In a letter to CEOs at 17 large pharmaceutical companies, President Trump asked them to lower their prices for Medicaid drugs to match what their companies charge other wealthy countries. If they do not do so voluntarily by the end of September, Trump threatened to use his authority to make them do it. Even if honored, Trump’s request is not likely to lower drug prices for anyone in the US, including people with Medicaid, who already pay low drug prices.
To be clear, Congress had authority to require drug companies to reduce drug prices for all government programs in the reconciliation bill that Trump signed into law on July 4. It would have saved hundreds of billions of dollars. But, Trump did not ask Republicans in Congress to use this authority. But, it’s not evident that Trump has the authority to make drug companies do anything to lower drug prices without Congressional action.
This letter to Pharma CEOs suggests that President Trump is willing to let pharmaceutical companies charge Americans high drug prices. He appears no longer to want all Americans to enjoy the same low prescription drug prices that people in other wealthy countries enjoy. His request to Pharma CEOs applies only to drugs on the market that Medicaid patients take. He added that everyone should benefit from lower prices that peer countries pay for “all new drugs.”
The President uses strong language: “If you refuse to step up, we will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices.” But, what tools does he have? Why would the pharmaceutical companies blink?
The President also asked pharmaceutical companies to sell some of their biggest-selling drugs to all Americans directly (presumably without pharmacy benefit managers acting as middlemen and without insurance coverage) at the same low price they charge other wealthy nations. Trump does not specify how many or what types of drugs. He then says that the cost should be the same as what these companies charge “third-party payers,” presumably Pharmacy Benefit Managers. But, it’s not at all clear that PBMs get the same low prices as other wealthy nations.
It’s hard to believe Trump’s letter to Pharma CEOs will bring down Medicaid drug costs. Trump’s May executive order calling on pharmaceutical companies to reduce the prices of their drugs failed to reduce drug prices, which are only going up. Even President Trump called their response to his executive order inadequate. His new request comes at the same time that he is imposing 15 percent tariffs on the EU, which will eat into the profits of many pharmaceutical companies and lead them to raise drug prices further.
Here’s more from Just Care:
- New EU tariffs on prescription products could drive up drug costs further
- Online pharmacies can save you money
- Medicare Part D drug coverage
- Case study: Costco saves one couple hundreds of dollars over Medicare Part D
- 2025: Planning for health care costs in retirement
