With Republicans gaining control of the US Senate and Donald Trump on track to return to the White House following the 5 November elections, the new Republican majority could help biopharma achieve key legislative priorities such as reform of the 340B outpatient drug discount program and revisions or even repeal of the drug pricing provisions of the Inflation Reduction Act.
Key Takeaways
- While the election results are not complete, Republican control of the White House buttressed by GOP majorities in both chambers of Congress would offers the biopharma industry an opportunity to advance policy priorities like revisions to the Inflation Reduction Act’s drug pricing provisions and 340B reform.
- Strong pharmacy benefit reform targeting rebates is also a better possibility in the environment than it would be in a divided Congress.
- Although Trump is notoriously hard to pin down, his upcoming Administration is not looking like the threat to manufacturers that the first one was.
Control of the House, as well as the official outcome of the presidential race, remained uncertain as of press time.
Even after all the results are known, however, drug pricing will not be an immediate focus for lawmakers. Trump’s 2017 tax cuts and the enhanced Affordable Care Act insurance premium subsidies provided by the Biden Administration’s COVID-era American Rescue Plan are both scheduled to expire at the end of 2025.
As a result, Congress will be pre-occupied with these dueling priorities and whether and how to extend them over the next year. Democrats will fight to preserve the premium subsidies and reduce the tax cuts with Republicans on the opposite side of the fence.
Ending IRA Negotiations Not A Trump Priority But May Be Pushed By Congress
Although the main focus of the legislation will not be on drug pricing issues, a must-pass tax bill could provide a vehicle for legislation curtailing the pricing reform provisions of the IRA, for example.
Some Republicans in Congress have been pushing for repeal, and though Trump has not signaled support, if it is part of a must-pass bill, he would likely sign it.
Although Trump is notoriously hard to pin down, his upcoming Administration is not looking like the threat to manufacturers that the first one was. He has been relatively quiet about his plans for drug pricing during the campaign, which marks a major change from his previous campaign rhetoric. Neither Trump nor Kamala Harris made drug pricing a central element of their arguments to voters.
Trump’s ongoing interest in international reference pricing, which he publicly espoused earlier in the campaign, has been downplayed by his team of late, apparently in part because the Biden Administration already has a number of initiatives in place to lower drug pricing in Medicare.
For example, while Trump has not indicated a plan to repeal the Medicare price negotiation program, he may also be less committed to protecting it than Vice President Harris would have been.
“We would expect that the former president, should he be re-elected, is unlikely to focus on prioritizing ending IRA negotiations,” predicted Jennifer Young, a former HHS official in the George W. Bush administration and cofounder of the consultancy Tarplin, Downs and Young.
“The approach he would bring to it would be to bring his expertise as a business person to bear in negotiating greater value using the existing mechanism,” Young said during a recent KFF-hosted webinar on the elections.
Republican members of Congress have expressed serious concerns with the drug pricing provisions of the IRA and support repealing it, which could develop into a serious threat against the law if Republicans control Congress and the White House, health care policy analyst Chris Jennings of Jennings Policy Strategies countered.
“I just listened to Republicans in the Senate Finance Committee last week talk about that particular policy. And if it was up to them, they would have repealed it yesterday,” he said.
“I’ll give you a scenario where that could happen,” Jennings continued. “Even if Donald Trump says, ‘Oh, I’m really not for that,’ my experience with Donald Trump has been if [a policy] wasn’t his, it therefore was bad. And if someone from Capitol Hill passes legislation, and let’s say it’s part of a big tax package that he wants to sign, do you really think he’s going to veto that bill?”
In addition, Jennings pointed out, Trump will be “in office … when the pharmaceutical industry is trying to sue [the Centers for Medicare and Medicaid Services] time and time and time again about its implementation. Do I have absolute confidence that a Republican Administration will defend the law as aggressively as a Democratic Administration? No, I do not.”
IRA Reform And The Cost Offset Problem
It is unclear how legislation targeting the IRA – or even just equaling the commercial lifespan for small-molecule drugs compared to large-molecule biologics – would be fashioned because the savings from the Medicare negotiation and price inflation rebate provisions were designed to function as cost offsets for enriching the Part D benefit with the $2,000 annual out of pocket cap.
Former Trump advisor Joe Grogan has noted the cost-offset challenge involved with even reducing the price impact of the negotiation program so that it targets small molecule drugs later in their lifecycle or expands the exemption from negotiation for orphan drugs, two biopharma priorities.
Furthermore, as the price negotiation and redesign parts of the law move closer to implementation, the calculus of savings and cost to the government is changing fairly significantly.
The Congressional Budget Office recently reported that it is revising downward its estimate of how deep the price cuts from negotiation will be. Originally the office had projected 50% cuts, but now CBO is thinking they will average 22%.
At the same time, the estimated cost of the redesign is much higher than previously thought. CBO now expects it will cost $10bn to $20bn more than it originally forecast during 2025 alone.
The redesign also includes shifting more financial risk from the Medicare program to Part D plans, which led major sponsors to increase premiums in 2025 and exit the standalone plan market altogether. The Centers for Medicare and Medicaid Services responded to those moves with a demonstration project in which the government subsidized premiums in order to stabilize the market.
Republicans and biopharma have strongly criticized the demonstration and its $7bn cost and have signaled an interest in targeting the redesign with reform legislation as well.
However, the $2,000 cap, which is scheduled to go into effect in 2025, is expected to be major improvement for beneficiaries facing very high spending for treatments like oncology drugs and so may be difficult to abandon. It is also expected to boost sales for high-cost drugs.
340B Reform Has Solid Republican Support
In the current Congress, the Republican-led House has taken the lead on reform legislation targeting the controversial 340B outpatient drug discount program. But that could change beginning next year assuming GOP in control of both chambers.
Democrats in Congress have tended to drag their feet on reforming the program in part because of concerns about disrupting support for the health care safety net the program was designed to provide.
In the Senate, a bipartisan effort to develop legislation that began in early 2024 has yet to produce a final bill, also reflecting disagreement on the best way forward.
Reform of the program is strongly supported by biopharma, and the lobbying drumbeat will only continue in the current environment.
340B sales have continued to surge upward each year, representing an ever-increasing percentage of most major manufacturers’ sales.
The implementation of the first Medicare-negotiated prices in 2026 also boosts the chances that companies will face a higher risk of providing both federally-mandated price concessions and 340B discounts on the same drug, which is prohibited by law.
The Centers for Medicare and Medicaid Services is not planning to intervene to help avoid duplication and is leaving it up to manufacturers to sort out.
Manufacturers believe the current system does not allow the kind of 340B claims transparency needed to prevent duplication. And one potential approach advanced by Johnson & Johnson, switching 340B concessions from up-front discounts to back-end rebates, has been blocked (so far) by the Health Resources and Services Administration.
Pharmacy Benefit Managers And Rebate Reforms
Another important policy priority for industry, pharmacy benefit manager reform, is also poised to advance under the new government.
However, it is unclear whether legislation will move much beyond requiring greater transparency and perhaps eliminating spread pricing, in which PBMs bill payers for more than they reimburse pharmacies for drugs.
Key PBM legislative priorities for manufacturers include delinking PBM compensation from drug list prices as a way to counter PBM tendencies to favor high list price/highly rebated drugs in formulary placement. Biopharma is hoping to accomplish that reform even before the end of this year.
If that doesn’t happen, biopharma could gain support from the White House for the policy. PBM rebate reform is the subject of a major, though now-suspended, regulation issued in the waning days of Trump’s previous administration.
The rule would essentially eliminate the anti-kickback safe harbor for rebates in Medicare. But because it is expected to significantly increase costs to the federal government, implementation of the rule has been postponed a number of times by Congress (currently until 2032) and the “savings” produced by the delay has been used as cost offsets in unrelated legislation.
