On March 11, 2024, the White House released President Biden’s Fiscal Year 2025 Budget (link) and accompanying HHS Budget in Brief (link), which elaborates on health care proposals. The $7.3 trillion budget request includes $130.7 billion in discretionary and $1.7 trillion in mandatory proposed HHS budget authority for FY 2025. 

Notable prescription drug proposals include: 

Expansion of the Inflation Reduction Act (IRA) number of negotiated drugs 
Extension of the IRA inflationary penalties and $2,000 annual prescription drug and $35 monthly insulin caps to commercial markets 
Creation of a National Hepatitis C Elimination program and a requirement for states to cover PrEP at zero cost-sharing for Medicaid and CHIP beneficiaries 
Establishment of a process to allow states to partner with CMS and a private sector contractor to negotiate Medicaid supplemental rebates from manufacturers. 

Budget highlights include:  

Inflation Reduction Act (IRA) Expansion
Proposes to expand on the IRA by “significantly increasing the pace of negotiation, bringing drugs into negotiation sooner after they launch, expanding inflation rebates and the $2,000 out-of-pocket prescription drug cost cap beyond Medicare and into the commercial market.” 
Government Negotiation:
The Budget does not specify how the negotiation policy will be expanded, but the White House recently proposed to increase the number of drugs negotiated each year to 50 (under current law, 10 drugs are under negotiations for price year 2026, 15 drugs will be negotiated for price years 2027 and 2028, and 20 drugs will be negotiated for price year 2029 onward). 
Expansion of the Government Negotiation policy and applicability of Inflationary Penalties to drug units sold in the commercial market is estimated to generate savings of $200B over ten years.  
Includes a proposal to extend the IRA’s $35 cost-sharing cap for a month’s supply of a covered insulin product to the commercial market, expected to cost $31M over 10 years.  
Medicare
With policy intent similar to the CMMI model proposal noted below, proposes adding a new permanent benefit to Part D coverage that requires Part D plans to offer a Medicare standard list of generic drugs at a maximum copayment of $2 for a 30-day supply across all phases of the prescription drug benefit until the beneficiary reaches the OOP maximum ($1.3 billion in costs over 10 years). 
Amend section 351 of the Public Health Service Act to no longer include a separate statutory standard for a determination of interchangeability and to deem all approved biosimilars to be interchangeable with their respective reference products (budget neutral).  
CMMI Priorities:
$1.35B for FY 2025, a $300M increase from FY 2024. 
The Budget in Brief highlights numerous CMMI priority initiatives, including the Enhancing Oncology Model, Cell & Gene Therapy Access Model, Medicare $2 Drug List Model, Accelerating Clinical Evidence Model, and the Innovation in Behavioral Health Model. 
The Budget in Brief notes that CMMI is still compiling stakeholder input and developing model specifications for the Medicare $2 Drug List Model (the budget also includes a legislative proposal establishing this policy as a permanent change to the Part D benefit design) and the Accelerating Clinical Evidence Model. 
Cancer Moonshot Initiative:
The FY 2025 Budget invests $2.9B across HHS for the Cancer Moonshot initiative. 
The budget proposes to reauthorize the 21st Century Cures Act Cancer Moonshot program through FY 2026 and provide $2.9B in mandatory funding in FY 2025 and FY 2026, with $1.45B each year.  
The Advanced Research Projects Agency for Health (ARPA-H) will help lead the Cancer Moonshot and designate a Cancer Moonshot champion to coordinate internal and external goals. $1.5B for ARPA-H funding, consistent with FY 2023 final funding levels. 
$7.8B budget for the National Cancer Institute (NCI) including $716M for discretionary resources to support the Cancer Moonshot initiative, a $500M increase above FY 2023. 
$756M, an increase of $100M above FY 2023, to support cancer prevention and control programs across Centers for Disease Control and Prevention (CDC), including tobacco prevention. 
Creation of a cancer care quality data reporting program for all Medicare providers to provide more information about the quality of cancer care. 
The HHS Budget-in-Brief mentions the Enhancing Oncology Model as supporting the President’s Unity Agenda and Cancer Moonshot initiative. The model began July 1, 2023, and is scheduled to run through 2028. 
National Hepatitis C Elimination Program
$9.4 billion is proposed to fund an HHS-wide National Hepatitis C Elimination Program. The five-year program would increase access to curative medicines and expand screening, testing, and provider capacity. The program is expected to yield $13.1 billion (Medicaid) and $289 million (Medicare) in savings over a ten-year period, for an estimated net savings of $4 billion.
ADVI note: While the Medicare section of the budget notes that the federal government would pay 100% of cost sharing for Part D beneficiaries in the National Hepatitis C Elimination Program, additional information with respect to the Medicaid program are not detailed in the Budget in Brief. 
Medicaid
Establish a process for CMS and participating states to partner with a private sector contractor to negotiate supplemental rebates from manufacturers ($5.2B in net savings over 10 years).  
Require states to cover HIV/AIDS Pre-Exposure Prophylaxis (PrEP) and associated laboratory services with no cost sharing for Medicaid and CHIP beneficiaries ($10.6B in savings over 10 years). 
CDC
Proposes to establish a Vaccines for Adults program that would provide uninsured adults with access to ACIP-recommended vaccines, building on the Vaccines for Children program.  

Additional proposals include: 

Medicare
Apply the Mental Health Parity and Addiction Equity Act to Medicare (listed as “not scoreable”).  
Allow the HHS Secretary to require limited and temporary coverage of drugs, vaccines, or devices authorized by the FDA for emergency use, or other items and services used to treat a pandemic disease during a public health emergency, in Medicare, Medicaid, CHIP, and for uninsured people (not scoreable).  
Allow the HHS Secretary to temporarily waive or modify the application of specific requirements of the Clinical laboratory Improvement Amendments of 1988 Act (not scoreable). 
Private Insurance
Permanently extend Enhanced Premium Tax Credits in the Affordable Care Act exchanges ($43.1B in costs over 10 years). 
Provide Medicaid-like coverage to individuals in non-expansion states, paired with financial incentives to ensure states maintain their existing expansions ($200B in government-wide costs over 10 years). 
Provide $500M in additional funding to continue to implement the No Surprises Act ($500M in costs over 10 years). 
Medicaid
Prescription drugs
Make a “technical change” to formally make the Medicaid Drug Rebate Program (MDRP) optional for territories. This proposal would also exclude territory prescription drug sales from certain pricing calculations (budget neutral). 
Note: As of January 1, 2023, U.S. territories are required to participate in MDRP. Only Puerto Rico is currently participating; territories not yet ready to participate must submit a waiver. 
Coverage
 Allow states to provide 12 months of continuous eligibility for children up to age 6 ($4.2B in net costs over 10 years). 
Allow states to provide continuous eligibility for 36-month periods for all children up to age 19 ($5.4B in net costs over 10 years).
Align income and asset calculation methodologies between the Medicare Savings Program and Part D LIS Program ($4.3B in Medicaid costs over 10 years). 
Require states to provide 12 months of post-partum coverage in Medicaid and CHIP ($707M in net savings over 10 years). 
CHIP
Allow states to extend rebates under the MDRP to separate CHIP programs starting in FY2025 ($2.3B in savings over 10 years). 
Vaccines for Children ($1.9B in net costs over 10 years)
Expand the Vaccines for Children program to children under the age of 19 enrolled in separate CHIPs 
Cover the vaccine administration fee for uninsured children  
Establish a provider reimbursement rate floor for vaccine administration fees under the Vaccines for Children program  
Prohibit enrollment fees and premiums in CHIP $816M in net costs over 10 years) 
State Grants and Demonstrations
Convert existing and any new state demonstration programs to a permanent Medicaid state plan option ($11.4B in costs over 10 years). 
Agency for Healthcare Research and Quality
Increase funding to the United States Preventive Services Task Force (USPSTF) by $6M, funding 3-5 additional reviews.  
FDA
$3.5B in user fees and increases the statutory maximum for the Export Certification Fee Program and the Tobacco User Fee Program.  
$5M increase (for a total of $55M) for medical product safety and effectiveness programs supported by 21st Century Cures, to include streamline review processes, breakthrough designation programs, and enhanced communication with medical device developers. 
$12M, separate from the drug shortage line item, is proposed to enhance FDA’s ability to address supply- and demand-driven shortages in both the food and medical products sector; $3M of which would be dedicated to regulatory oversight of drug, device, and biologic manufacturing. 
$2M towards strategic investments to boost operational efficiency for enterprise transformation. This includes efforts to streamline the planning, implementation, and governance of essential business process improvements. 
Public Health Preparedness:
$3.8B for the Administration for Strategic Preparedness and Response (ASPR), an increase of $138M above FY 2023. The funding increase will activate integrated federal capabilities in response to disasters of all kinds and build new biodefense and cybersecurity functions. Includes:
$95M to onshore production of medical countermeasures and active pharmaceutical ingredients used in essential medicines. 
$20B in mandatory funding over five years to promote biodefense against 21st century health threats.
As part of that plan, ASPR will invest $10.5B to conduct advanced research and development of vaccines, therapeutics, and diagnostics for high-priority viral families; scale up domestic manufacturing capacity for medical countermeasures; and support the public health workforce. 
$970M for the Biomedical Advanced Research and Development Authority (BARDA), which is $20M above FY 2023. BARDA supports the development and procurement of medical countermeasures that can respond to chemical, biological, radiological, and nuclear threats.  
$820M for Project BioShield, flat with FY 2023.
These funds will be used to move key medical countermeasures (tests, vaccines, and therapeutics) candidates along the development pipeline, including Phase 2 and 3 clinical trials, establishment of manufacturing processes, expansion and validation of scaled manufacturing, and procurement. 
$173M for the Public Health and Social Services Emergency Fund, an increase of $57M from FY 2023.
As part of this plan, HHS will enhance early detection and response to both health threats and supply disruptions; build domestic manufacturing capacity for supplies; facilitate a response-ready workforce; and enhance recovery. 

ADVI Angle:  

The annual release of the president’s Budget is significant as it outlines the administration’s policy priorities. With the Budget, the president is “requesting” Congress to enact proposals related to fiscal policy and federal programs, and signals how the Biden Administration may act on reforms that are within its administrative authority. Medicare proposals are particularly notable, as the administration has vast authority to enact significant reforms through CMMI and may waive the entire Medicare statute when implementing a demonstration.   

The president’s proposal to dramatically expand the IRA’s government “negotiation” of prescription drugs demonstrates the “slippery slope” concerns with the policy. As Sen. Peter Welch (D-VT) said on Dec. 29, 2022, “The slippery slope is very powerful. If [negotiation] works in Medicare, it can work in the private market. Once you have the tool, and it gets implemented, and people get to experience lower rates, and it doesn’t harm health outcomes, it’s going to be really hard to reverse that.” Today’s Republican-led House would prevent passage of government negotiation expansion, but a potential Democrat-controlled Congress and White House in the future would likely be eager to pursue a “slippery slope” expansion of the policy. 

ADVI will continue monitoring developments and the next steps. This is a delayed release. ADVI Instant content is distributed in real-time for retainer clients. Get in touch to learn more about how we can support your commercialization, market access, and policy needs.