Could Trump’s Pharmaceutical Executive Order Lower the Cost of Living for Retirees?
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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On May 12, President Donald Trump proposed a new executive order (EO), titled The Most Favored Nation, to lower the cost of prescription drugs for Americans on Medicare within 30 days. If pharmaceutical companies don’t oblige, they may be forced into price standards on par with lower prices paid by other countries.
Could this order lower not only the costs of prescription medications but, ultimately, the cost of living for retirees?
Potentially Lower Costs
Undeniably, lower drug prices would be helpful to retirees and lower their overall costs, but according to Taylor Kovar, a CFP and the founder and CEO of 11 Financial, “It’s unlikely to make a massive difference on its own.”
This is partly because healthcare costs, especially prescriptions, though a significant part of a retiree’s budget, “are just one piece of the puzzle.” He pointed out that other costs like housing, food and transportation play a larger role in the cost of living.
“That said, any reduction in medication costs could provide some relief, especially for retirees who rely on multiple medications for chronic conditions.”
Not Immediately
Cobi Blumenfeld-Gantz, the CEO and co-founder of Chapter, a technology-driven Medicare advisory organization, agreed that this EO will not “directly or immediately” lower the cost of medications or living for retirees.
“First, the efforts to equalize domestic and international prices will likely result in either higher prices abroad or the withdrawal of drugs from certain international markets, instead of a significant lowering of domestic prices,” he warned.
Moreover, he found the EO “remarkably short on details regarding the mechanism for lowering drug prices,” and suggested any reductions would take quite some time to become effective should they ever materialize.
The Inflation Reduction Act
Blumenfeld-Gantz said that two provisions in the Biden-era Inflation Reduction Act (IRA) are “more significant” in their impact on lower prices for retirees than Trump’s new EO.
The first IRA provision that benefits retirees is “the new $2,000 annual cap on out-of-pocket costs for Part D drugs.” The second one is the required negotiations between Medicare and drug companies for certain high-volume, expensive drugs that have been on the market for nine to 13 years.
What Drugs Will Become Cheaper?
Any prescriptions likely to have “the most significant savings potential” are brand-name drugs whose patents have not yet expired and thus can’t be made generic, Blumenfeld-Gantz said. However, many of those drugs are already on track to become eligible for negotiation under the IRA after 13 years on the market.
The Impact on Health Insurance Premiums
Retirees may also be eager to see how this EO plays out in their health insurance premiums. However, Blumenfeld-Gantz said it is “too early to tell” and that it could take decades to show savings.
“In the long run over several decades, if lower drug prices result in more seniors being able to afford drugs that help avert expensive hospitalizations, then those savings could be passed along in the form of lower premiums,” he said.
It Could Add Costs
In fact, the EO could cost seniors more, Blumenfeld-Gantz said. This is because, by essentially forcing lower prices on drugs, which pharmaceutical companies say will reduce available research and development funds, “then seniors might consume more health services that could have been averted with better medications that are less available or were never developed,” Blumenfeld-Gantz said.
Legal Battles Could Slow Progress
Additionally, legal battles are likely to ensue as tensions exist between policymakers and pharmaceuticals manufacturers, Blumenfeld-Gantz explained. “Many policymakers believe pharmacy benefit managers (PBMs), which sit between pharmacies, insurers and drugmakers — earn unjustified profits and dramatically increase costs to consumers.”
As pharmaceutical companies and other industry stakeholders push back on the “most favored nation” pricing model, this could delay or weaken its effectiveness, Kovar added.
The timeline for retirees to see any cost savings depends on how quickly the executive order is implemented and whether any legal or industry challenges arise, Kovar explained.
Remain Cautious and Informed
Kovar recommended that retirees “remain cautious” and stay informed but consider other ways to manage healthcare costs. This includes reviewing Medicare plans, exploring supplemental insurance options or finding ways to save on prescriptions, like using discount programs or shopping around for the best prices.
Editor’s note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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Sources
- Taylor Kovar, 11 Financial
- Cobi Blumenfeld-Gantz, Chapter
