Health Law Diagnosed: Mintz IRA Update — Q3 2025 Edition
In the latest episode of Health Law Diagnosed, Of Counsel Bridgette Keller is joined by Associate Hassan Shaikh for a discussion on noteworthy developments relating to the IRA and drug pricing.
Together, Bridgette and Hassan explore:
- The expansion and evolution of the Medicare Drug Price Negotiation Program
- Court challenges to the Negotiation Program
- Drug pricing reform and the OBBBA
- Impacts on patients and hospitals related to Medicare Part D, 340B, and OPPS clawbacks
- The rise of direct-to-consumer drug sales models
Bridgette and Hassan cut through the complexity and provide an overview of these topics, which are covered in greater depth in the Q3 2025 Edition of the Mintz IRA Update.
Have questions or want to connect with the team? Reach out to us at [email protected].
Health Law Diagnosed: Mintz IRA Update — Q3 2025 Edition Transcript
Bridgette Keller: Hi there, welcome back to Health Law Diagnosed, a Mintz podcast dedicated to health law, health policy, and social issues in the health care industry. I’m Bridgette Keller, your podcast host. Today we’re digging into the Q3 2025 Mintz IRA Update. Joining me is my colleague and articles editor of the Mintz IRA Update, Hassan Shaikh. Hassan, welcome to the show.
Hassan Shaikh: Thanks, Bridgette. It’s great to be here.
BK: As you know, we’re here to sift through all the noise, the headlines, the reports, and pull together the important updates for our listeners. The things we hope will keep them informed and ahead of the game. Where should we start?
Medicare Drug Price Negotiation Program: Expansion and Evolution
HS: That’s a great question and a helpful reminder that our goal here is to cut through the complexity to provide the 10,000-foot view on the major topics we’re discussing in the most recent edition of the Mintz IRA Update. If you get the chance to download the PDF, you’ll see that this edition of the update is a 20-page deep dive into the noteworthy developments relating to the IRA and drug pricing that we think our listeners should be apprised of. We’re talking regulatory and legislative efforts, court battles, and big industry trends.
These moves are happening quickly and converging all at once, and it’s making for an incredibly dynamic period in our industry. It also reflects the fundamental tension that exists in our health care system of how to balance controlling costs for patients and for the system as a whole, while also encouraging manufacturer innovation and ensuring patient access to medications at pharmacy counters and in their doctor’s office. All that’s to say, I think we start by talking about the program that’s central to the IRA and a lot of the other issues we’ll discuss today: the IRA Medicare Drug Price Negotiation Program.
BK: Ah, yes. The negotiation program is at the center of so many topics. Let’s start right there because it’s not just chugging along, right? It’s expanding in scope, even while facing some pretty serious challenges.
HS: That’s right. CMS — or the Centers for Medicare and Medicaid Services — issued draft guidance in May 2025 for the third round of the negotiations under the program. This guidance brings with it two major expansions that’ll shift the negotiation program into a more established phase. First, the guidance gives us clear timelines for when the program will officially expand into negotiating high-cost Medicare Part B drugs. Think infusions and injections that you might get in the hospital or at a doctor’s office.
It’s a pretty significant expansion because for the past two years, we’ve focused on Part D drugs, which you’re picking up from the pharmacy counter. Although we knew the expansion into Part B was on the horizon, this marks the negotiation program’s official entry into a whole new area of health care spending. Second, CMS is now introducing a proposed framework for renegotiation of all those drugs selected in the first and second rounds of the program.
BK: Oh wow, that’s really interesting. So those drugs that were negotiated in the first or second round might actually get a second look? Will there be a price adjustment?
HS: That’s right.
BK: Why would they do that?
HS: Well, the triggers in the current guidance seem to focus on big market changes or new clinical uses. So if a drug’s monopoly status has extended past 12 years, or a drug is approved for a new condition that affects a lot more people, those drugs would be subject to some renegotiations. In the end, it’s about making sure that the negotiated maximum fair prices of previously selected drugs reflects those drugs’ current realities.
BK: That’s right. So the negotiation program is adapting to the entire life cycle of bringing the pharmaceutical to market.
HS: Exactly. At the same time, the guidance also indicates that CMS is trying to increase transparency and engagement in the program. In the draft guidance, CMS says they’ll publish a list of up to 50 of the top negotiation-eligible drugs and hold some patient roundtables in spring of 2026 to gather public input. And they’re not messing around with compliance: manufacturers who don’t ensure patients get the negotiated prices could face some hefty fines.
Legislative Development: The OBBBA
BK: What’s fascinating here is that we are watching the negotiation program grow and evolve all within the parameters of the IRA. But even as it does so, I read that there are a lot of new legislative curveballs that could shake things up for orphan drugs.
HS: You got it. The big one is the OBBBA. It’s the July 4 act that President Trump signed into law, which is also called the One Big Beautiful Bill Act. It expands the contours of the orphan drug exclusion under the negotiation program. In the past, the IRA permitted a narrow exemption from the negotiation program for drugs with a single rare disease indication. So prior to the OBBBA, if a drug held an orphan designation for more than one rare disease or condition, it wouldn’t qualify for the orphan drug exclusion, even if it wasn’t approved for any non-orphan indications. But under the OBBBA, orphan drug exclusions have been expanded to include a drug with one or more drug indications, meaning that orphan drugs that treat multiple rare conditions will receive a complete exemption from price negotiations and being a part of the negotiation program as long as they aren’t approved for any non-orphan uses.
On top of that, the OBBBA revises some of the negotiation program timelines to further push out when an orphan drug becomes eligible for negotiations under the program. Before it was enacted, eligibility for price negotiations would begin seven years after the date of first approval for drug products or 11 years after initial licensure for a biologic product, regardless of whether the drug was first approved or licensed for an orphan indication. But with the passage of the One Big Beautiful Bill Act, the negotiation timeline for orphan drugs can only begin once that drug is approved for a non-orphan indication, regardless of the original approval date.
BK: Interesting. So then until an orphan drug receives a non-orphan approval, it can’t be subject to price negotiations under the negotiation program.
HS: Exactly. The effect of this small provision in the OBBBA is estimated to be pretty significant. The Congressional Budget Office estimates that these changes to orphan drug eligibility could cost Medicare about $5 billion in lost savings over the next 10 years.
BK: That’s incredible. That’s a pretty significant loss. And now CMS will have to write their final guidance to account for the OBBBA. There’s a lot going on with the negotiation program, huh?
HS: There really is.
BK: Thank you for updating us on it. Listeners and readers can actually go right to the Mintz IRA Update to find more details about that.
Legal Developments: Court Challenges
BK: Now, why don’t we pivot to the courts, Hassan? We know the negotiation program has been under a number of challenges across the country. Where are we there? What’s happening?
HS: So far the government’s having quite a bit of success in the courts. The courts have pretty much across the board continued to decide in favor of the government, oftentimes leaning on the fact that participation in Medicare is voluntary. So in addition to losses on procedural issues, manufacturers’ constitutional claims haven’t held muster with a number of the federal circuit courts.
BK: But even as a number of circuit courts are making these similar decisions, new cases are still being filed. So it seems like the lawsuits aren’t necessarily over. Is that right?
HS: That’s right. They’re definitely not over. Teva just filed suit in the DC federal court over the inclusion of two of its drugs, Austedo and Austedo XR, in the second round of drug price negotiations. And the trade association PhRMA just lost its case in a federal district court in Texas and will be bringing that case up to the conservative-leaning Fifth Circuit, where one of the judges has previously expressed skepticism about legality of the negotiation program. So there’s a little bit of everybody keeping their eye on that specific case. Then AstraZeneca has indicated that it might be seeking Supreme Court review of its case from the Third Circuit in which the Third Circuit decided against AstraZeneca. We’re on the lookout to see if they submit their cert petition by September 20, which is the agreed upon deadline they have with the Supreme Court.
BK: If the Supreme Court does decide to take up the appeal, it’ll be interesting to see how its decision affects operations of the negotiation program. Definitely something to be on the lookout for.
Executive Orders and Drug Pricing Reform
HS: All this legal maneuvering is happening while President Trump is pushing hard on drug costs through channels available under the executive branch. We discuss in more detail in the Mintz IRA Update that various executive orders that President Trump has issued on drug reform in the past few months, including his April 2025 reform order in which he directed federal agencies to implement a variety of drug pricing reforms, including getting rid of the so-called “pill penalty” from the IRA negotiation program.
BK: Oh yes, the pill penalty. That’s the difference between pills and biologics, right? Nine years versus thirteen?
HS: Exactly. We just talked about it a second ago and we said seven years versus eleven. It all gets a little complicated. But what it means is you can be begin negotiations seven years after a pill is introduced to the market and it becomes negotiated, and its MFP goes into effect nine years after it goes to the market. Whereas with the biologic, it’s 11 years before you can begin negotiations and 13 years at the time that the MFP actually goes into effect.
The reform order aims to treat pills and biologics the same. In other words, small molecule drugs, or pills, would be eligible for negotiation at the same time that biologics would after FDA approval. So 11 years and then a 13-year MFP effective date. It also pushes for greater PBM competition and transparency and direct studies into international importation options and manufacturer competition.
BK: All potential solutions for ultimately driving drug costs down. Are there any other notable executive orders?
HS: Yeah, there’s one more that I’d flag here, and that’s the MFN order that was issued on May 12. This one is bold and essentially requires manufacturers to give the US most-favored-nation (MFN) pricing to any comparably developed foreign country.
BK: Essentially this would mean the US is charged the lowest price globally that a manufacturer offers?
HS: Exactly. To drive home their seriousness, the White House sent letters in late July to 17 manufacturers, essentially putting them on notice to the steps they need to take to comply with the MFN order. These steps included demand for MFN pricing and Medicaid, a promise by the manufacturers not to offer better prices overseas for new drugs, encouragement for manufacturers to establish direct-sale pipelines to patients at MFN prices, and reinvesting international profits to lower US prices.
The letter also includes a September 29 deadline threatening to deploy every tool available to protect American families from what it calls “abusive drug price practices.”
BK: Strong language.
HS: Very strong. But it does raise this important question: Without Congress acting, how enforceable is this MFN order? And what tools do they have to enforce manufacturer compliance with these steps? We saw Senator Cassidy’s MFN bill stall in Congress, so the path for these executive orders isn’t exactly clear right now.
Patient and Hospital Impacts: Medicare Part D, 340B, and OPPS Clawbacks
BK: Why don’t we shift focus and talk about the direct impacts on patients and hospitals. This edition of the Mintz IRA Update talks more about Medicare Part D redesign and the always complicated 340B program. In the past, we covered the IRA-related changes to Part D implemented by CMS for 2025, but now we’re looking toward 2026. So what do you see as the big-ticket items?
HS: I think the big-ticket item here is the minor increase in the Medicare Part D out-of-pocket cost max. That’s what everyone’s going to think about when it comes to their wallet, right? The Medicare out-of-pocket cost max has gone from $2,000 in 2025 to $2,100 in 2026. There’s also a new selected drug subsidy program established under the 2026 Redesign Instructions. Under the program, CMS will make prospective payments to Part D plans for selected drug utilization, with the subsidy being equal to 10% of a plan’s negotiated price for a selected drug. Although this program provides relief to Part D plans, there will need to be some reporting and reconciliation with CMS on an annual basis to reconcile those prospective payments with their actual plan utilization for that year.
BK: It also sounds like the credible coverage standard is getting tougher, with plans now being required to be designed to pay at least 72% of a participant’s prescription drug expenses to be considered equivalent to the actuarial value of standard Part D coverage. Is that right?
HS: That’s right, and it means that employers will probably need to revisit and might need to beef up their group health plan coverage of prescription drug expenses. Luckily, non-retiree drug subsidy group health plans or your typical employer group health plan, for example, have until 2027 to ensure compliance with the 72% coverage requirement. In 2026, they’ll have the option to meet either the existing 60% requirement or the revised 72% requirement. Then once we get to 2027, everybody will be required to meet that 72% requirement.
BK: It’s good then that a large majority of employer group health plans will have an opportunity to align with those new requirements. Definitely something for our clients to keep in mind as we wrap up with this year and start to look at 2027. Then there’s also everything going on with 340B. What’s happening there?
HS: Yes, 340B. A lot happening there, which we cover in more detail in our 340B Roundup in the Mintz IRA Update. I’d recommend that you read through the four articles when you have a chance because we just get into way more detail than we can here. But as always, the program is dealing with a few converging issues. I’m optimistic that the introduction of a new rebate model pilot program for 340B claims might help relieve some of the tension around the program though, if that’s a helpful highlight.
BK: How are they going to do that?
HS: There’s significant concern from manufacturers that in many cases they’re paying duplicate discounts on certain drugs because of the intersection between 340B and Medicaid rebates.
BK: Ah yes, the duplicate discount issue.
HS: Exactly. The 340B program requires upfront discounts on certain outpatient drugs sold to 340B pharmacies, which can include outside retail pharmacies that 340B hospitals contract with to dispense 340B drugs to their eligible patients. But some of those patients may be covered under Medicaid, and in that case, manufacturers are also required to pay a Medicaid drug rebate program rebate in addition to first selling the contract pharmacy a discounted drug at a 340B rate. So in response to the concern of paying duplicate discounts because of the complexity with balancing the 340B program and the Medicaid drug rebate program, some manufacturers started restricting contract pharmacies from getting access to 340B pricing, saying that only in-house 340B pharmacies, and not the pharmacies that hospitals might contract with, would be eligible for that 340B pricing.
BK: I imagine that’s an issue for HRSA? And most states across the country.
HS: Exactly. HRSA, the agency that oversees the 340B program, pushed back with violation letters against those manufacturers that were trying to exclude certain contract pharmacies. The courts have surprisingly often sided with the manufacturers, saying that HRSA likely overstepped its authority. But the federal-level battles and confusion have led states to jump in and try to solve the problem themselves for the pharmacies and eligible patients for 340B programs that live in their states. We’re seeing state laws pop up in an effort to ban manufacturers from restricting contract pharmacy access. Although it’s still a patchwork quilt of laws and corresponding lawsuits going back and forth, we’re monitoring it closely to see where it all lands.
BK: A patchwork quilt describes it well. A patchwork quilt or a tangled web, seeing as we’re coming into Halloween season.
HS: Exactly, that’s perfect. The chaos in mounting pressure hasn’t stopped the other parts of 340B from moving forward. HRSA launched a new 340B rebate model pilot program earlier this year, which I think can act as like a welcome release valve in this situation. It’s a voluntary program that’s being piloted only for negotiated drugs under the IRA. But under this structure, instead of a manufacturer providing upfront discounts on 340B drugs, they’ll be able to offer a post-purchase rebate to covered entities, which is a practice that they’re more than familiar with and operationalized to be able to handle. There’s a lot of history with the rebate model and HRSA blocking manufacturers from implementing their own rebate models in years past, so the introduction of the pilot program is welcome news.
BK: Sounds like it. That’s so interesting.
HS: CMS is also trying to help tackle the duplicate discount concerns. So I don’t want you to think that it’s all on HRSA’s shoulders. For the first time ever in its 2026 physician fee schedule, CMS proposed a claims-based method to identifying 340B drugs. The proposal includes voluntary disclosure of five new data elements per claim and methodology for cross-referencing prescriber and pharmacy NPIs with known 340B relationships.
BK: That’s right. It’s some positive news in the 340B space.
HS: I think so, but as always, there’s a lot of interest with each of these decisions, and it’s pretty clear right now that hospitals aren’t very happy with the rebate model. The American Hospital Association called it a response to a non-existent program integrity problem, and warned that the rebate model introduces potential financial risks to hospitals and the communities that they serve.
BK: It does sound like hospitals are going to have to grapple with at least some change in 340B from upfront discounts to rebates. Speaking of hospitals, Hassan, it sounds like there’s more financial pressure potentially coming from CMS with these proposed clawbacks in the Outpatient Prospective Payment System (OPPS) rule for 2026.
HS: That’s right, nice segue there, Bridgette. As background: During the first Trump administration, 340B hospitals had their payments cut from 2018 to 2022 under the reasoning that 340B hospitals were receiving a windfall by purchasing drugs at 340B discounts and then being reimbursed by CMS at the standard rate of 106% of the average sales price for the drug that all other hospitals were reimbursed at.
The AHA challenged the 340B payment cuts and in 2022, and the Supreme Court said that those cuts were in fact unlawful. So CMS had to pay back $9 billion to the 340B hospitals and providers and restore the old reimbursement methodology in 2023. But here’s the wrinkle: Back when the 340B cuts were made, a big chunk of the savings that CMS created by reducing 340B hospital reimbursements was then used to increase payments on non-drug items and services for all other hospitals.
BK: Why’d they do that?
HS: Because the Medicare statute imposes a budget neutrality requirement, which generally prohibits changes to Medicare spending in any amount above or below a certain mandated threshold.
BK: So they saved about $9 billion and offset those savings by increasing reimbursements of non-drug-related items and services by about $7.8 billion.
HS: Now, because they didn’t actually get to make the approximately $9 billion in savings after the Supreme Court found those cuts to be unlawful, CMS needs to recoup the $7.8 billion in overpayments it made under the OPPS as an offset in the past. That way, it’ll actually stay budget neutral. So in 2025, CMS introduced a plan to recoup the $7.8 billion in overpayments by incrementally reducing certain payments under the OPPS through 2041.
BK: 2041, my goodness. Obviously hospitals are concerned about the recoupment, but are they concerned about other things in this plan?
HS: Well, yes and no. It isn’t ideal to have to take a haircut now for overpayments in the past because it requires some financial reconsideration, right? So there’s a general push against having this recoupment happen. But the more pressing concern is that in the 2026 OPPS proposed rule, CMS indicated that it would seek accelerating the recoupment plan from 16 years to 6 years. In other words, the way you just reacted to 2041 is now being reduced by 10 years. So CMS wants to recoup $7.8 billion by 2031 instead of 2041. In order to do so, they’ll have to impose an even larger haircut on hospitals under the OPPS.
BK: That’s a big change. I could see why hospitals would be upset about that, because it’s going to be a much more significant haircut than it was before.
Industry Response and the Rise of DTC Drug Sales Models
BK: Hassan, bringing us back to the Mintz IRA Update and the 340B Roundup: We’ve heard about government action, court battles, hospital impacts. Let’s get the industry perspective. What are the pharmaceutical companies saying amidst all of this?
HS: That’s a great question. We look to the PhRMA Group, which is the manufacturer industry’s largest trade group, to get a better sense of what PhRMA is generally thinking. In their 2025 policy agenda, PhRMA laid out four main pillars of what their concerns are. They want to promote innovation, fight government price setting, stop what they call 340B abuse, and rein in PBM and insurer profits. All things that I’m sure you’ve heard many times before.
BK: Pretty clear and unsurprising priorities, and it sounds like their sharpest criticisms are aimed right at the IRA negotiation program.
HS: That’s right. The pro-innovation, anti–price setting pillars focus on the IRA negotiation program, and in particular the pill penalty we talked about earlier. PhRMA puts out an estimate that the pill penalty could result in 188 fewer small molecule drugs, or pills, over the next 20 years being introduced into the market, which again drives home their point about creating a pro-innovation environment. But remember, President Trump’s reform order essentially directed HHS to get rid of the pill penalty, so PhRMA may have already notched a win there.
BK: It isn’t surprising then that they are concerned about price-setting initiatives at the federal and state levels. Since we discussed the litigation PhRMA itself is bringing against the negotiation program in Texas, it all dovetails.
HS: That’s right. The agenda is an interesting read and we break it down in more detail in the Mintz IRA Update. The real takeaway is that PhRMA is presenting a multi-front defense and offense strategy. So far this year, we’ve seen some of their demands be addressed at the highest levels of the federal government — including, for example, their desire to stop the so-called abuse of the 340B program that we’re starting to see with that new rebate pilot program.
BK: Very true. Even with everything else happening, it’s fascinating to realize that the landscape of pharmaceutical sales is quickly changing too. Manufacturers are moving to direct-to-consumer (DTC) models. And this is a move that seems to be supported by the Trump administration.
HS: Absolutely. It’s a strategic play to manage pricing and the patient relationship in a complex environment and speaks to PhRMA’s final goal of reining-in insurers and PBMs. These direct-to-consumer models essentially bypass PBMs and insurers by offering discounts to cash-pay patients that order directly through the manufacturer’s preferred providers. We’re seeing real-life examples pop up in the market with folks like Eli Lilly and Novo Nordisk, who are partnering with telehealth platforms like Ro and Hims & Hers to offer discounted GLP-1s directly, sometimes with other services bundled in, to patients looking for that.
BK: I’ve seen a lot of ads about this. Do you think it’s going to be smooth sailing for these DTC programs?
HS: Not entirely. These models are under scrutiny, particularly by Congress and particularly by the Senate. In fact, a handful of senators investigated these types of arrangements, and although they didn’t find any overt fraud and abuse, they did warn that some of the activities could implicate the anti-kickback statute. Prescription drug advertising has a big target on its back too, which puts these types of DTC programs into a little bit of a flux.
There’s Senators Bernie Sanders and Angus King’s proposed End Prescription Drug Ads Now Act, which hopes to ban all prescription drug and biologic advertising, including on radio, television, and social media. And Secretary Kennedy has talked about an executive order to stop TV drug ads too.
BK: That would be quite a change, banning all ads. That seems like a significant shift, but also unique to America.
HS: Very unique. And speaking of America, there are a lot of potential First Amendment hurdles that we’d have to get through in order to make that effective. There’s also the logistical considerations that I want to flag around these DTC programs. Manufacturers would need infrastructure for supporting these direct sales. We’re seeing familiar names like BlinkRx starting to unveil new initiatives to help manufacturers manage these programs. There’s so much happening in the DTC world. Right now, to me, it sounds like a bit of a Wild West situation.
BK: Hassan, that’s a perfect segue — I want us to go to another Wild West situation: GLP-1s. What does this all mean, then, for the brand drugs like Ozempic, Wegovy, Mounjaro, and Zepbound? And of course, there’s semaglutide and tirzepatide compounded counterparts.
HS: I think you’re right that this might be the real Wild West. There’s no doubt that GLP-1s are completely changing how we treat obesity, diabetes, heart issues, and probably more indications than we can imagine right now. The potential is massive and demand seems to be through the roof. But there is a big affordability barrier, as retail prices for these drugs average between $900 and $1,300 per month, and insurance coverage for them, especially for obesity indications, is pretty spotty.
BK: Right. They are not consistently covered for obesity, unlike diabetes. And a clear example of this is that CMS left out of its April 2025 final rule a Biden-era proposal to cover anti-obesity medications under Medicare and Medicaid. There were also supply issues at one time as well, right? This allowed access to compounded and cheaper versions for a good amount of time.
HS: That’s right. Back in 2022, there was a huge surge in demand for GLP-1s, which led to widespread shortages. That ended up putting the GLP-1s onto the FDA drug shortage list. Once they were on the drug shortage list, that in turn triggered the right for compounding pharmacies to begin producing compounded versions of those drugs at lower costs than the branded medications. Beginning in 2022, we started seeing health startups and med spas and wellness clinics and other non-traditional providers start offering GLP-1 access to the public, which accelerated its use and established new revenue streams that those entities became accustomed to. But that shortage officially ended in February 2025, and the FDA gave compounding pharmacies until May 2025 to cease all further production of those medications. Of course, that’s helped with quality control, but it’s also cut off a cheaper, albeit less regulated, access point for many, making the brand-name cost barrier even higher.
BK: This is where the direct-to-consumer sales aspect is coming in.
HS: Definitely. Manufacturers are now hoping to use their DTC platforms to meet that huge demand directly.
BK: What do you think is on the horizon for the GLP-1 market?
HS: I think that the market still looks strong, and manufacturers are racing ahead to develop new formulations. There are pill versions of the drugs that are being discussed to come out to the market, and then combination therapies to help with these indications. In the long term, Medicare coverage of the drugs for obesity indications would help strengthen the market, which hasn’t happened yet. And Novo Nordisk’s GLP-1s are facing negotiations this year for an MFP that would go into effect in January 2027. So we should keep an eye on that.
Wrap-up
BK: That brings us all the way back to the negotiation program, right where we started. Hassan, we’ve covered some ground today, but it goes to show how much is included in the Mintz IRA Update. So listeners and readers, I encourage you to download the PDF and check out these articles. It’s been a whirlwind the last few months and there’s a lot to think about and a lot to digest. Hassan, thank you so much for joining us today to talk through it all.
HS: Absolutely. Thanks for having me, Bridgette.
BK: Listeners (and readers), thank you for joining us for this episode of Health Law Diagnosed. If you have any questions on the latest edition of the Mintz IRA Update, please feel free to reach out directly or email us at [email protected]. I’m Bridgette Keller and this was Health Law Diagnosed.
Authors
Bridgette A. Keller
Of Counsel
