What's Happening?
The Trump administration has introduced two new drug pricing models aimed at reducing U.S. drug costs by aligning them with international prices. These models, introduced by the Centers for Medicare & Medicaid Services’ Innovation Center, are mandatory
for manufacturers and are part of President Trump's most-favored-nation plan. The models propose alternative methods for calculating Medicare rebates based on international pricing metrics. However, the pharmaceutical industry is raising legal concerns about the government's authority to implement these models without clear congressional authorization. Legal experts suggest that the models could face significant legal challenges, as they may exceed the demonstration and waiver authority granted to the Center for Medicare & Medicaid Innovation under Section 1115A of the Social Security Act.
Why It's Important?
The introduction of these drug pricing models is significant as it represents a major policy shift in how drug prices are regulated in the U.S. If implemented, these models could potentially lower drug costs for Medicare beneficiaries by aligning U.S. prices with those in other countries. However, the legal challenges posed by the pharmaceutical industry highlight the ongoing tension between government efforts to control drug prices and the industry's pushback against policies perceived as overreach. The outcome of these legal challenges could have far-reaching implications for the pharmaceutical industry, healthcare policy, and the broader U.S. economy, as it may set precedents for how far federal agencies can go in implementing major policy changes without explicit congressional approval.
What's Next?
The CMS has introduced these models as proposed rulemaking, with public comments due by February 23. The pharmaceutical industry is expected to challenge the models in court, potentially arguing that they violate the Administrative Procedure Act and exceed the agency's authority. The legal proceedings could delay or alter the implementation of the models. Additionally, President Trump has unveiled a healthcare roadmap that includes the most-favored-nation plan, which he wants Congress to codify into law, potentially providing additional legal protections for the models. The outcome of these legal challenges and the response from Congress will be critical in determining the future of drug pricing regulation in the U.S.
