Trump’s strategy to control drug prices restores his first term’s “most popular country” program
President Trump’s latest strategy for premium drug prices is designed to link the prices of prescription drugs in the United States to the prices paid for the same products in other countries, a so-called “favorite country” policy that was previously proposed but never took effect.
Pharmaceutical companies are already facing price negotiations for selected products covered by Medicare and Medicaid, which are covered by the Department of Health and Human Services. But the plan was created by regulations, the Lower Inflation Act. Like many Trump’s policies, his most popular drug price plan comes through executive orders.
“The principle is simple,” Trump said in a press conference on Monday. “No matter how much the drug price is paid in other developed countries, this is what Americans are going to pay.”
Trump said the policy change is because the high drug prices in the United States subsidize low drug prices in foreign markets, and this imbalance is equivalent to other countries getting “free rides” from US innovation. Trump defended them in turn despite his critical attitude towards pharmaceutical companies during the press conference. Other countries “unfairly shift the burden to American patients by blocking their products, unless they accept bottom-line pricing and the low price of the products.” Trump specifically called on EU countries to engage in such alleged practices. Trump advised that he could use trade policies, such as preventing European countries from selling cars in the United States, to defend pharmaceutical companies from these practices.
Details about the prices of drugs in a particular most popular country are coming, but similar to the drug price negotiation plan, HHS will lead the way. Without identifying any particular product, Trump claims that some drugs will be “immediately lowered” by 50% or even 90%. Trump also said he plans to cut “middleman,” a term commonly used to refer to pharmaceutical welfare managers whose roles include negotiating drug prices on behalf of health plans. Without providing specific details, Trump said his administration will cut middlemen and promote direct drug sales to the American people.
Trump first tried to implement the most popular drug pricing during his first presidency. An executive order in 2020 proposes linking drug prices in Medicare Part B with drug prices in other countries. The plan proposes seven years to test the most popular drug pricing for 50 drugs spent on Medicare Part B. However, the proposed CMS rules for implementing the plan are trapped in legal challenges that prevent it from taking effect. The Biden administration then canceled the proposed rules.
Under the new executive order, HHS Secretary Robert F. Kennedy Jr. will promote direct-to-consumer buying programs to sell their drugs at their most valuable value. The Trump order also calls for HHS secretary to work with other agency officials to propose the most popular pharmaceutical companies’ target price targets, bringing drug prices to aligned with fairly developed countries. These prices will be determined within the next 30 days.
If the company does not meet the price proposed by HHS, the order calls on the HHS secretary to impose the most popular national pricing through the agency’s rule-making process. The next step under the order will be the FDA taking steps to import prescription drugs from developed countries with lower drug prices. Under the order, the exemption to allow imports is permitted. Trump said at a press conference that the imports will apply to safe and legal drugs. He added that imports will be pressured to lower drug prices.
The biopharmaceutical industry trade group PHRMA has a different view on the Trump order. In a statement released Monday, Stephen UBL, president and CEO of PHRMA, attributed the high cost of U.S. drug prices to foreign countries “not paying their fair share.” He also fixed the higher drug prices to the middlemen, responding to the group’s previous comments about PBM. But even though UBL praised two trade negotiations to force other countries to pay more and PBM reforms, he is closely linked to the price of U.S. medicines with foreign prices.
“Importing foreign prices from socialist countries will be a bad thing for American patients and workers,” UBL said. “This will mean reducing treatments and treatments and will harm the tens of billions of dollars our member companies plan to invest in the U.S. — threatening jobs, harming our economy and making us more dependent on China for innovative drugs.”
Leerink Partners analyst Michael Cherny said in a note sent to investors that Trump’s comments about the middleman raised questions about the role of PBM. Whether direct-to-consumer sales drives consumers to buy prescription drugs outside of traditional insurance plans remains an open question. New executive orders may be a headwind for PBM, but overall branded drugs drive a small basket of total profits. Cherney said that dealings that are more direct to consumers will mean more to insurers than to where the prescription is. Leerink believes that CVS’ retail pharmacies will remain the largest and most important drug measures entity.
Analysts for William Blair see the order as a way to eliminate U.S. discounts and non-transparent pricing, rather than lowering U.S. drug prices, which the company said could be a way to get other developed countries to increase their prices and drug spending. But even this way, the company has outstanding questions: whether the company can raise prices of approved drugs in developed countries with pre-priced prices, and whether it can achieve drug import threats in other countries with lower list prices. William Blair also expects any legal challenge to implement the most popular drug pricing.
Photo: Andrew Harnik, Getty Images
