Healthcare & Life Sciences: Drug Pricing Digest — Number 46

Inflation Reduction Act, Healthcare Reform, and General Developments

Trump Most Favored Nation Executive Order Challenges The Pharmaceutical Industry

On May 12, 2025, President Trump issued an executive order that threatens to impose a so-called most favored nation (MFN) pricing policy. Essential details regarding the scope of the MFN policy are absent, but in general, an MFN pricing approach could tie the price for a drug in the US (or in a specific US market) to the lowest price of the drug in any of a number of reference countries. 

The executive order states that within 30 days, the government will “communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations” and that if “significant progress towards most-favored-nation pricing for American patients is not delivered,” other actions will follow, such as “a rulemaking plan to impose most-favored-nation pricing.” Other provisions of the executive order address the importation of drugs, drug prices in other countries, and facilitating “direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.”

Sources: Bloomberg (first, second, third, fourth), Politico Pro (first, second), Pink Sheet, StatNews (first, second), BioWorld, InsideHealthPolicy, Scrip (first, second, third), 340B Report.

The Food and Drug Administration (FDA) has reportedly begun to take action regarding the importation of drugs. At a recent industry conference, Grace Graham, FDA Deputy Commissioner for Policy, Legislation, and International Affairs, reportedly stated that “when it comes to the Section 804 Importation Program, FDA is taking steps to streamline and make it easier for states to obtain authorization without sacrificing safety or quality.”

Source: InsideHealthPolicy.

As reported in issue No. 45 of this digest, President Trump recently suggested imposing MFN pricing in the Medicaid program as part of budget reconciliation. While stakeholders continue to discuss possible legislation regarding the MFN policy, House members have introduced legislation that would impose reference pricing based on an average of prices in other countries, rather than based on the lowest price, as under MFN pricing.

Sources: Bloomberg (first, second), InsideHealthPolicy (first, second), Politico Pro (first, second), StatNews (first, second), 340B Report (first, second).

IRA Implementation Continues With 2028 Draft Negotiation Guidance For IPAY 2028, Legislative Proposal

On May 12, 2025, on the same day President Trump issued his MFN executive order but without similar fanfare, the Centers for Medicare & Medicaid Services (CMS) published draft guidance implementing the negotiation program under the Inflation Reduction Act (IRA) for Initial Price Applicability Year 2028. In an executive order President Trump issued in April 2025, which was discussed in issue No. 44 of this digest, the president called for greater transparency regarding the IRA. Possibly in response, the draft guidance proposes that CMS would publish not just the selected drugs, as in prior years, but also the group of 50 drugs from which the selection was made. Comments are due on June 26, 2025.

The April 2025 executive order also addressed expanding the IRA’s exclusion of orphan drugs from forced negotiation, and a recent reconciliation bill includes this amendment, although it is unclear if this provision will survive the budget process.

Sources: Bloomberg, InsideHealthPolicy, Pink Sheet.

Executive Order On Domestic Pharmaceutical Manufacturing

Yet another executive order, issued on May 5, 2025, seeks to encourage domestic US manufacturing of pharmaceuticals through measures such as eliminating “duplicate or unnecessary requirements” in “regulations and guidance that pertain to the development of domestic pharmaceutical manufacturing” with the intent to “streamline and accelerate the development of domestic pharmaceutical manufacturing.” Other provisions are designed to ensure “routine reviews of overseas manufacturing facilities involved in the supply of United States medicines, which shall be funded by increased fees on foreign manufacturing facilities.”

Sources: InsideHealthPolicy, StatNews, PoliticoPro, CNBC.

HHS Requests Public Comments On Deregulation

In response to an executive order from January 31, 2025, calling for deregulation, the Department of Health & Human Services (HHS) published a Request for Information titled “Ensuring Lawful Regulation and Unleashing Innovation To Make American Healthy Again.” Comments are due by July 14, 2025.

We discussed a similar initiative by CMS in issue No. 44 of this digest.

Sources: BioWorld, InsideHealthPolicy, Medtech Insight.

Lawsuits Challenging The IRA Continue

Drug manufacturer litigation against the drug pricing negotiation program established under the IRA continues. The US Court of Appeals for the Third Circuit dismissed one such suit on standing grounds.

Sources: InsideHealthPolicy, Law360, Pink Sheet.

Stakeholder Discussions Of The IRA Continue

A bipartisan group of House members expressed concerns in a letter to the Secretary of HHS about how the implementation of the IRA’s maximum fair price may affect pharmacies. Meanwhile, the American Hospital Association (AHA) voiced concerns regarding impacts on the 340B program in a letter to CMS.

Sources: Bloomberg, 340B Report.

Medicaid Drug Rebate Program (MDRP)

No developments to report. 

340B Program

District Court Rules In Favor Of HRSA In Litigation About Rebate Models

On May 16, 2025, the US District Court for the District of Columbia issued an opinion in litigation brought by manufacturers to defend their 340B rebate models against threats of government enforcement. The opinion states that the Health Resources & Services Administration (HRSA) “did not act contrary to law by requiring the [manufacturers] to obtain approval before implementing their proposed rebate models” but denied a motion that sought “a declaration that rebates are categorically prohibited under the 340B statute.” The court granted summary judgment against three manufacturers in which HRSA “has not yet made a final decision on whether to accept [their] rebate proposals.” As to the fourth manufacturer’s proposal, “the agency has made a final decision, and it has done so without providing adequate justification for its decision.” The court “will remand that decision to the agency for further consideration of [the] proposal.”

As discussed in issue No. 45 of this digest, HRSA stated in a recent filing that it “expects to be in a position to provide guidance for stakeholders in thirty days.”

Sources: Politico Pro, 340B Report.

Arkansas Statute Targets Limited Distribution Networks

An Arkansas statute that will become effective September 1, 2026, prohibits pharmaceutical manufacturers from restricting or limiting the distribution of prescription medications to limited networks of out-of-state pharmacies, particularly for drugs paid for by state and public health benefit plans. HB 1531, signed into law on April 16, 2025, requires manufacturers to provide Arkansas pharmacies with the opportunity to participate in distribution networks unless the manufacturer can demonstrate to the state Board of Pharmacy that restrictions are necessary for patient health and safety.

Additional States Adopt Contract Pharmacy Laws

More 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, seventh, eighth, ninth).

Manufacturer Challenges To State 340B Laws Continue

Lawsuits challenging the 340B laws enacted by various states continue.

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

Litigation Regarding GPO Prohibition Continues

Litigation filed on November 1, 2024, by a group purchasing organization (GPO) challenging how HRSA has implemented the GPO prohibition remains ongoing. At issue is guidance HRSA issued in 2013, which explains that “HRSA has become aware that some hospitals subject to the GPO prohibition have been purchasing covered outpatient drugs through a GPO and subsequently either (1) ‘replenishing’ through accounting by ‘replacing’ the GPO purchased drug with a drug purchased under 340B; or (2) otherwise reclassifying the method of purchase after dispensing. HRSA has not authorized this GPO replenishment model.” The guidance prohibits these practices, stating that “the GPO prohibition is violated upon use of a GPO to obtain covered outpatient drugs and cannot be fixed or cured by subsequently changing the characterization through accounting or other methods.”

In a cross motion for summary judgment filed on May 9, 2025, HRSA states that the 2013 guidance “restated the requirements of the statute and therefore was not contrary to law,” “the release was an interpretive rule that did not require legislative rulemaking, and “neither [HRSA]’s decision to publish it or its refusal to allow Plaintiff an exemption from following it was arbitrary and capricious.”

Sources: Bloomberg, 340B Report.

HHS Secretary Discusses 340B Program

HHS Secretary Robert F. Kennedy, Jr. discussed the 340B program during a budget hearing before the House Appropriations Committee’s Subcommittee on Labor, Health and Human Services, Education, and Related Agencies. When asked to confirm or deny whether 340B program oversight would transition from HRSA to CMS, as some stakeholders had suggested, he responded: “I can’t because of the court order. But I can tell you, the 340B program…is not a straightforward program because it was originally intended for 100 institutions that were serving very poor communities. It’s now grown to 27,000 institutions. The patients, themselves, seldom get the benefits of the drug reduction. And, actually, 100,000 if you look at all the kind of satellite institutions.” He added, “I can tell you that the drug companies are worried because if we do what President Trump wants, which is compliance with the executive order to go to most favored nation, it will lower the price of all drugs, which means it will further lower the cost of 340B drugs. And they consider that existential, so that is a problem that we all need to work out together.”

Sources: YouTube, 340B Report.

Medicare Part B

No developments to report.

Medicare Part D

No developments to report.

State Law Developments

No developments to report.