At a January 16 Leonard Davis Institute of Health Care Economics (LDI) virtual panel discussion focused on drug pricing in the second Trump Administration three top experts painted a complicated picture of the government’s ongoing struggle to create a drug pricing process that effectively serves patients, government health agencies and the pharmaceutical industry in an orderly, transparent, and fair manner.

Opening the discussion, moderator Rachel M. Werner, MD, PhD, Executive Director of LDI, said, “There’s been a whirlwind of activity around drug pricing policy, all of which has kept prescription drug pricing squarely in the health policy spotlight and raised important questions about how much leverage the federal government can exert, how markets and manufacturers are likely to respond, and where consumers may actually see savings.”

The University of Pennsylvania LDI panel took place 24 hours after President Trump unveiled his “Great Healthcare Plan,” which includes new drug pricing proposals.

The other panelists were Avik Roy, Co-Founder and Chairman of the Foundation for Research on Equal Opportunity (FREOPP); Rachel Sachs, JD, MPH, Professor of Law at the Washington University School of Law; and Marta Wosińska, PhD, Senior Fellow in Economic Studies at the Brookings Institution Center on Health Policy.

Over the course of the hourlong Zoom event, panelists suggested that the latest fight over prescription drug prices makes it difficult to tell who is really winning. The Trump administration is keeping Biden’s Inflation Reduction Act (IRA) drug negotiations in motion while also promoting new most-favored-nation pricing, tariff threats, and a “TrumpRX” direct-to-consumer drug sales portal. Each move ricochets through a system in which list prices are not what insurers pay, net prices are not what patients pay, and savings can accrue to the Treasury, insurance plans, or manufacturers long before they reach the pharmacy counter. The result is a three-way tug-of-war among populist promises of “fair” global pricing, industry deal-making to protect blockbuster revenues, and partisan politics that can turn yesterday’s reform into today’s target — all playing out within a fragmented U.S. market that is uniquely vulnerable to workarounds, carve-outs, and unintended consequences.

The main topics of the panel discussion were:

The Inflation Reduction Act (IRA)

A signature 2022 achievement of the Biden Administration, the Inflation Reduction Act set in motion three major changes in Medicare drug costs. First, it redesigned Medicare’s drug benefit to better protect seniors, particularly those with very high prescription bills. Previously, there was no cap on out-of-pocket spending, and many seniors paid thousands of dollars annually or skipped medications altogether. Beginning in 2024 and fully implemented in 2025, the law eliminated some cost-sharing and added a $2,000 annual cap, making drugs more affordable but also increasing government spending.

To offset those costs, the law introduced two cost-control measures. Drug manufacturers must now pay Medicare rebates if they raise prices faster than inflation, and Medicare is permitted — on a limited, phased-in basis — to negotiate prices for a small number of high-cost drugs.

Sachs explained that the first implementation cycle of the IRA took effect earlier this month, allowing Medicare to negotiate prices for 10 drugs covered under Medicare Part D. The IRA allows Medicare to negotiate prices for 15 additional Part D drugs for 2027 and 15 additional Part B and Part D drugs for 2028. Medicare approves thousands of drugs for Part D coverage, and an ongoing debate surrounding both the IRA rollout and new Trump Administration proposals is how many drugs will ultimately be included in the various cost-reduction initiatives.

Roy, whose FREOPP is a nonpartisan, nonprofit think tank, said his organization’s research has identified three structural weaknesses in the IRA that limit its effectiveness in reducing prices:

1. It targets the wrong drugs. Roy argued that the IRA looks backward rather than forward, requiring the Centers for Medicare and Medicaid Services (CMS) to negotiate prices on drugs that historically cost Medicare the most, rather than those projected to drive future spending. As a result, CMS often targets drugs nearing patent expiration and likely to face generic competition, yielding limited savings while missing emerging “budget busters.”
2. It does not focus on biologics. Roy said small-molecule drugs generally function well under the existing patent-and-generic system, with prices dropping sharply once generics enter the market. Biologic drugs, by contrast, are governed by different statutes, face weak biosimilar competition, and account for more than half of U.S. drug spending despite representing a small share of prescriptions. He argued that Medicare negotiation would be far more effective if concentrated on biologics, where monopoly pricing power persists long after patents expire.
3. It does not sufficiently target monopoly drugs. Roy said CMS’s negotiating leverage should be aimed at drugs with no therapeutic alternatives, where insurers are required to provide coverage and manufacturers face few pricing constraints. In markets with multiple competitors, pharmacy benefit managers and insurers already exert some pricing pressure. The greatest policy leverage, he said, lies where monopoly power is strongest.

Trump’s Great Healthcare Plan

Two proposed drug pricing models from the Center for Medicare and Medicaid Innovation (CMMI) in the newly announced Trump “Great Healthcare Plan” are the Global Benchmark for Efficient Drug Pricing Model (GLOBE) and the Guarding U.S. Medicare Against Rising Drug Costs Model (GUARD). Both rely on what are commonly known as Most Favored Nation (MFN) agreements. Under MFN arrangements, a seller promises a buyer pricing terms at least as favorable as those offered to any other customer. If the seller later provides a lower price or better terms elsewhere, the MFN buyer automatically receives those same benefits.

GLOBE is a Medicare Part B drug pricing initiative that would use MFN benchmarks to calculate manufacturer rebate obligations when U.S. prices exceed those in comparable countries.

GUARD applies a similar MFN framework within Medicare Part D, triggering rebates when U.S. drug prices are higher than those paid abroad.

Although the models were only recently announced, Trump has promoted and negotiated MFN-style drug pricing arrangements since the start of his second term. In May, he signed an executive order titled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” directing federal agencies to pursue MFN pricing strategies.

The administration also sent letters to 17 pharmaceutical manufacturers — several based outside the United States — urging them to negotiate pricing agreements, Sachs said.

“As part of those efforts, there was a threat of significant tariffs on certain pharmaceutical products,” Sachs said. “The connection is that a company agreeing to an MFN arrangement and to sell certain drugs directly to consumers at lower prices could receive relief from those threatened tariffs.” She emphasized that the details of these MFN deals are not public.

“There’s a difference between statutorily authorized policy like the IRA and more ad hoc executive approaches,” Sachs continued. “These confidential deals are not my preferred way to make public policy. You can’t analyze them. You can’t assess enforceability or determine who benefits. Analysts generally do not believe these agreements will meaningfully affect prices, despite the President’s rhetoric suggesting prices will fall by 1,000 percent or more.”

Tariffs

Sachs said tariffs represent another wildcard in how the new, loosely defined programs may ultimately perform.

“The tariff approach the administration has used in this case could increase prices rather than lower them if manufacturers pass those costs on to consumers,” she said. “Whether they will do that remains an open question.”

TrumpRX

Another Trump Administration initiative, TrumpRX is a federal government-run prescription drug pricing and direct-to-consumer sales platform that has launched at trumprx.com, though little information is currently available on the site. Pfizer is reported to be the first manufacturer to sign on to sell drugs directly to consumers there. Although the platform could theoretically lower costs for some consumers, panelists questioned whether it will do so in practice.

Wosińska cited an equity analyst who examined manufacturer direct-to-consumer insulin programs and concluded that only about 5 percent of insulin patients would benefit. “The other 95 percent,” she said, “would be better off putting it on a credit card and running it through their insurance deductible.”

“Only a very narrow population may benefit,” Wosinska said. Uninsured patients or those seeking drugs not covered by insurance, such as GLP or fertility drugs, could see meaningful savings, she said. However, she noted, high prices would remain a major affordability barrier.

The panelists suggested that for most insured people, TrumpRX is unlikely to be cheaper than using their insurance. That’s because the prices offered are based on what foreign governments pay drug companies—not what patients in those countries pay out of pocket—and those prices are still usually higher than what insured Americans pay after insurance kicks in.

Where things get even trickier is for people with high-deductible health plans. A drug might look much cheaper on TrumpRX (say $200 instead of $500), but if that purchase does not count toward your insurance deductible, you could end up spending more over the year, not less. This is because you would keep paying discounted cash prices month after month without ever reaching the point where insurance starts covering the drug after your deductible limit is reached.

Economists’ biggest unanswered question is whether TrumpRX purchases will count toward insurance deductibles. If they don’t, many patients—especially those with high deductibles—could actually lose money despite lower sticker prices. Trump has suggested insurance might eventually be integrated into the platform. If that happens, it could help some patients. But until that detail is clear, TrumpRX looks like a limited niche option, not a broad solution to high drug prices.

What Should the Administration Do?

As the discussion concluded, Werner asked each panelist to suggest one action the administration could take to meaningfully advance the effort to lower drug prices:

• Roy: “Fix the Inflation Reduction Act by making it more future-oriented, focusing on monopolies, and targeting biologics.”
• Sachs: “Take competition seriously. It’s not enough for the Food and Drug Administration (FDA) to just approve biosimilars. They have to be covered on formularies. They have to be prescribed by physicians. They have to be substituted where relevant at the pharmacy counter. The administration could do a lot more to make competition actually effective without needing to rely on Congress.”
• Wosińska: “There are areas where we should be moving forward but have been moving backwards instead. We need to be restructuring Part B payment and the Average Sales Price (ASP) Plus fixed percentage system* because you couldn’t have designed a worse incentive system when it comes to controlling costs.”

*The ASP Plus system is the long-standing CMS method for paying for most physician-administered drugs under Medicare Part B. It reimburses providers based on a drug’s average sales price plus a percentage add-on, which critics say encourages the use of higher-priced drugs and places financial pressure on smaller medical practices because they often must front tens or hundreds of thousands of dollars to keep drugs in stock.

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