Q&A – Will President Trump’s Executive Order Really Lower Prescription Drug Prices? – Driven By Braman Motorcars
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Today’s Entry: Hi Brian, longtime – first time. I appreciate the research you put into your work and that’s why I’m reaching out to you today. I’d love to believe that President Trump's eo will really be the change needed to bring RX prices down but I’m skeptical. Politicians always talk about this, but nothing ever changes. What’s different this time (if anything) and will it really work?
Bottom Line: It’s a fair question. Monday’s executive order entitled: Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients is the order President Trump signed that’s aimed at reducing prescription drug prices for Americans. And actually, the first difference with this policy, compared with previous attempts – is within the name of the executive order. There's a foreign policy objective that’s in play. As is noted by President Trump in the order:
- The United States has less than five percent of the world's population and yet funds around three quarters of global pharmaceutical profits. This egregious imbalance is orchestrated through a purposeful scheme in which drug manufacturers deeply discount their products to access foreign markets, and subsidize that decrease through enormously high prices in the United States.
To address that issue, and to bring down the cost of prescription drugs, the president laid out four actionable sections in the order. They are these:
- Policy: Americans should not be forced to subsidize low-cost prescription drugs and biologics in other developed countries, and face overcharges for the same products in the United States. Americans must therefore have access to the most-favored-nation price for these products.
- Addressing Foreign Nations Freeloading on American-Financed Innovation. The Secretary of Commerce and the United States Trade Representative shall take all necessary and appropriate action to ensure foreign countries are not engaged in any act, policy, or practice that may be unreasonable or discriminatory or that may impair United States national security and that has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development, including by suppressing the price of pharmaceutical products below fair market value in foreign countries.
- Enabling Direct-to-Consumer Sales to American Patients at the Most-Favored-Nation Price. The Secretary of Health and Human Services (Secretary) shall facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.
- Establishing Most-Favored-Nation Pricing. (a) Within 30 days of the date of this order, the Secretary shall communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations.
So, for starters, nothing in this order has been attempted by prior administrations. This attempt to lower prescription drug prices is different. Also, its aim is a two-pronged approach. The reason prescription drugs are cheaper in other countries is due to a series of government price controls. Under the largely socialized medical establishments of other countries – the price that they’re willing to pay is dictated to the drug companies.
The pharmaceutical companies then find themselves in the situation of having to agree to the terms or being locked out of doing business in those markets. Drug companies take the deals which don’t enable them to achieve sustainable profit margins for both profit needs and to fund ongoing R&D – making up for those deficiencies in this country. That’s what Trump is looking to end.
There is pressure being applied on drug companies and the countries that institute price controls, but that want access to these medicines in addition, and especially, to the drug companies to do business differently. Some picked up on this order and suggested it was an effort at price controls. That’s not at all what this is.
The order tasks HHS to figure out what the average price being paid is for drugs under most-favored nation status and then allow Americans access to drugs at those prices. Either through companies choosing to sell directly to Americans at those prices or enabling direct-to-consumer sales from other nations.
As for whether it will work... Time will tell but consider this from industry expert and Trump critic Mark Cuban (founder of Cost Plus Drugs). On X he posted:
Gotta be honest. The @realDonaldTrump EO on healthcare and in particular, drug pricing could save hundreds of billions. He then broke down ways it could happen which largely focused on removing the middle-man cost of PBMs or Pharmacy Benefit Managers which act as middle-men in the process adding cost to what Americans pay for drugs. He even offered up this: Put me in coach! I’m here to help. And that’s coming from someone who was campaigning for Kamala last fall.
None of this will come easily as foreign countries will be reluctant to budge and PBMs will fight for their lives...however pharmaceutical companies, generally speaking, would love to see this work. Here’s why. When drug prices are expensive who gets blamed? It’s the drug company, right? No one blames the PBMs. Drug companies could sell drugs at lower prices and still make as much as they do today (or perhaps even more) by cutting out the middle-men. That’s the added incentive on their end for this to work. More to come...