Trump to Sign Executive Order Pegging US Prescription Drug Prices to International Rates

Strategic Insights -

President Donald Trump's latest attempt to bring down prescription drug prices has been met with fierce opposition from the pharmaceutical industry. In a post on Truth Social, Trump announced that he will sign an executive order on Monday, dubbing it the "Most Favored Nations" policy. This policy would make the US pay the same price for prescription drugs as the country that pays the lowest price anywhere in the world, resulting in an immediate reduction of 30-80% in drug prices. The move aims to address the disparity in drug prices between the US and other countries, where government-regulated prices are significantly lower.

Key Takeaways:

  • The "Most Favored Nations" policy, proposed by Trump, would peg US prescription drug prices to international rates, with a potential 30-80% reduction in prices.
  • The policy was previously attempted by the Trump administration in 2020, but it was blocked in court on procedural grounds and later dropped by the Biden administration.
  • Pharmaceutical companies, including Eli Lilly, Johnson & Johnson, Novartis, Merck, and Pfizer, have opposed the policy, citing concerns over government price-setting and the opaque negotiations between drugmakers and middlemen.
  • The policy taps into public frustration over the high cost of prescription drugs in the US, with some analysts predicting that it could deal a significant blow to the pharmaceutical industry.
  • Pharmaceutical companies have been investing in US manufacturing and research, but their efforts may be undermined by the policy.

Statistics:

  • 30-80% reduction in prescription drug prices, as projected by Trump.
  • $10s of billions in investments pledged by pharmaceutical giants, including Eli Lilly, Johnson & Johnson, Novartis, Merck, and Pfizer, in US manufacturing and research development.
  • 12 million people, according to a 2020 CMS pilot program, who could be affected by the "Most Favored Nations" policy.

Sources:

  • Daniel Gilbert, President Donald Trump said Sunday night that he will sign an executive order pegging the prices of U.S. prescription drugs to those of other countries with lower prices (Source: Truth Social, accessed 2023)
  • Pharmaceutical Research and Manufacturers of America, Government price setting in any form is bad for American patients (Source: statement by Alex Schriver, senior vice president at Pharmaceutical Research and Manufacturers of America)
  • Citi Research analyst, Geoff Meacham, This could create even more of a headwind than sector tariffs (Source: note to clients, accessed 2023)
  • Albert Bourla, Pfizer's CEO and head of Pharmaceutical Research and Manufacturers of America, Pharmaceutical companies argue that it's unfair to compare the list price of their drugs with the final prices that other governments pay (Source: call with financial analysts, accessed 2023)
  • Julie Kim, president of Takeda's US unit, A most favored nations policy is not the right way to encourage investing in U.S. manufacturing (Source: statement, accessed 2023)
  • November 2020, Trump administration rolled out a pilot program under CMS for drugs covered under Medicare Part B (Source: CMS press release, accessed 2023)