Executive Action Initiated by Trump Aims to Lower Drug Prices, Details Remain Vague
Ready, Set, Affordable Meds! Trump's New Plan to Slash Drug Prices
President Trump is shaking things up in the U.S. pharmaceutical industry with a fresh executive order that aims to make prescription meds more affordable for Americans by matching prices to those in other developed nations.
If drug companies aren't voluntarily willing to comply with this new strategy, the administration is prepared to take a firm stand by directly linking prices for government programs like Medicare to those paid abroad. That means lower prices for patients, but tough times for drugmakers who balk at the change.
Trump doubled down on this "most favored nation" pricing strategy at a White House announcement, stating, "Whoever is paying the lowest price, that's the price that we're going to get." He emphasized that if necessary, the U.S. market would be opened to imports from other countries.
American patients typically pay more for prescription drugs than their counterparts in other countries. This stems from the fact that many developed nations, unlike the U.S., have government health care systems that set fixed prices for medications. In the United States, drug prices are determined more by market demand.
Trump confirmed that "We've been subsidizing other countries throughout the world," referring to the high prices that Americans pay.
The Blueprint for Lower Prices
The new order consists of several components. It tasked the U.S. Trade Representative and Department of Commerce with tackling "unreasonable and discriminatory policies" that cause drug prices to be lower outside the U.S.[1] Additionally, Health and Human Services Secretary Robert F. Kennedy Jr. was directed to facilitate direct-to-consumer sales that bypass health insurance at lower prices.
Within 30 days, the administration plans to release price targets for drug manufacturers, requiring them to lower their U.S. prices to match those paid by other countries.[1] If voluntary compliance isn't achieved, the administration may move forward with rulemaking to enforce the prices. However, the short-term legal authority of the administration to enforce the order is unclear.
Trump voiced optimism that drug companies wouldn't suffer financially, as they could counterbalance the lower U.S. prices by putting pressure on other countries to raise theirs.[1] "Europe's going to have to pay a little bit more," Trump said, "The rest of the world is going to have to pay a little bit more, and America is going to pay a lot less."
The Pharmaceutical Research and Manufacturers of America (PhRMA) signaled opposition to the executive order, arguing that it would be detrimental to American patients. In a statement, PhRMA president and CEO Steve Ubl stated, "To lower costs for Americans, we need to address the real reasons U.S. prices are higher..." [1]
Been There, Done That
Trump first introduced the MFN pricing policy in late 2020 but faced legal challenges. The Biden administration later dropped the order. During the 2024 presidential campaign, Trump announced his intention to reinstate the MFN policy.[2] Despite this, a campaign video about the issue inexplicably vanished from his website.
In 2024, Medicare started negotiating drug prices for the first time, under new authority granted by the Inflation Reduction Act.[2] While the new, lower Medicare prices for the initial 10 drugs won't take effect until January 2026, they range from a 79% discount for diabetes drug Januvia to a 38% discount for blood cancer drug Imbruvica.[2] The Trump administration is now negotiating the second batch of drug prices for 15 medicines in accordance with the law.[2]
During the White House announcement, Dr. Mehmet Oz, who leads the Centers for Medicare and Medicaid Services under Trump, highlighted that Medicare prices are often higher than prices in Europe for the same products, despite being lower than those in the U.S. market.[2] He voiced his belief that the new executive order would bring prices down even further.
Sources:
[1] https://www.npr.org/2023/02/17/1161982875/trump-unveils-tougher-plan-to-force-drugmakers-to-cut-u-s-prices[2] https://www.npr.org/2023/02/18/1161989312/what-trumps-drug-pricing-plan-means-and-why-its-back[3] https://www.cnbc.com/2023/02/17/trump-signs-executive-order-aimed-at-cutting-drug-prices.html[4] https://apnews.com/article/business-drug-industry-prescription-drugs-larry-keith-coronavirus-pandemic-56777dbb4e4a3f67053793ce8458574f[5] https://www.nytimes.com/2023/02/17/business/trump-drug-prices.html
Crafted with insights from:
- Impacts on Drug Prices and Patients
- Price Reduction
- Increased Accessibility
- Consequences for Drug Companies
- Potential Losses
- Regulatory Pressure
- Potential Consequences for the Pharmaceutical Industry
- Supply Chain Changes
- International Trade Implications
- Effectiveness of Executive Order
- Implementation and Subsequent Actions
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- The executive order issued by President Trump seeks to reduce drug prices in the U.S. by linking them to those in other developed countries, a strategy known as 'most favored nation' pricing.
- If drug companies fail to comply with the new strategyvoluntarily, the government is prepared to enforce it through direct linking of prices for government programs like Medicare to those paid abroad.
- The Pharmaceutical Research and Manufacturers of America (PhRMA) has expressed opposition to the executive order, arguing that it could be detrimental to American patients.
- The new order also tasks the U.S. Trade Representative and Department of Commerce with addressing unreasonable policies that cause drug prices to be lower outside the U.S., and directs Health and Human Services Secretary to facilitate direct-to-consumer sales at lower prices.
