Rewriting the Rx Rules: Employer Sponsored Plan Implications from Executive Orders on Drug Pricing

President Trump's May 2025 Executive Order, Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients, which builds upon his April 2025 executive order, further introduces several policy changes that could significantly impact employers offering pharmacy benefits.

✨ If your company is already using a transparent pass-through PBM, then you are already in the best position possible to take advantage of this new policy. If you are fully insured, level-funded or self-insured and using one of the big, mainstream PBMs, then you will need to audit your contract as well as pharmacy strategy.

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🔑 Key Takeaways for Employers Offering Pharmacy Benefits

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🏷️ Most-Favored-Nation (MFN) Pricing Policy

The Executive Order reinforces and expands the April directive by officially instructing CMS (Centers for Medicare & Medicaid Services) to implement MFN pricing for both Medicare and broader U.S. prescription drug markets — meaning drug prices in the U.S. must not exceed what peer countries pay for the same drugs. This policy aims to reduce drug costs by benchmarking U.S. prices against international standards.

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💡 Implication for Employers

 While this initially targets Medicare, it sets a pricing benchmark that could spill into the commercial market, especially for employers using reference-based pricing models or negotiating directly with PBMs or carriers. Over time, pricing pressure on drug manufacturers may reduce costs in employer-sponsored plans as well.

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🔎Increased Scrutiny on PBMs and Intermediaries

The orders emphasize the need to curb PBM influence, calling for more transparent rebate practices and direct manufacturer-to-plan pricing where possible. By encouraging direct negotiations between the government and pharmaceutical companies, the administration aims to eliminate hidden fees and rebates that can inflate drug costs. There’s a push for eliminating spread pricing and ensuring discounts flow directly to the plan or member.

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💡 Implication for Employers‍

Expect rising demand for transparent PBM contracts. Employers should audit their PBM arrangements for rebate retention, pass-through guarantees, and disclosure of manufacturer incentives. Transparent, fee-based PBM models may gain traction.

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🌐 Expansion of Drug Importation Programs

The administration is directing agencies to finalize pathways for safe importation of lower-cost drugs from countries like Canada. This includes bulk purchasing programs that could eventually be leveraged by employer groups.

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💡 Implication for Employers

Employers in self-funded models maybe able to incorporate international drug sourcing options into their pharmacy benefits, particularly for maintenance and specialty meds, reducing total cost of care.

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📜 Reinforced Compliance Focus

Building on previous initiatives, the order mandates greater transparency in drug pricing, requiring that discounts and rebates be passed directly to patients rather than retained by intermediaries.

💡 Implication for Employers

Ensure your pharmacy benefit designs, vendor agreements, and rebate arrangements are compliant with evolving federal pricing and transparency regulations. We will work closely with you to ensure you stay ahead.

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🎯Next Steps Renewal Can Help With

1. Audit your PBM contract for transparency, spread pricing, and rebate pass-throughs.

2. Consider shifting to value-based, transparent pharmacy models

3. Stay engaged with benefit captives exploring importation and alternative sourcing

4. Evaluate reference-based or international pricing frameworks in strategic planning.

5. Educate your stakeholders and key leadership on how these federal actions may impact long-term drug trend forecasting and budgeting.

We will issue additional updates as we get more information.

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