- I will be signing one of the most consequential Executive Orders in our Country's history. Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%. I will be instituting a MOST FAVORED NATION'S POLICY whereby the United States will pay the same price as the Nation that pays the lowest price anywhere in the World, the president writes on Social Truth.
Donald Trump believes that Americans have long had to pay excessive prices for medicines and describes this as “very embarrassing”, and criticizes pharmaceutical companies, which he believes blame high prices on research costs.
The presidential decree is intended to be signed today, Monday, May 12.
Binds at the lowest global price
Trump's MFN (Most Favored Nation) policy means that the US government health insurance program, primarily Medicare, may not pay more for drugs than the lowest price offered in any other country. The policy aims to harmonize drug prices globally and reduce high costs for American patients. By linking Medicare prices to the lowest international price, the ambition is to reduce prices by 30 to 80 percent, which will lead to major savings according to Trump: “The United States will save TRILLIONS OF DOLLARS.” However, an exact figure for the savings has not yet been officially specified.
A similar policy was introduced by Trump back in 2020 as part of his first-term health care reform agenda. This earlier version of the MFN policy, which was supposed to take effect on November 27, 2020, was blocked by a federal court. After Trump left office, the policy was scrapped by President Joe Biden, which instead focused on strengthening Medicare through Inflation Reduction Act (IRA) 2022. This law gives Medicare the right to negotiate prices on up to 20 expensive drugs per year.
Trump's current MFN policy differs from the IRA in that it not only allows for negotiations but directly ties prices to the lowest global price.
High prices in the USA
- For many years the World has wondered why Prescription Drugs and Pharmaceuticals in the United States States of America were SO MUCH HIGHER IN PRICE THAN THEY WERE IN ANY OTHER NATION, SOMETIMES BEING FIVE TO TEN TIMES MORE EXPENSIVE THAN THE SAME DRUG, MANUFACTURED IN THE EXACT SAME LABORATORY OR PLANT, BY THE SAME COMPANY???, Trump writes on Social Truth.
Is this true? According to the non-profit organization KFF prescription drugs in the United States are generally significantly more expensive than in other high-income countries. According to Border drug prices were generally 2,78 times higher than prices in 33 other countries in 2022. Then, between January 2022 and January 2023, prescription drug prices increased by more than 15 percent, reaching an average of $590 per drug product, according to Department of Health and Human Services. Of the 4 drugs included in the list, 200 percent of the price increases exceeded the rate of inflation.
Reactions from the pharmaceutical industry
The pharmaceutical industry, represented by lobbying organizations such as PhRMA, have previously expressed concerns about the consequences of lowering drug prices. They argue that high prices in the US are necessary to fund research and development of new drugs, and that lowering prices could reduce incentives for innovation.
- Government price setting in any form is bad for American patients, said Alex Schriver, senior vice president at PhRMA in one statement to Barron's: At a time when we are facing growing competition from China, policymakers should focus on fixing the flaws in the US system, not importing failed policies from abroad.
Julie Kim, CEO of Takeda USA, sa last week that "a most favored nation's policy is not the right way to encourage investing in US manufacturing", and that "it would be a significantly challenging situation for the whole industry, including us, to manage."
Despite the industry's warnings, the overarching question remains: Are high drug prices a necessity for innovation, or can affordable drugs and continued research progress coexist? The new policy is likely to affect the pharmaceutical industry's profits and potentially force companies to reallocate costs to other markets.