Assessing the Impact of a Revoked Executive Order on a Medicaid Drug Demonstration Project

At a Glance

• The new administration could decide to slow down participation in the Medicare and Medicaid demonstration by delaying approvals and corresponding agreements with state participants. While CMMI has the authority to conduct demonstration projects, projects not authorized via statute can be amended or even scrapped.
• Of the three projects linked to the rescinded EO, the Cell and Gene Therapy Access Model project would appear to be a difficult one to ax politically. Lawmakers on both sides of the political spectrum have long wrestled with cost and access challenges associated with these types of products, and the project is optional for manufacturers and states.
• Much more politically vulnerable would be any project to reduce payments for drugs approved via the Food and Drug Administration’s (FDA) accelerated approval pathway. This has been a challenging topic politically, particularly following CMS actions to limit Medicare coverage of an Alzheimer’s therapy approved via the pathway, and ongoing tensions seeking to balance patient access to potential therapies on one hand with concerns over cost absent confirmatory data on the other.

Of the scores of day-one executive orders (EOs) issued by President Trump, the order rescinding a Biden administration executive order on lowering prescription drug costs is receiving much attention, given implications the action may have on several Medicare and Medicaid demonstrations, including one focused on high-cost therapies in Medicaid. But rescinding the order in and of itself may have little to no impact on these projects, as we await additional actions by incoming administration personnel.

Background

The rescinded order in question — EO 14807, Lowering Prescription Drug Costs for Americans — was issued by President Biden on October 14, 2022, on the heels of the Inflation Reduction Act, which implements significant changes to the Medicare prescription drug program. The order directs the secretary of Health and Human Services to “consider whether to select for testing by the Innovation Center new health care payment and delivery models that would lower drug costs and promote access to innovative drug therapies for beneficiaries enrolled in the Medicare and Medicaid programs, including models that may lead to lower cost-sharing for commonly used drugs and support value-based payments that promote high-quality care.”

Fast forward to February 2023, and then-Health and Human Services Secretary Xavier Becerra announced that the Center for Medicare and Medicaid Innovation (CMMI or Innovation Center) would implement three specific prescription drug demonstrations, including the Centers for Medicare & Medicaid Services’ (CMS) Cell and Gene Therapy (CGT) Access Model. The CGT model is a voluntary initiative that seeks to facilitate state Medicaid programs in entering into outcomes-based agreements with manufacturers of cell and gene therapy products, and the initial focus condition is sickle cell disease. The model recognizes the challenges many states — especially those with small populations — will face in assembling such agreements. As such, it calls for CMS to negotiate outcomes-based agreement with product manufacturers. State Medicaid programs could then opt to enter into such agreements.

CMMI opened its state application portal last month, and states can opt to participate in the project between now and January 2026. But while CMMI notes that the demonstration was developed in response to EO 14807, the statutory authority for CMS to conduct demonstration projects is rooted within the Social Security Act. The Innovation Center was established via the Affordable Care Act to “test innovative payment and service delivery models to reduce program expenditures.” Given this authority rooted in law, rescinding the EO alone would not scuttle the program.

Analysis

The new administration could decide to slow down participation in the demonstration by delaying approvals and corresponding agreements with state participants. But the future of this model — as well as projects to establish $2 monthly copayments in Medicare Part D for generic medications used to treat common chronic conditions and to reduce Medicare Part B payments for drugs approved via the FDA Accelerated Approval pathway while confirmatory evidence is being compiled — remains to be determined. While CMMI has the authority to conduct demonstration projects, projects not authorized via statute can be amended or even scrapped. This has been exercised during both the first Trump administration, when the Innovation Center cancelled or amended some demonstrations, and the Biden administration, which recently terminated the Medicare Advantage Value-Based Insurance Design demonstration beginning in 2026 and sunsetted the Comprehensive Primary Care Plus model to focus on the Primary Care First payment model options. A particular concern during the first Trump administration was mandatory demonstrations, a point that is not applicable to the CGT model, which is voluntary but which could impact other projects.

Of the three projects linked to the rescinded EO, the CGT project would appear to be a difficult one to ax politically. Lawmakers on both sides of the political spectrum have long wrestled with cost and access challenges associated with these types of products, and the project is optional for manufacturers and states. Much more politically vulnerable would be any project to reduce payments for drugs approved via the FDA’s accelerated approval pathway. This has been a challenging topic politically, particularly following CMS actions to limit Medicare coverage of an Alzheimer’s therapy approved via the pathway, and ongoing tensions seeking to balance patient access to potential therapies on one hand with concerns over cost absent confirmatory data on the other. We will anticipate more clarity to come as new HHS and CMS leaders are only just beginning to assume their roles.