CED Newsletters & Policy Alerts

Action: Executive Order “Initial Recession of Harmful Executive Orders and Actions” 

What it does: The Executive Order rescinding many Orders of the Biden Administration rescinded Executive Order 14087 of October 14, 2022 (Lowering Prescription Drug Costs for Americans). That Order had directed the Secretary of the Department of Health and Human Services (HHS) to “consider whether to select for testing by the Innovation Center [(Center for Medicare and Medicaid Innovation)] new health care payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payment that promotes high-quality care.” 

Key Insights: 

• The Inflation Reduction Act of 2022 (IRA) included major changes to address rising drug prices in Medicare Parts B and D. The changes included caps on beneficiary annual out-of-pocket prescription drug costs, access to recommended vaccines, and a $35 monthly cap per prescription for insulin covered by a Medicare prescription drug plan and insulin delivered through traditional pumps. It also provided for Medicare to negotiate prices of certain drugs directly with manufacturers. 

• President Biden issued Executive Order 14087 to address prescription drug affordability through the Centers for Medicare & Medicaid Services’ (CMS) Innovation Center, for instance considering the effects of imposing a $2 monthly out-of-pocket cap on some generic drugs (a study which was not completed before the Order’s repeal and is now moot). 

• On January 17, the last business day of the Biden Administration, Medicare announced the second cycle of drugs on which Medicare would begin price negotiations, including Ozempic®, Rybelsus,® and Wegovy.® Successful negotiations this year would affect prices in 2027 for the 15 drugs, which account for about $41 billion in Medicare expenses or 14% of Part D prescription drug costs. 

• While the new Order does not affect the statutory provisions of the IRA (and the first Trump Administration had also initiated an effort in 2020 for Medicare to negotiate drug prices), the Order does raise uncertainty about the new Administration’s policies to reduce prescription drug costs and more specifically its plans for Medicare to negotiate drug prices under the IRA.  

• This is likely to be a key question during the confirmation hearings for Dr. Mehmet Oz to become Director of CMS.