LEGAL UPDATE
New Executive Order Seeks to Lower Drug Prices and Improve PBM Transparency
On April 15, 2025, President Trump issued an executive order (EO) that directs his administration to take a wide range of actions to lower prescription drug prices for patients in the United States. The EO directs the DOL to propose regulations consistent with the EO within 2 to 12 months, depending on the provision. The regulatory process takes time to implement and will not immediately lower drug costs.
PBM Transparency
The Employee Retirement Income Security Act (ERISA) includes standards of conduct for those who manage employee benefit plans and their assets, who are called fiduciaries. Under ERISA’s strict fiduciary standards, employers must prudently select and monitor their third-party service providers, including pharmacy benefit managers (PBMs).
Highlights
- On April 15, 2025, Trump signed an EO aimed at lowering prescription drug prices.
- The EO includes a variety of directives related to the Medicare program and pharmaceutical industry.
- It also directs the DOL to propose regulations improving PBM fee transparency.
- The directives may not have an immediate impact on drug costs, as they will take time to implement.
Scrutiny of the PBM industry has intensified over the years due to concerns over problematic PBM practices impacting increased drug costs, lack of transparency and employee lawsuits alleging mismanagement of their prescription drug benefits.
Although recent federal transparency laws have addressed prescription drug coverage and PBMs, and multiple states have enacted their own PBM regulations, significant gaps and opportunities for improvement remain. The EO is another attempt to make positive reforms in this space.
List of Reforms
The EO outlines a variety of actions including directing the U.S. Department of Health and Human Services (HHS) to:
- Update guidance to improve Medicare drug price negotiations, focusing on transparency and high-cost drugs.
- Test a new Medicare payment model to improve value and lower costs for expensive drugs not covered by price negotiations.
- Survey hospital drug acquisition costs and propose Medicare payment changes to better reflect actual costs, if appropriate.
- Streamline the drug importation process to help states access lower-cost medications safely.
- Evaluate Medicare payment policies that may be pushing drug administration into more expensive hospital settings.
In addition, the EO directs the U.S. Department of Labor (DOL) to improve existing 408(b)(2)(B) transparency disclosures for any direct/indirect broker compensation received from PBMs. The EO also list ways the administration will be pursuing a broad strategy to lower drug costs by expanding Medicare negotiations, increasing PBM and pricing transparency, supporting drug importation, tying grants to affordable access, and advancing payment and policy reforms to boost competition and value.
April 2025
This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
