Trump's executive order means healthcare

President Trump released another EO on April 15th. He had promised to do something about the medicine. EO was filled with a wide range of responses from insiders across the industry. Some people expressed deep concern about what is described as its wide scope and inaccuracy. Others only saw messaging platforms that strengthened their continued focus on Trump's aid. Interestingly, the subject of where the drug is manufactured was not displayed on EO.

EO is certainly ambitious. It begins with a statement intended to provide the context of the actions the President hopes that Cabinet and departmental leadership will take. In each of the 11 domains of EO, officials are instructed to explore new approaches to problems that have often existed for years, then return within the time frame defined in the solution recommendations (for example, within 180 days).

Trump highlights actions taken during his first administration that aimed to reduce the costs of prescription drugs. Notable was his new commitment to “sitting blankly” and Americans charge higher prices than people from other countries paid for the same drug. This is a theme reminiscent of the January 2024 Senate hearing led by Democratic Sen. Bernie Sanders. The stage can therefore step up for bipartisan engagement to lower drug prices.

However, unlike Senate hearings, EO's purpose did not stop at one of the criticisms I have raised earlier about the focus of the Senate hearing: isolated criticism of the pharmaceutical industry. EO highlighted the Trump administration's focus on promoting competition, and the importance of developing general and biosimilar alternatives to branded products to increase consumer access to affordable medicines. To achieve this, EO has recognized the need to address the underlying business environment in which these products are refunded. Today there are false incentives working for the wide range of biosimilar drug adoption.

Trump's challenge to “pill penalty” also speaks of false incentives. This time we are the results of the law in the Inflation Reduction Act, which supports biology that is more expensive than small molecule prescription drugs. Biology, often used to treat rare diseases, spends another four years four years before being subject to price control through direct negotiations with the Centers for Medicare and Medicaid Services. EO points out that the additional time biology enjoys is distorting investments from small molecule prescription drugs that typically target larger populations.

Beyond the production of competitive products, EO called for advance efforts by the Trump administration to reform the payments ecosystem, ensuring that government-mandated discounts that cannot be pocketed by pharmacy benefits managers will be handed over to patients. The “intermediaries” PBMs have been subjected to intense Congressional scrutiny for their anti-competitive practices, self-dealing, and lack of transparency in their formal development with subjects I have previously worked on and how drug prices are negotiated.

The theme of transparency continued as EO emphasized the importance of knowing the cost of prescription drugs before purchasing, not just for patients, but for employers and physicians.

Importantly, EO did not focus on drug-only costs. He spoke to medicines in the context of the broader US health ecosystem, calling for evil incentives in delivering and paying healthcare services. Today, hospitals are being urged to direct patients to the hospital's outpatient department. EO challenged this practice in particular, questioning where the drug is administered and why patients are seen in more expensive outpatient hospitals when they are seen in doctors' offices that cost less for the same care. This is an issue that resonates with insurers who advocate in favour of “site-neutral” payments, saying that essentially payments for a particular service should not depend on where the service is provided.

Not surprisingly, insurance companies are standing to save money if the same care is provided in a more cost-effective setting. However, the American Hospital Association, which represents American hospitals, has long fought hard with neutral payments on the site. Running patients to more expensive hospital-based departments can help financially bound healthcare providers maintain their business. Clearly, if the country introduces neutral payments to its sites without taking a holistic approach to solving the country's healthcare crisis, hospitals could be harmed.

And this is why the scope of questions Trump wants to address in this EO is so important. Issues of coverage, access to innovative medicines, availability of healthcare services, misalignment of incentives, and ongoingly increasing costs have been debated for decades. Government solutions that bend the cost curve have largely failed, and in some cases, fundamental issues that have been unintentionally exacerbated, the focus of my last book, bringing value to healthcare.

Like the CEO of a large private company, President Trump laid out a set of health sector priorities that he would like to see. He left his leadership to come back to him with solutions to these long-standing problems the country had failed to solve. In that respect, he opened the door to a novel, overall solution. EO can be seen as creating a platform that supports the development of radically different business models across the healthcare ecosystem. Given the complexity of healthcare and the need for systematic solutions, this represents the potential for thoughtful approaches to addressing the issues that have plagued the industry for decades. Rather than prescribing fine tunings around the edges or taking blunt instruments to solve serious problems, research bound by knowledgeable professionals can become what patients need.