Mintz IRA Update — PhRMA’s 2025 Policy Agenda and the Industry’s Crossroads with the IRA and Drug Pricing Reform
This article is part of the Mintz IRA Update – Fifth Edition. Explore the full series of IRA-related insights here.
As US pharmaceutical manufacturers continue to lead biopharmaceutical research and development, they find themselves increasingly at odds with the nation’s shifting regulatory landscape — a reality underscored in a 2025 policy agenda published by the industry’s largest trade association, the Pharmaceutical Research and Manufacturers of America (PhRMA).
The policy agenda, which sets forth PhRMA’s comprehensive framework for preserving American leadership in innovation while addressing growing concerns around affordability and access, proposes four core policy initiatives to “strengthen American leadership” in innovation while ultimately ensuring a “healthier America.” In this post, we provide an overview of PhRMA’s proposed policy priorities and examine how they intersect with ongoing drug pricing reforms — particularly those introduced under the Inflation Reduction Act (IRA) and the Trump administration’s related executive orders.
PhRMA’s Policy Framework
PhRMA’s 2025 agenda is built around four core policy priorities:
- Adopting a pro-innovation regulatory and trade agenda,
- Protecting the US from the harms of price setting,
- Stopping abuse of the 340B program, and
- Reigning in PBMs and health insurers to put patients over profits.
Together, these pillars reflect a strategic effort to (1) defend the sector from what PhRMA views as regulatory overreach, market distortions, and misaligned incentives that threaten innovation and patient access to affordable medications, while (2) directing attention to other players and regulations in the supply chain for more effective drug price controls.
Price Setting and the IRA: Innovation Under Pressure
The “Pill Penalty”
PhRMA’s most pointed critiques target the IRA’s Medicare Drug Price Negotiation Program (Negotiation Program) — specifically as it relates to the so-called “pill penalty,” which permits small molecule drugs to be subject to price controls nine years after FDA approval, versus 13 years for biologics.
According to PhRMA, the policy is likely to chill manufacturer investment in the development of pill-based treatments that are often more convenient, cost effective, and preferred by patients. PhRMA estimates that the pill penalty could result in 188 fewer small molecule innovations over the next two decades, with downstream impacts on cancer care, mental health, and chronic disease management. PhRMA further warns that the curb of investments to small molecule drugs will increase costs and impact patient adherence to medication protocols.
As we discussed in a previous post, in April the Trump administration directed the Department of Health and Human Services to work with Congress to modify the Negotiation Program to align the treatment of small molecule prescription drugs with that of biological products — potentially notching a significant victory for PhRMA’s proposed policy agenda.
Bureaucratic Overreach
PhRMA broadly criticizes federal and state price setting initiatives — namely the Negotiation Program and the creation of state-level price setting boards (e.g., PDABs) — as material threats to innovation and patient access.
The policy agenda continues to argue that participation in the Negotiation Program is coerced through disproportionate penalties (e.g., through the imposition of an excise tax that could equal up to 1,900% of a drug’s daily revenues) and asserts that the Program is materially responsible for an increase in prescription drug coverage restrictions that put millions of beneficiaries’ access to Part D drugs at risk. It also posits that the Negotiation Program poses a significant threat to the sustainability of independent and regional chain pharmacies, especially in rural areas, due to delayed reimbursements and reduced margins on price-set drugs. According to the policy agenda, “due to typical differences between prices at which pharmacies acquire price-set drugs and the amount Part D plans will reimburse under the IRA, each pharmacy stands to lose $11,000 in weekly cash flow and could forfeit an average of $43,000 in annual revenue due to payment delays,” resulting in reduced availability of medications, staffing issues, and pharmacy closures.
PhRMA also asserts that state prescription drug affordability boards (PDABs) are a material threat to patient access to medications — arguing that state price-setting initiatives will result in health plans developing more stringent utilization management protocols that will further hinder patient access to previously available medications. We previously discussed this long-standing belief in a prior edition of the Mintz IRA Update, but its inclusion in the policy agenda underscores the industry’s continued interest in minimizing shifting regulatory regimes at not only the federal level but also the state level.
PhRMA’s Other Policy Priorities
340B Reform
The policy agenda calls for comprehensive reform of the 340B drug discount program, citing widespread abuse and lack of oversight. PhRMA argues that under the current framework, eligible hospitals and clinics purchase outpatient drugs at steep discounts and then mark up prices significantly when billing insurers and patients, resulting in increased costs at the pharmacy counter without the delivery of meaningful benefits to the underserved communities for whom the 340B program is intended. We discuss the current state of 340B reform in our 340B Roundup.
PBMs and the Supply Chain
PhRMA’s third core policy initiative targets other players in the pharmacy supply chain, arguing that such other entities (primarily PBMs and health plans) account for the largest share in brand drug spending and should be more closely regulated to materially move the needle on drug costs in the US. PhRMA’s proposed policy reforms include requiring PBMs and health plans to share negotiated savings with patients at the point of sale, delinking PBM compensation from drug prices, prohibiting copay accumulator and maximizer programs, and increasing oversight of PBM and health plan utilization management practices.
Defending the Innovation Ecosystem
Finally, PhRMA emphasizes the need to adopt a modernized regulatory and trade agenda to foster a predictable and reliable environment for pharmaceutical innovation. Its three proposed initiatives for accomplishing the goal include adopting AI and real-world evidence to streamline and expedite FDA review, preserving post-approval R&D incentives (e.g., patent term restoration and new drug product exclusivity programs), and negotiating trade agreements that expand market access and require foreign compliance with global IP commitments to prevent “free-riding on American innovation.”
Conclusion
PhRMA’s 2025 policy agenda offers a detailed roadmap of what PhRMA and its members perceive as the most significant threats to the pharmaceutical industry. The policy agenda also may reflect where we will see legal disputes and policy debates over the next year among various pharmaceutical supply chain stakeholders. The agenda underscores the complex network of interests and the delicate balance of affordability, access, and innovation that legislators and regulators must keep in mind as they seek to address drug pricing in the United States.
Authors
Theresa C. Carnegie
Member
