Summary
Congress is in recess until after Labor Day and will resume on September 2. During this period, Impact Health Policy Partners will provide a series of brief policy outlooks examining key priority areas likely to shape the health policy landscape this fall. This week, we are featuring pharmacy benefit manager (PBM) reform, Medicare Advantage, prescription drug pricing, and artificial intelligence (AI).
Pharmacy Benefit Manager Reform
While previous iterations of the One Big Beautiful Bill Act (OBBBA) included provisions to address pharmacy benefit manager (PBM) practices in Medicaid and Medicare, these were ultimately excluded from the final package. However, interest in reviving the bipartisan health care package that stalled at the end of last year is growing among Republican lawmakers, including the PBM provisions. That package featured assuring pharmacy access in Medicare, as well as delinking and transparency in Part D, commercial transparency and rebate pass-through, and prohibiting spread pricing in Medicaid. Since then, Rep. Buddy Carter (R-GA) has introduced the bipartisan PBM Reform Act, which features many of these same provisions. If bipartisan support grows for advancing a health care package, PBM reform will likely be featured, as this has been a bipartisan policy since 2023.
Medicare Advantage
Bipartisan support for addressing Medicare Advantage (MA) has also grown since the passage of the OBBBA, with the Ways and Means Health and Oversight Committees most recently convening a joint hearing to examine the program (Impact summary). Most of the policy options are targeted at upcoding and overpayments, prior authorization, and transparency. Again, if the bipartisan health care package is to come together this fall, addressing MA overpayments may be used as an offset for other policies, such as an extension of the enhanced premium tax credits,
Prescription Drug Pricing
The OBBBA featured an expansion of the Orphan Drug exclusion in the Medicare Drug Price Negotiation Program, but otherwise did not address prescription drugs. While it was speculated that Sen. Bill Cassidy (R-LA) had floated a Most-Favored-Nation (MFN) proposal to be included in the reconciliation package, it appears that there was not enough Republican support for it to move forward. Therefore, most of the action related to prescription drugs during the Trump Administration thus far has occurred outside of Congress. The Federal Trade Commission is set to convene its third listening session on anticompetitive practices that affect prescription drug affordability today, which will culminate in a report to the President with policy recommendations and President Trump continues to threaten to impose MFN pricing if manufacturers do not take steps to offer such pricing. He most recently sent letters to 17 major drug manufacturers demanding such actions take place by September 29.
Artificial Intelligence
Congress recently advanced H.R.1, which initially included a controversial 10-year moratorium that would have prevented states from enacting or enforcing their own AI regulations. However, in a striking 99-1 vote, the Senate decisively removed this moratorium, thereby preserving state autonomy over AI policymaking. The Trump administration supported the moratorium as a way to avoid a fragmented patchwork of state AI standards, favoring instead a unified federal regulatory approach. Still, the Senate’s action reflected a bipartisan consensus to uphold states’ ability to protect residents with tailored AI oversight, especially in the absence of comprehensive federal regulation. As it stands, states like Colorado, California, and Texas are leading the way with robust efforts to advance AI accountability and transparency. Against this backdrop, Congress will need to carefully navigate how it develops a federal regulatory approach, balancing the momentum of state-level initiatives with the goal of establishing coherent, nationwide standards.
The White House has doubled down on its national leadership with the release of its AI Action Plan, which sets forth over 90 policy directives across three pillars: accelerating innovation, building AI infrastructure, and leading global diplomacy (IHPP summary). While the plan focuses broadly on supercharging private sector AI growth and slashing regulatory red tape, it also includes a strong stance against burdensome state AI rules that, in the administration’s view, could undermine U.S. competitiveness. To that end, the plan calls on federal agencies to consider withholding certain funds from states that maintain what it deems onerous AI regulations. The AI Action Plan also signals a shift toward rapid, private-sector-driven deployment of AI, emphasizing speed and innovation over detailed prescriptions for safety and accountability. While the plan itself does not establish many binding rules, it is expected to drive the development of new voluntary guidelines and best practices over the coming year. As these frameworks are created, stakeholders, including those in health care, will have significant opportunities to provide input and participate in shaping public-private partnerships that will help define the next phase of federal AI policy.
Within the Department of Health and Human Services (HHS), particularly the Centers for Medicare and Medicaid Services (CMS), the push is on for AI-driven health solutions to enhance access and outcomes. Recent CMS rulemaking requests public feedback on how to integrate Software as a Service (SaaS) and AI costs into Medicare payment models, recognizing that existing reimbursement methods don’t yet capture the value of digital and AI-based tools (IHPP summary). The newly launched CMS Digital Health Tech Ecosystem initiative aims to accelerate the deployment of interoperable, patient-focused AI solutions, including conversational assistants and digital care navigators (IHPP summary). These moves are widely seen as foundational steps, laying out both voluntary government commitments and frameworks for future AI adoption in health care, even though much of the regulatory detail will be shaped by ongoing stakeholder engagement and responses to forthcoming requests for information (RFIs) and proposals (RFPs).
Regulatory Update
The Office of Management and Budget completed reviewing an interim final rule titled, “Administrative Simplification: Modifications to NCPDP Retail Pharmacy Standards.
OMB is also reviewing the following:
- Medicare:
- CY 2026 Medicare Advantage/Part D Policy. Final CY 2026 policy and technical changes to the Medicare Advantage, Medicare Prescription Drug Benefit, and Medicare Cost Plan Programs, and PACE
- Medicaid:
- Gender-Affirming Care. A proposed rule titled, “Medicaid Program; Prohibition on Federal Medicaid Funding for Sex Trait Modification Procedures Furnished to Children and Youth.”
- Immigration Status. A final rule titled, “Medicaid Eligibility Changes Under the Affordable Care Act of 2010; Giving States Freedom to Use Immigration Information to Determine State Residency for Medicaid Eligibility.” The final rule is part of the Trump administration’s efforts to increase federal oversight on states using Federal Medicaid funding for the health care of undocumented immigrants.
- State Directed Payments. A proposed rule titled, “Medicaid Managed Care-State Directed Payments.” The proposed rule appears intended to advance a presidential memorandum released on June 6, which directs HHS to “eliminate waste, fraud, and abuse in Medicaid, including by ensuring Medicaid payments rates are not higher than Medicare, to the extent permitted by applicable law.”
- Prescription Drugs:
- A notice from the Food and Drug Administration titled, “Safety Labeling Changes–Implementation of Section 505(o)(4) of the Federal Food, Drug, and Cosmetic Act; Draft Guidance for Industry; Availability.”
- Non-Opioid Analgesics. An FDA notice titled, “Development of Non-Opioid Analgesics for Chronic Pain, Draft Guidance for Industry; Availability.”
- Investigational Drugs. An FDA notice titled, “Expanded Access to Investigational Drugs for Treatment Use: Questions and Answers; Guidance for Industry; Availability.”
- Nutrition:
- Head Start. A notice from the Administration for Children and Families titled, “Publish Request for Information: Nutrition Services in Head Start Programs