Trump's Executive Order on Drug Prices Falls Short of Expectations

President Trump signed an executive order on Monday, urging drugmakers to voluntarily reduce prices of key medicines in the United States. However, the order lacks clear legal authority to mandate lower prices, and experts have expressed skepticism about its efficacy. The move was seen as a win for the pharmaceutical industry, which had been bracing for a policy that would have been more damaging to its interests.

The executive order comes as Congress considers proposals to cut billions from Medicaid and the Obamacare marketplaces, which could lead to 8.6 million Americans losing health insurance. Despite Trump's long-standing complaints about the high cost of medicines in the US, the order does not propose more substantial measures to address the issue. Pharmaceutical stocks rose on the news, with investors relieved that Trump did not propose more far-reaching changes.

Key Takeaways:

• The executive order does not provide clear legal authority to mandate lower prices, leaving it vulnerable to legal challenges.
• The order asks federal agencies to investigate why European countries get lower prices for prescription drugs, but has limited leverage to drive up prices in Europe.
• The administration has one month to set voluntary "price targets" for certain medicines, such as GLP-1s, a class of popular drugs.
• The order does not propose more substantive measures to address high drug prices, such as working with Congress on legislation or writing regulations to change how government health programs pay for some drugs.
• The pharmaceutical industry, including Merck and Pfizer, saw a rebound in stock prices after the announcement, with Merck's stock rising by 6 percent and Pfizer's closing up by nearly 4 percent.
• The order has sparked skepticism from experts, who warn that higher prices in Europe would not necessarily lead to lower prices in the US.
• Senator Josh Hawley and Senator Peter Welch have introduced a bill to limit drug prices in the US to an average of the prices paid by a group of peer countries.

Statistics:

• Pharmaceuticals stocks rose by 4 percent on Monday, with Merck's stock up 6 percent and Pfizer's closing up by nearly 4 percent.
• Brand-name drug prices in the US are three times as high, on average, as those in peer nations.
• The Trump administration has limited leverage to drive up prices in Europe, where drugmakers are already locked into contracts with governments.
• 8.6 million Americans could lose health insurance as Congress considers proposals to cut billions from Medicaid and the Obamacare marketplaces.

Sources:

• "Trump signs executive order to lower U.S. drug prices" by The New York Times
• "PhRMA" lobbying group statement
• Senator Josh Hawley's and Senator Peter Welch's bill to limit drug prices in the US
• Ameet Sarpatwari's study on pharmaceutical policy at Harvard Medical School
• Stacie Dusetzina's study on drug pricing at Vanderbilt University
• TD Cowen analysts' note to investors
• Jefferies analysts' note to investors
• Elise Amendola/Associated Press