On Monday, President Trump signed an executive order asking drug producers to voluntarily lower prices for major US drugs.
However, the order does not cite any obvious legal authority that requires a lower price. The order said that if drugs do not comply, the administration will consider taking regulatory measures from other countries in the future or importing the drug from other countries.
It was like a victory for the pharmaceutical industry, supporting policies that would damage its profits much more.
On Sunday evening, Trump said in the Truth Social Post that he would link our drug prices to people in fellow countries under the “most favourable country” pricing model. His executive order on Monday will not do that. Pharmaceutical stocks rose in the news on Monday morning.
Trump's executive order comes hours after House Republicans cut around $700 billion from the Medicaid and Obamacare markets and provided vast healthcare policy changes that would make an estimated 8.6 million Americans uninsured. Congress refused to include provisions to directly limit drug prices in its packages.
The executive order also urged federal agencies to investigate why European countries get lower prices and to ask for more payments. The Trump administration has limited leverage to raise prices in Europe.
“I'm not knocking on a pharmaceutical company,” Trump said just before signing the order Monday. “I'm really knocking the country more than the pharmaceutical company.”
Trump chose not to propose measures that could have more teeth, such as calling for the administration to work with Congress to change the way government health programs pay for some drugs.
Many Republican lawmakers are opposed to drug price restrictions, but Trump is opposed to the current system. With this system, pharmaceutical companies charge the US significantly higher prices than elsewhere in the world.
At an event on Monday, Trump turned his anger at the European government for negotiating the low prices.
“We're going to support pharmaceutical companies in other countries,” he said.
Trump threatened to use trade policies to encourage European countries to pay more for prescription drugs. However, pharmaceutical companies are already locked up in government contracts, and if they try to charge more for new drugs, European countries are totally balancing them.
In his first term, Trump sought to enact a more substantial policy to lower drug prices for Medicare, a health insurance program that covers 68 million Americans over the age of 65 or with disabilities. The plan would have only applied to 50 drugs administered in clinics and hospitals paid by Medicare. The federal court blocked it and found the administration skipped action in the policy making process.
Some experts said the policy could have passed legal convened if pursued by the book, while others said Congress was needed to pass the law.
Monday's executive order calls for far more drug changes in its face, not just patients insured by Medicare. However, there is no clear mechanism for enacting price reductions.
The order said if the initial action fails to make sufficient progress in lowering US drug prices, the Trump administration may “suggest a rule plan to impose pricing in the most preferred countries.”
Democrats have introduced numerous bills to bring American prices more along with the prices of their fellow foreigners, and the laws passed during the Biden administration allow Medicare to negotiate directly on the prices of limited drugs used in the program. Generally, policies that lower drug prices are extremely popular among both Republican and Democrat voters.
The pharmaceutical industry is also brave in punishing tariffs on imported drugs Trump has vowed to impose immediately. Trump recently said he was planning an announcement on drug tariffs this month. Tariffs are likely to lower drug makers' profits, even if they could raise some drug prices in the US and pass on some of the additional costs.
Drug investors have been released that Trump did not propose more substantial policies than he threatened. After withdrawing pre-market deals, the drug rebounded when details of Trump's move were revealed. Merck's shares rose 5% on Monday morning. Pfizer roses increased by 3%. The index of small biotech stocks has increased by 3%.
“Best than feared,” a Wall Street Bank analyst wrote in a note to investors.
In a statement Monday, the drugmaker's lobbying group said it shouldn't look at how much the US will pay drugs to other countries.
However, Phrma, a leading industry group, praised Trump for using trade negotiations to threaten foreign governments to “pay a fair share of the drug.”
“U.S. patients should not create bills for global innovation,” said Stephen J. UBL, Phrma's CEO.
The US brand drug prices are three times higher than Piernation's, on average three times higher.
That's despite the fact that much of the research leading to new drugs is conducted in American labs and hospitals.
Drugmakers generate a significant portion of the global profits from US sales and usually design business strategies in the US market.
Pharmaceutical companies claim that higher prices in the US have additional benefits. Industry-funded analysis found that US patients were faster and with fewer insurance restrictions than patients in other countries.
In other wealthy countries, governments generally pay prescription drugs for the whole population and negotiate substantial discounts from drugmakers. Many other countries make their own comparisons with peer countries' prices to help them decide what they will be willing to pay.
However, in the US, governments have little formal involvement in setting drug prices outside of the Biden-era program on a limited number of drugs in Medicare. The Trump administration is currently overseeing the program.
This month, Missouri Republican Sen. Josh Hawley and Vermont Democrat Peter Welch introduced a bill that would limit the average price paid by groups of peer countries.
In an interview, Welch said he agreed with Trump that Americans are overpaying drugs and that international comparisons will help them set a fairer price. However, he believes that Congress needs to tackle the issues to ensure durable policies.
“It's really important to do this legislatively,” he said.
