Trump pledges his support for a change to the IRA long sought by drugmakers

Title

Trump Moves to End IRA 'Pill Penalty,' Backing Major Drugmaker Demand

Keywords

Trump executive order
IRA pill penalty
Medicare drug price negotiation
Small molecule drugs
Biologics
Pharmaceutical innovation
Drug pricing reform
Inflation Reduction Act
Pharma industry lobbying
Drug development incentives

Key Facts

Executive Order Targets IRA 'Pill Penalty'

President Donald Trump signed an executive order that calls for eliminating the so-called "pill penalty" in the Inflation Reduction Act (IRA), a policy that subjects small-molecule (pill-form) drugs to Medicare price negotiations after 9 years on the market, compared to 13 years for biologic drugs1 3 8.

Pharma Industry Win

The "pill penalty" has been a point of contention for drugmakers, who argue it unfairly reduces the market exclusivity period for small molecule drugs, threatening innovation and pushing investment toward biologics, which are more complex and expensive1 3 6 8.

Legislative Hurdle

This change cannot be made by executive order alone. Trump's directive instructs the Department of Health and Human Services to work with Congress to amend the IRA, as the negotiation timetable is set by statute3 8.

Potential Impacts

The pharma industry is expected to benefit, particularly companies developing small molecules, peptides, or RNA-based treatments for large Medicare populations such as cardiovascular or CNS diseases1.
Advocates warn the move could result in higher drug spending for Medicare and delay price relief for seniors, accusing the administration of favoring drug company profits over patients1 2.

Broader Reforms in the Order

- The executive order also calls for:

Improved transparency in Medicare drug price negotiations.
Cracking down on pharmacy benefit manager "middlemen."
Streamlining drug importation procedures.
Accelerating the approval of generic and biosimilar drugs.
Exploring payment reforms to reduce hospital drug costs and align payments across care settings1 2 8.

Industry and Political Response

The order was welcomed by pharmaceutical analysts and investors as a rare positive step for the sector, potentially reversing incentives away from expensive biologics and supporting broader drug innovation3.
Patient advocacy groups and some lawmakers criticized the move as "deeply harmful," warning it could result in higher drug prices for Americans and reduce projected Medicare savings1 2.
Analysts note that while industry optimism is high, Congressional action remains necessary for the pill penalty change to be implemented3 5 8.

Background on the IRA

The IRA, signed in 2022, enabled Medicare to negotiate prices on select high-cost drugs, aiming to reduce federal healthcare spending.
The law's different exclusivity periods (9 years for small molecules, 13 for biologics) were designed to balance cost savings and innovation but have drawn increasing criticism from industry and some policymakers1 5 6.

Summary Table:
IRA Pill Penalty Change

| Aspect | Current IRA Policy | Trump's Proposed Change | Pharma Industry Position | Critics' Concerns |
|-------------------------|-------------------------|---------------------------------|------------------------------|--------------------------|
| Price negotiation start | 9 years (small molecule)| 13 years (align w/ biologics) | Levels playing field, drives innovation | Delays price relief, raises costs |
| Affected products | Pills, oral drugs | Pills, peptides, RNA drugs | Encourages broader R&D | Favors pharma profits |
| Legislative process | Statutory (requires Congress) | Requires Congressional action | Needs legislation | --- |

Trump’s move represents a significant policy shift long sought by drugmakers and sets the stage for robust debate in Congress about balancing innovation incentives with public health spending and drug affordability1 3 8.