Trump’s Executive Order Aims to Lower Drug Prices, Sparking Industry Debate

Former President Donald Trump signed an executive order aimed at lowering prescription drug prices in the United States, targeting what he termed "profiteering and price gouging from Big Pharma." The order, dubbed "most favored nations drug pricing," seeks to align drug prices in the U.S. with the lowest prices paid in other developed countries.

Trump asserted that this initiative would result in immediate price reductions for some medications, potentially ranging from 50% to 90%. He criticized the existing system, claiming that the U.S. was effectively subsidizing healthcare in other nations. He highlighted that while the U.S. accounts for only 4% of the global population, pharmaceutical companies derive over two-thirds of their profits from the American market.

"Starting today, the United States will no longer subsidize the healthcare of foreign countries," Trump stated. "We’re subsidizing others’ healthcare, the countries where they paid a small fraction of what for the same drug that what we pay many, many times more for and will no longer tolerate profiteering and price gouging from Big Pharma."

He also addressed the pharmaceutical industry’s argument that high prices are necessary to fund research and development, stating, "For years, pharmaceutical and drug companies have said that research and development costs were what they are, and for no reason whatsoever, they had to be borne by America alone. Not anymore, they don’t."

The executive order directs the U.S. Trade Representative and Secretary of Commerce to take action against foreign countries that engage in practices that unfairly undercut market prices and drive price hikes in the U.S. It also instructs the administration to communicate price targets to pharmaceutical manufacturers, ensuring that America, as the largest purchaser and funder of prescription drugs, receives the best possible deals.

Furthermore, the order tasks the Secretary of Health and Human Services with establishing a mechanism that allows American patients to purchase drugs directly from manufacturers at the "most-favored-nation" price, bypassing intermediaries. If drug manufacturers fail to offer these prices, the order directs the Secretary to propose rules imposing most-favored-nation pricing and to take other measures to significantly reduce drug costs and end anti-competitive practices.

Health and Human Services Secretary Robert F. Kennedy Jr. expressed strong support for the initiative, stating that he never thought such a change would occur. He shared an anecdote about his Democratic, Bernie Sanders-supporting children being moved to tears by the news, believing it was an impossible feat.

However, the Pharmaceutical Research and Manufacturers of America (PhRMA), a trade group representing the pharmaceutical industry, has voiced strong opposition to the executive order. PhRMA president Stephen Ubl described the "Foreign First Pricing scheme" as a "bad deal for American patients."

Ubl argued that importing foreign prices would cut billions of dollars from Medicare without guaranteeing improved patient access to medicines. He warned that it would jeopardize investments in American innovation, making the U.S. more reliant on China for innovative medicines.

PhRMA contends that addressing the real reasons behind higher drug prices in the U.S. is crucial. Ubl pointed out that the U.S. is the only country where Pharmacy Benefit Managers (PBMs), insurers, and hospitals take 50% of every dollar spent on medicines. He highlighted hospital markups in the 340B program and the rebates and fees paid to middlemen as factors that often exceed the total cost of medicines overseas. PhRMA suggests that giving more of this money to patients would lower their costs and reduce the gap with European prices.

The executive order and the ensuing debate highlight the complexities surrounding drug pricing in the United States. While proponents argue that the order will lower costs for American consumers and address unfair pricing practices, critics raise concerns about its potential impact on pharmaceutical innovation and the availability of medicines. The long-term effects of the order remain to be seen, but it has undoubtedly ignited a significant debate about the future of drug pricing in the U.S.