On April 15, President Donald Trump signed an executive order titled “Lowering Drug Prices by Once Again Putting Americans First.” This order directs federal agencies to take specific actions aimed at reducing prescription drug costs, improving transparency, and increasing competition. Although it does not change the law directly, it signals key policy shifts that could significantly affect Medicare and employer-sponsored group health plans. Below is a high-level summary of the order’s intent, relevant directives, and timelines employers should be aware of as these initiatives take shape.
Background
Executive orders serve as directives from the president to federal agencies. They do not change existing laws but introduce administrative action through proposed regulations and instruct agencies to develop and issue regulations or guidance consistent with current statutory authority. Therefore, while the order does not immediately change any legal obligations, it does signal future regulatory actions that could affect how employers manage their group health plans.
During his first term, President Trump implemented initiatives to cut drug prices, including promoting generics, enabling drug importation, mandating drug price transparency, and capping insulin costs in Medicare. The order claims that many of these efforts were scaled back under the Biden administration, which instead implemented the Medicare Prescription Drug Negotiation Program through the Inflation Reduction Act (IRA).
The order outlines a plan to restore competitive pricing, accelerate drug approvals and reduce the role of intermediaries in the drug supply chain.
Key Directives and Implications for Employer Plans
- Oversight of middlemen
The order directs the assistant to the president for domestic policy, along with other officials, to develop recommendations within 90 days to create a more transparent and competitive pharmaceutical value chain. This could significantly affect how employers negotiate with pharmacy benefit managers (PBMs), distributors, and retail pharmacies. - Expanded drug importation
The FDA is directed to streamline the approval and oversight of state-level drug importation programs within 90 days, potentially enabling employers in those states to access lower cost drugs from abroad. - Transparency from PBMs
Within 180 days, the Department of Labor must propose regulations requiring PBMs to disclose both direct and indirect compensation. This could increase pricing clarity and allow employers to better understand and potentially renegotiate PBM contract terms, rebate arrangements and hidden fees. - Generic and biosimilar market acceleration
The FDA must issue a report within 180 days recommending strategies to accelerate the approval of generic and biosimilar drugs. These products typically cost up to 80% less than brand name drugs, offering potential savings. - Prescription-to-OTC reclassification
The FDA must also recommend ways to improve the process of converting prescription medication to over-the-counter (OTC) status, which could impact access and reduce out of pocket costs. - Medicare changes
Several provisions in the order are aimed at reforming how Medicare pays for high-cost drugs, such as improving the Drug Price Negotiation Program, which would align payment with acquisition costs and introduce new value-based payment models.
The order also directs the secretary of health and human services to work with Congress to address the “pill penalty” under the IRA. Currently, small molecule drugs, such as pills, pills are subject to price controls years earlier than complex biological drugs. This discrepancy threatens to discourage pharmaceutical investment away from affordable medications for large populations and toward expensive biologics used for rare conditions. For employer sponsored group health plans, if left unaddressed, this policy could reduce access to affordable treatments for common diseases.
Requirement and timeframe overview
Employers should monitor the following agency deadlines and forthcoming actions:
90 Days (by July 14, 2025):
- Recommendations on pharmaceutical middlemen reform
- Streamlining of drug importation programs
180 Days (by October 12, 2025):
- Proposed PBM compensation transparency regulations
- Recommendations to accelerate generic/OTC access
1 Year (by April 15, 2026):
- Implementation of new Medicare payment models to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biologicals.
Employer takeaways
While executive orders do not create immediate legal changes, they do provide insight into regulatory priorities. The order outlines a substantial agenda: targeting PBM transparency, promoting competition, and aligning drug payments with acquisition costs. However, it does not change the law by itself. Instead, it directs federal agencies to develop rules, issue guidance, and implement regulatory changes over time.
For employer plan sponsors it is important to recognize that while the order sets a strong policy direction, its impact will depend on the regulations and directives that follow. At this stage, no immediate action is required.
Employers should closely monitor future rulemaking by agencies such as the Department of Health and Human Services, the Department of Labor and the Centers for Medicare & Medicaid Services. Until formal guidance is issued, employer plan sponsors should not implement any changes to their pharmacy benefit or plan designs. Sequoia will continue to monitor this information closely and will communicate updates on further legislative and regulatory developments.
Connect with a Sequoia consultant to learn how Sequoia’s compliance services are integrated in our benefits services and tailored solutions. And if you’re already a Sequoia client, stay on top of your employer obligations with your Compliance Checklist that highlights important compliance dates, action items, and resources.
