This insight identifies the issues included in the executive order and the time frames for further action by the government. The executive order does not require any action by group health plan sponsors now.

Using ERISA to address concerns about PBM compensation

The executive order requires the Department of Labor to propose regulations under ERISA Section 408(b)(2) to improve transparency into the direct and indirect compensation received by pharmacy benefit managers (PBMs). An accompanying fact sheet states that the order intends to improve disclosure of fees that PBMs pay to brokers for steering employers to use their services.

These regulations, which are due within 180 days (October 12, 2025) would likely reflect similar proposals in Congress to require fiduciaries to ensure that service provider contracts with PBMs require disclosure of specific information. In some proposals, plan fiduciaries could be required to attest that their contracts contain such information, similar to the “gag-clause” attestation currently in existence. (We discussed these attestations in our March 10, 2023 insight.)

Additional efforts to address competition

The executive order requires the Department of Health and Human Services (HHS), together with the Justice Departments, the Commerce Department and the Federal Trade Commission (FTC), to conduct joint public listening sessions and issue a report with recommendations to reduce anti-competitive behavior from pharmaceutical manufacturers. The FTC has previously issued two reports critical of the vertically integrated and highly concentrated markets in which PBMs operate. However, the administration recently put on hold administrative litigation the FTC filed in the previous administration that challenged several PBMs for allegedly engaging in anticompetitive and unfair rebating practices artificially inflated the list price of insulin. (For information about the FTC reports and the litigation, refer to our August 26, 2024 article.)

The executive order also requires that recommendations to the President within 90 days (July 14, 2025) on how best to promote a more competitive, efficient, transparent and resilient pharmaceutical value chain that delivers lower drug prices for Americans.

Drug importation

The executive order requires the FDA to take steps within 90 days (July 14, 2025) to streamline and improve the drug importation program under Section 804 of the Federal Food, Drug, and Cosmetic Act and the State Implementation Program (SIP) Pathways created under the first Trump administration, which would permit drug importation from Canada.

Several states have filed SIP requests, and Florida’s program was approved on January 5, 2024. Colorado, Florida, Maine, New Hampshire, New Mexico, North Dakota, Vermont and Wisconsin have laws allowing for a state drug importation program; six of these states have submitted Section 804 Importation Program proposals and are awaiting FDA approval.

However, on April 16, 2025, the administration announced that the Commerce Department would commence a national security investigation of imports of pharmaceuticals and pharmaceutical ingredients under Section 232 of the Trade Expansion Act. This investigation could lead to tariffs in the sector, which could impact the viability of an importation program.

Medicare drug price negotiations

The Inflation Reduction Act required the Centers for Medicare & Medicaid Services (CMS) to identify high-cost prescription drugs and negotiate prices, which will take effect January 1, 2026. CMS has published a list of the 10 drugs for which it has negotiated prices for 2026, including blockbusters Eliquis^®, Jardiance^® and Xarelto^®. It has also published a list of drugs for 2027, which includes the expensive glucagon-like peptide-1 (GLP-1) drugs Ozempic^® and Wegovy^®, and has begun the second cycle of price negotiations.

The executive order directs the Secretary of HHS to propose and seek comment on guidance for the 2028 drug list within 60 days (June 14, 2025) and to improve the transparency of the program, prioritize the selection of high-cost drugs and minimize any negative impacts of the negotiated prices on pharmaceutical innovation within the United States. The order does not indicate that the drug negotiation program will be curtailed, but states that its administratively complex and expensive regime has thus far produced much lower savings than projected.

Additionally, the executive order notes that the drug-negotiation program draws a distinction between large- and small-molecule medicines and allows price negotiation for small-molecule medicines nine years after FDA approval, compared with 13 years for large-molecule biologics. The executive order states that this discrepancy, which it calls the “pill penalty” because small-molecule prescription drugs are usually in tablet or capsule form, threatens to distort innovation by pushing investment “towards expensive biological products, which are often indicated to treat rarer diseases, and away from small molecule prescription drugs, which are generally cheaper and treat larger patient populations.” The executive order directs the HHS Secretary to work with Congress to modify the drug price negotiation program to align the treatment of the two types of medications.

Changes to the Medicare Part D program

The executive order states that the Inflation Reduction Act’s changes to the Medicare Part D program led to inflated premiums and diminished coverage choices for seniors, prompting a taxpayer-funded bailout of insurance companies offering Part D plans. This could be a reference to the premium stabilization program implemented for 2025 that made additional payments to Part D plans to offset the higher costs of the Part D benefit.

The executive order requires that the HHS Secretary, together with other health leaders in the administration, provide recommendations to the President within 180 days (October 12, 2025) on how best to stabilize and reduce Medicare Part D premiums. It is unclear how the CMS would implement this directive because most changes to the Part D benefit were statutory.

Site-neutral payment reforms

The executive order directs HHS to propose regulations within 180 days (October 12, 2025) to ensure that Medicare is not encouraging outpatient drug administration at more costly hospital outpatient departments rather than at physician offices. This “site-neutral” payment reform supports the idea that the rates Medicare pays for a treatment or service is the same regardless of where it is delivered.

Site-neutral payment reform has been the subject of debate in Congress, and many advocates seek to have policies created that would make the policy applicable to employer-sponsored group health plans as well.

Modifications to the Section 340B program

The executive order contains a provision that affects the 340B program that permits hospitals and clinics that treat low-income individuals to allow those patients to purchase outpatient prescription drugs at discounted prices. The HHS Secretary must act within 90 days (July 14, 2025) to ensure these hospitals and clinics provide insulin and injectable epinephrine to low-income patients at the 340B discounted price.

Additionally, within 180 days (October 12, 2025), the HHS Secretary must publish a plan to conduct a survey to determine the hospital acquisition costs for covered outpatient drugs at hospital outpatient departments. Thereafter, the Secretary will consider and propose appropriate adjustments to align Medicare payment with the cost of acquisition.

Additional issues

Other provisions of the executive order seek to address additional aspects of drug regulation. Within 180 days (October 12, 2025), the FDA must issue a report providing administrative and legislative recommendations to accelerate approval of generics, biosimilars, combination products and second-in-class, brand-name medications and improve the process through which prescription drugs can be reclassified as over-the-counter medications.

Additionally, the executive order directs HHS to select for testing within one year a payment model to improve the ability of the Medicare program to obtain better value for high-cost prescription drugs and biologicals, including those not subject to the drug-negotiation program.

Finally, with respect to Medicaid, the executive order directs the development of recommendations to be presented to the president within 180 days (October 12, 2025) on how to ensure that manufacturers pay accurate Medicaid drug rebates, promote innovation in Medicaid drug payment methodologies, link payments for drugs to the value obtained and support states in managing drug spending.

Implications for plan sponsors

The executive order includes multiple policy initiatives, some of which are already in development and others that are nascent, undefined proposals. Many of the initiatives that could affect group health plan sponsors have more definition, such as proposals to require fee disclosure concerning PBM payments. Others are aspirational, indicating the focus of resources on cost control. Still other proposals require congressional action or amendment to existing laws, such as the site-neutral payment initiatives and modifications to the Part D prescription drug program.

The push forward on developing controls on prescription drug costs comes at the same time as extensive reductions in force at responsible agencies, such as the FDA. Other environmental factors, such as potential tariffs on pharmaceuticals, could affect both importation programs and the cost of drugs.

Sponsors of group health plans should be aware of these proposals, monitor initiatives proposed by the federal departments and review the impact of potential legislation on their benefit plans.

If you’re on our mailing list, we’ll keep you informed of developments.