Trump’s Order Expands IRA Pill Penalty to International Reference Pricing

President Trump’s Executive Order Extends Well Beyond IRA Pill Penalty Directly to International Reference Pricing

The White House has unveiled a plethora of changes that could disrupt the pharmaceutical industry well beyond the IRA. President Trump issued an Executive Order (EO) on April 15, 2025, titled "Lowering Drug Prices by Once Again Putting Americans First". While the headlines post EO centered around the removal of the “pill penalty” component of the IRA, the EO’s 14 sections EO impact many aspects of bio/pharmaceuticals. The three items we will cover in this blog are:

• The removal of the pill penalty
• The re-introduction of a Most Favored Nation (MFN) approach to pricing which is a refresh of the first Trump administration’s EO dated September 13, 2020.
• Other potential top line impacts of this EO

1. The Removal of the Pill Penalty

The “pill penalty” arose from the existing IRA legislation where small molecule drugs (i.e. pills) are subject to price negotiation once they have been approved for 7 years while large molecules (i.e. biologics) are subject to negotiations after 11 years. For each product type, the negotiated price would take effect two years after negotiations, making pills subject to a Maximum Fair Price after 9-years and biologics after 13-years. As a result of the pill penalty, many observers thought manufacturers would favor the development of biologics. The post EO headlines allude to eliminating the pill penalty by applying the 11-year standard for biologics to all medicines. This can be seen as a concession to the biopharma industry, since the EO does not make the standard for all 7 years which would theoretically reap even more cost savings.

2. The Re-introduction of the Most Favored Nation (MFN) Approach

One of the EO’s biggest items is highlighted in Section 4 titled “Reducing the Prices of High-Cost Drugs for Seniors”. This section covers most favored nation (“MFN”) pricing, which would institute a version of the principles of International Reference Pricing (“IRP”) widely used outside of the US. As described in the EO, and summarized here (Trump revisits plan to tie US drug prices to those in other countries: report | FirstWord Pharma) the administration would like to tie Medicare prices to those in other countries with similar GDP. The language used in this section is very similar to the MFN language used by the first Trump administration in his EO for MFN dated September 13, 2020.

This also corresponds to Section 3 titled “Improving upon the Inflation Reduction Act” where the EO language clearly indicates a desire to improve upon the Inflation Reduction Act. The Trump administration would like to eclipse the savings achieved through negotiated prices in the IRAs first year. In Indegene’s Blog 9 post, we analyzed savings expected from the IRAs first year based on a Medicaid benchmark which ties a products price to launch, MFN savings could surpass this type of savings, depending on the methodology used, as noted in this Indegene analysis completed in 2020 and detailed below.

Indegene 2020 EO MFN Analysis

Indegene analyzed pricing data and published an abstract for ISPOR in 2020 regarding the possible impact of a MFN approach back in 2020 when this concept was first floated and we revisit that analysis below. In 2019, there were multiple proposals to reform US drug pricing. Our analysis focused on two of the proposals made to reform US drug pricing back in 2019:

• The first Trump Administration’s MFN EO covered Medicare Part B drugs and proposed an approach pegging U.S. drug prices to the lowest level paid by comparable countries
• ‘H.R. 3’, covering both Medicare Part B and Part D which contemplated capping drug prices at 120% of the average price in Australia, Canada, France, Germany, Japan, and the United Kingdom.

Both proposals focused on the visible ex-factory prices (WAC in the US). It should be noted that if the focus was on net prices we would expect the gap between the prices and potential savings to increase significantly.

Our analysis used data available as of Dec 2019 in all countries (reimbursed price used in Japan and ASP included in the US). Since both proposals cited Medicare Part B, the analysis included single source Medicare Part B drugs that were:

• Approved by the FDA after Jan 2010
• Had total spend of over $100M in 2017 Approved and available in the six reference markets mentioned above

This analysis was done 5 years ago, but for the 10 drugs that met the inclusion criteria, the results showed:

At launch, reimbursed prices in the US would be

• 59% lower (range: 33% to 80%) based on MFN
• 31% lower (range: 10% to 67%) based on the 120% cap

As of September 2020, U.S. reimbursed prices would be:

• 68% lower (range: 54% to 88%) based on MFN
• 42% lower (range: 19% to 78%) based on the 120% cap

Specifically on a product basis, we created the following slide, again, based on the 2020 analysis and pricing in place 5 years ago:

2020 MFN Approach

2020 MFN APPROACH REDUCES US CURRENT PRICES BY AN AVERAGE OF 68% (RANGE: 54% TO 88%)

• US price increases since launch lead to larger reductions (e.g: Actemra's reduced 79% from launch price vs. 88% from current price)
• Prices below do not reflect net prices, which are generally confidential, and could significantly change the relationship (generally leading to further reductions)

Ex-factory Prices in US Dollars (as of August 2020)

54%

88%

Products	Strength	US Current WAC	Lowest Price	Lowest Price Country	US WAC Δ to Lowest Price
Eylea	2mg/.05mL	$1,850	$627	France	66%
Opdivo	100mg/10mL	$2,742	$1,124	France	59%
Prolia	60mg/mL	$1,279	$163	Australia	87%
Keytruda	100mg/4mL	$4,862	$2,230	Japan
Yervoy	50mg/10mL	$7,501	$3,186	France	58%
Entyvio	300mg	$6,728	$1,485	France	78%
Kyprolis	10mg	$406	$144	Australia	65%
Kyprolis	60mg	$2,435	$863	Australia	65%
Perjeta	420mg	$5,292	$1,900	Japan	64%
Actemra/RoActemra	200mg/10mL	$1,153	$139	Australia
Kadcyla	100mg	$3,063	$1,117	Australia	64%

Exchange Rates (Aug 2020)

Local Currency	1 AUD	1 EUR	1 GBP	1 CAD	1 JPY
US Dollar	$0.68	$1.11	$1.30	$0.75	$0.0092

Source: Datasets from official country-specific resources curated by MME in August 2020
CONFIDENTIAL - © MME LLC 2020

Indegene plans to update this analysis for 2025, incorporating relevant products and prices in our next IRA blog post, but we anticipate similar results. For details on the 2020 analysis, please refer to the this link: ISPOR 2020 Analysis.

3. Other EO Top Line Impacts

In addition, the EO is loaded with other aspects sure to impact pharmaceutical manufacturers. A quick rundown of some of the major changes is below:

Please continue to follow our upcoming blog posts as we continue our assessment of the impact of the IRA.

Meanwhile, you can read the previous editions of our IRA blog series here:

• Section 5 - Appropriately Accounting for Acquisition Costs of Drugs in Medicare:Calls for a study to consider reducing Medicare payments for 340B hospitals to ASP-22% (similar to the first Trump administration), which was overturned because HHS needed to conduct an acquisition cost survey, hence the rationale for this study.
• Section 7 - Access to Affordable Life-Saving Medications: Provides 340B prices for insulins and EpiPens to patients at federally qualified health centers
• Section 9 - Accelerating Competition for High-Cost Prescription Drugs: Aims to accelerate approval of generics, biosimilars, combination products, and second-in-class brands
• Section 10 - Increasing Prescription Drug Importation to Lower Prices:Takes steps to streamline and improve the Importation Program. Given the current state of tariffs, there are still details to be worked through.

Meanwhile, you can read the previous editions of our IRA blog series here:

• Part 1 of the series was an overview of the IRA’s key provisions.
• Part 2 assessed price increase levels pre/post-2020 election through the end of 2022.
• Part 3 illustrated the impact that both the IRA and the period of post-pandemic higher inflation had on January 2023 price changes.It also talked about the top 50 products accelerating price increases, and how many products stopped short of triggering the inflation penalty.
• Part 4 illustrated the impact of the IRA inflation penalty rebate on Part B drugs.
• Part 5 examined 2023 mid-year price changes in the context of the IRA regulations and provided observations about the 10 initial products selected for “negotiation.”
• Part 6 discussed the influence of IRA, Inflation Easing and Medicaid Regulations on the US drug price landscape.
• Part 7 discussed the Initial Reactions to CMS' Release of the Maximum Fair Prices for the First 10 Negotiated Part D drugs.
• Part 8 examined Who "Won" the Initial Price Negotiations?
• Part 9 navigated the CMS' Second list of Medicare Drugs Subject to Negotiation and Predicting their Maximum Fair Prices.