Yesterday, President Trump announced that he would sign an executive order lowering prescription drug prices by more than half, with the goal of ensuring Americans pay the same prices for their drugs as people in other wealthy countries. Today, he signed an executive order asking pharmaceutical companies to voluntarily lower their drug prices, a far cry from ensuring Americans are not paying more than people in western Europe for our drugs. But, his stated long-term goal remains lowering drug prices in the US.
What happened between today and yesterday? Did President Trump have a change of heart and decide that we should be paying three or four times more than people in other countries for our prescription drugs? Or, was he persuaded that he could better achieve a goal of lower drug prices if he asked Republicans in Congress to pass a law mandating lower drug prices?
President Trump might have been persuaded that an executive order mandating lower drug prices would fail. Without doubt, the prescription drug industry would have challenged a sweeping executive order in court. Last time the pharmaceutical industry challenged a Trump executive order attempting to lower drug prices in court, the industry prevailed.
Today’s executive order gives the Secretary of Health and Human Services 30 days to set goals for reducing drug prices. The Department of Commerce also has 30 days to let pharmaceutical companies know the drug price goals. The executive order calls for further federal action if the drug companies do not make real progress toward meeting the goals in the next six months.
HHS Secretary RFK Jr. will need to meet with pharmaceutical industry executives. If he is unsuccessful in his efforts, Trump directs him to enforce a “most favored nation” provision for drug prices. Were that to happen, Americans would pay no more for our drugs than people in other wealthy nations.
President Trump is not restricting lower drug prices to federal programs that pay for drugs, such as Medicare, Medicaid and the VA. He calls for all Americans to see lower drug prices. And, he wants lower prices for all drugs. Capping prescription drug costs would lower federal spending significantly.
It’s not clear whether President Trump is asking Republicans in Congress to include lower drug prices in their reconciliation bill; if he has, they have yet to hear him. They have not considered lowering drug prices in their reconciliation bill package, to date. If they do, they could save the government boatloads of money without needing to slash Medicaid spending.
According to Rand, we pay as much as 10 times more than people in other wealthy countries for our prescription medicines. Moreover, nearly 75 percent of pharmaceutical company profits come from sales of drugs in the US, even though Americans represent just five percent of the world’s population.
Here’s language from the Executive Order, if efforts to get the pharmaceutical industry to lower prices voluntarily do not succeed:
- The Secretary of Health and Human Services will establish a mechanism through which American patients can buy their drugs directly from manufacturers who sell to Americans at a “Most-Favored-Nation” price, bypassing middlemen.
- If drug manufacturers fail to offer most-favored-nation pricing, the Order directs the Secretary of Health and Human Services to: (1) propose rules that impose most-favored-nation pricing; and (2) take other aggressive measures to significantly reduce the cost of prescription drugs to the American consumer and end anticompetitive practices.
If President Trump succeeds in his quest to lower drug prices, it would be a huge blow to the pharmaceutical industry as well as to Pharmacy Benefit Managers and corporate health insurers, as well as some doctors and hospitals, all of whom benefit handsomely from high drug costs. It would also be a huge win for the president, as lowering high prescription drug costs has always been a top policy priority for Americans.
Although a Trump spokesperson says that ”The president is dead serious about lower drug prices,” it’s not at all clear that Trump will succeed in cutting drug costs. As a back-up plan, he has asked the Food and Drug Administration to allow far more drugs to be imported from abroad.
Here’s more from Just Care:
- Trump’s executive order on prescription drugs does not reduce drug prices
- Tariffs will likely drive drug prices higher and create drug shortages
- When will Medicare stop letting Part D insurers drive up drug costs?
- Prices for top Medicare drugs are up a lot
- Medicare Advantage insurers increasingly use step therapy for cancer drugs, delaying care
