Trump Executive Order Directing Development of New Drug Pricing Model
President Trump issued an Executive Order on April 15, 2025 focused on lowering high drug prices for Americans, reinforcing a goal set in his previous administration. Section 4 of the Executive Order charges CMS with the development and implementation of “a payment model to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biological products covered by Medicare”,¹ which would include drugs that do not fall under the Medicare Drug Price Negotiation Program.
Evolution of Drug Models at the CMS Innovation Center
The CMS Innovation Center (CMMI) has designed multiple drug payment and service models aiming to make prescription drugs more affordable and accessible. However, these initiatives have often faced operational and political challenges and to date, many have been introduced but not tested. Issues facing the implementation of drug models include that the majority of Part D spending is managed by private payers, changes to Part B reimbursement affect specialty providers like oncologists, and outside of the Drug Price Negotiation Program created under the Inflation Reduction Act, Medicare does not have the authority to negotiate drug prices with manufacturers. The table below outlines the main goal of prior CMMI drug models and their outcomes.
What Model May Be Tested Pursuant to the Executive Order?
During Trump’s first term, CMMI proposed two models that would have paid for Part B drugs based on international drug prices: the International Pricing Index (IPI) Model followed by a modified approach under the Most Favored Nation (MFN) Model, which would have tied Medicare reimbursement for many drugs to the lowest prices paid by specific foreign countries. This proposed rule was ultimately blocked on the grounds that it did not provide the public enough time to comment.¹² MFN was enjoined by the U.S. District Court and will not be implemented without further rulemaking.
Revisiting the recently released Executive Order, President Trump referred back to this initiative from his first term, stating “no longer would the executive branch sit idly by as pharmaceutical manufacturers charged patients in our Nation more than those in other countries for the exact same prescription drugs, often made in the exact same places”. The Executive Order requires HHS to pursue a rulemaking plan for the new model, which some are speculating may be a way to address the procedural defects of the MFN Model¹³ Given the language from the Executive Order, we can expect a mandatory drug model in the next year which could very well be international pricing based and will expand drugs subject to lower-pricing policies beyond Medicare’s Drug Price Negotiation Program.
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