transparency and oversight concerns that prevent 340B discounts from translating to better access or lower costs for patients,” noting that “Congress needs to act to bring much-needed reform to the 340B Program.”

Sources: BioWorld, Bloomberg Law, InsideHealth (first, second), 340B Report (first, second).

More States Adopt Contract Pharmacy Laws

Additional states have enacted or proposed legislation that would bar drug manufacturers from restricting contract pharmacy access. Some bills would require covered entities to make disclosures regarding 340B discounts. We note that legislative action related to the 340B program may have occurred in other states but has not yet been reported in the trade press.

Sources: 340B Report (first, second, third, fourth, fifth, sixth).

Manufacturer Challenges to State 340B Laws Continue

Drug manufacturer litigation challenging the 340B laws enacted by various states continues.

Sources: Bloomberg Law, 340B Report (first, second, third, fourth, fifth).

Rebate Model Litigation Continues

The three manufacturers defending their 340B rebate models in litigation responded to HHS court filings. HHS, in turn, responded to an inquiry from the judge by stating it “expects to be in a position to provide guidance for stakeholders in thirty days.” The rebate model litigation was discussed in issue No. 43 of this digest.

Sources: Law360, 340B Report (first, second, third, fourth).

Medicare Part B

No developments to report.

Medicare Part D

No developments to report.

State Law Developments

No developments to report.