Trump Drug Plan Projects $65B Medicaid Savings

President Donald Trump announced Thursday that Medicaid programs in all 50 states will participate in a prescription drug initiative the administration says will save taxpayers nearly $65 billion over the next decade.

The White House Council of Economic Advisers estimates lower Medicaid drug costs will produce $64.3 billion in combined federal and state savings, including $36.6 billion for the federal government and $27.6 billion for the states. The District of Columbia and Puerto Rico are also included.

The savings will come through rebates on hundreds of expensive brand-name medications, including drugs used to treat cancer, diabetes and asthma. The administration says every state Medicaid program will have access to the reduced pricing.

The expansion comes as prescription drug prices have been falling nationally. Bureau of Labor Statistics data show prescription drug prices were 2.9% lower in August than a year earlier. The White House says the decline is the steepest annual drop in more than 60 years.

Beyond Medicaid, the administration estimates agreements with 26 major pharmaceutical companies could ultimately generate more than $600 billion in savings across the U.S. drug market. Those manufacturers represent about 90% of the branded drug market, according to the White House.

TrumpRx, the administration’s direct-to-consumer prescription platform, has produced more than $700 million in savings, according to the White House, and now includes more than 1,000 branded and generic medications.

The pharmaceutical agreements also include commitments totaling about $170 billion for U.S. manufacturing and research and development, along with contributions to a federal reserve of active pharmaceutical ingredients intended to strengthen domestic drug supplies.

The Medicaid savings are being generated through the administration’s Most Favored Nation pricing system, which links U.S. prices to lower prices available in other developed nations, but the most immediate effect for taxpayers is the projected reduction in federal and state Medicaid spending.