Lowering Prescription Drug Costs for Americans

Background

Implementation and Administrative Actions

Executive Order 14087, issued in October 2022, aimed to tackle the high cost of prescription drugs in the United States. It mandated the Department of Health and Human Services (HHS) to explore new payment and delivery models through the Center for Medicare and Medicaid Innovation. This directive encouraged the testing of models aimed at lowering drug costs while ensuring that patients continued to have access to necessary medications. The Innovation Center was tasked with identifying innovative approaches that could lead to more affordable healthcare, thereby executing a significant endorsement of value-based care rather than volume-driven models, a hallmark of modern health policy reform.

This order aligned closely with prior legislative efforts, especially through the Inflation Reduction Act of 2022, which provided a framework for significant changes in Medicare, like capping out-of-pocket expenses for insulin and other prescription drugs. The most groundbreaking initiative was the granting of negotiation powers over certain drug prices to Medicare, aimed at lowering costs for high-priced medications covered under federal health programs. This legislative and administrative synergy was structured to ensure broader systemic changes in how prescription drugs were priced, potentially altering the economic incentives for pharmaceutical companies.

Operational adjustments arising from this order also included efforts to enforce compliance with new pricing models and incentives for lowering drug costs. HHS was empowered to devise methods to hold pharmaceutical companies accountable for any significant price increases, especially those that outstripped inflation. The broader policy context was to alleviate financial burdens on consumers while fostering a healthcare environment driven by affordability and access. As a result, the Biden administration pursued a policy framework that sought to change the trajectory of drug pricing trends in America.

Reason for Revocation

Policy Pivot and Ideological Shift

President Donald Trump’s decision to revoke this executive order in January 2025 was indicative of a broader ideological pivot in domestic policy. The Trump administration has historically prioritized deregulation and free-market principles, viewing government intervention in price setting as antithetical to these aims. The decision to eliminate these drug pricing reforms was likely tied to a broader agenda to dismantle policies seen as overreaching governmental controls. Trump's previous administration consistently championed a philosophy that favored pharmaceutical innovation without the encumbrance of stringent pricing regulations.

The revocation may have also reflected a resurgence of conservative values emphasizing reduced federal oversight and increased autonomy for private enterprise. It suggested a push towards restoring market-driven solutions to healthcare pricing, rather than government-led initiatives. The Trump administration might argue that competition, rather than regulation, is more conducive to technological advancements and cost reductions in the long run.

This action could further indicate a philosophical stance that the best pathway to innovation and price reduction lies in encouraging market competition rather than imposing price constraints. Critics might see this as prioritizing industry profits over consumer welfare, suggesting that political motivations overruled potential economic benefits to ordinary Americans. Conversely, proponents of deregulation might argue that an overly regulated market stifles the competitive dynamics essential for technological and therapeutic advancements in the pharmaceutical sector.

The revocation may also be seen as aligning with the interests of entities that the administration perceives as integral to economic growth, positioning such moves as beneficial to sustaining America’s position as a global leader in pharmaceutical innovation.

Winners

Industry Gains

The pharmaceutical industry stands to benefit significantly from the revocation of Biden’s drug pricing initiatives. Companies like Pfizer, Johnson & Johnson, and Merck, which possess wide-ranging portfolios of high-revenue drugs, might see increased profitability without the imposition of federally negotiated pricing mandates. By eliminating mechanisms designed to cap or control price hikes, the industry could reassert its pricing autonomy, potentially leveraging its R&D investments more aggressively for shareholder returns.

For pharmaceutical companies, the ability to set prices independently from Medicare's purchasing power could lead to revenue expansion opportunities, especially for cutting-edge therapeutics entering the market without competitive constraints. The implications are especially pronounced for those developing novel biologics or treatments where the market still lacks generic alternatives. The revocation may also decrease the regulatory compliance burden, translating into reduced administrative costs.

Additionally, those advocating for the protection of free-market economics in healthcare could see this policy shift as a positive step toward retaining the sector’s global positioning, promoting an environment where the focus is on pushing the envelope in drug discovery and development unfettered by government interference. Industry lobbyists and associations, like PhRMA, would likely regard the revocation as a victory for preserving the traditional incentives that drive pharmaceutical innovation.

Losers

Consumer Impact

The most direct impact of this revocation is likely to be felt by consumers, particularly those dependent on Medicare. Seniors and individuals with chronic illnesses that require regular medication could face higher out-of-pocket costs. This decision could disproportionately disadvantage low- to middle-income patients, who often rely on Medicare's negotiating power to moderate the effective costs of essential medications. As a result, some patients may need to make difficult choices between medication adherence and other financial obligations.

Health advocacy groups and organizations representing patients with chronic illnesses may also see this move as a detrimental step backward. These entities have historically advocated for lower drug costs to expand access to care and alleviate financial strains on their constituents. The removal of government-negotiated pricing negates a policy tool that was designed to make medications more affordable and would likely be viewed as a regression in public health policy objectives.

Medicare itself, as a taxpayer-funded program, might experience increased pressure on its budget. Higher drug costs not only affect beneficiaries but can lead to escalated overall program expenditures, which impacts the sustainability and financial forecasting of the program. This could potentially lead to discussions about future adjustments in premiums or benefits to offset unregulated growth in drug expenses, indirectly influencing millions of Americans dependent on government-sponsored healthcare.