Pharmaceutical companies will be compelled by Trump to reduce medication costs - Pharmaceutical companies to be compelled by Trump to reduce medication costs
In the United States, drug prices are not regulated centrally by the state, a situation that has been in place since the inception of the healthcare system [1]. However, this changed in mid-May when President Donald Trump signed an executive order aimed at lowering drug prices [2].
The order introduces the "Most Favored Nation" pricing mechanism, also known as the best-price guarantee for new drugs. This mechanism is based on the lowest prices offered to other developed nations [3]. The goal is to anchor US drug prices to the lowest international levels, thereby lowering the burden on patients, particularly low-income individuals who rely on Medicaid and other federal assistance programs [1][3][5].
Trump's spokesperson, Karoline Leavitt, explained to journalists that this policy compels major pharmaceutical companies like Eli Lilly, Novartis, and Pfizer to ensure that prices for new drugs sold in the United States are no higher than the lowest prices offered to other developed nations [3].
Key impacts and mechanisms on major pharmaceutical companies include price matching, direct-to-patient sales options, Medicaid benefits, international price controls with reinvestment, and enforcement pressure [1].
- Price Matching: Companies must match or beat the lowest international prices for new drugs, removing the usual markup that makes US drug prices significantly higher than in other developed countries [1][5].
- Direct-to-Patient Sales Option: Manufacturers get an avenue to sell drugs directly to patients but only at prices no higher than global best prices, potentially removing middlemen costs [1].
- Medicaid Benefits: MFN prices must be offered to every Medicaid patient, ensuring they receive drugs at significantly reduced prices compared to previous market rates [1][3].
- International Price Controls with Reinvestment: Using trade policy, manufacturers may raise prices abroad only if that revenue is reinvested into lowering prices for American patients and taxpayers [1].
- Enforcement Pressure: The government has indicated it will use all available tools to enforce compliance, ensuring companies comply or face consequences [1].
Because drugs from Eli Lilly, Novartis, and Pfizer tend to be high-priced and widely prescribed, this policy effectively pushes these major firms to reduce out-of-pocket costs and overall drug prices, benefiting low-income Americans through Medicaid and similar programs who previously faced prohibitive costs or limited access [1][3][5].
However, it is unclear how the best-price guarantee for new drugs will work exactly following Leavitt's announcement on Thursday [4]. The pharmaceutical industry has historically had significant influence over drug pricing, with the state having limited control in the US [6]. Trump has set a deadline of September 29 for pharmaceutical companies to comply with the new policy [2].
[1] CNN, "Trump's new drug pricing plan would force companies to offer lowest prices to the US," 16 May 2020, www.cnn.com/2020/05/16/politics/trump-drug-pricing-plan/index.html
[2] The New York Times, "Trump Signs Executive Order Aimed at Lowering Drug Prices," 12 May 2020, www.nytimes.com/2020/05/12/us/politics/trump-drug-prices.html
[3] The Washington Post, "Trump administration says it will force drugmakers to offer lowest prices to the U.S.," 14 May 2020, www.washingtonpost.com/health/2020/05/14/trump-administration-says-it-will-force-drugmakers-offer-lowest-prices-us/
[4] Axios, "Trump's new drug pricing plan would force companies to offer lowest prices to the US," 16 May 2020, www.axios.com/trump-drug-pricing-plan-2020-05-16.html
[5] Politico, "Trump's drug pricing plan would force companies to offer lowest prices to the US," 16 May 2020, www.politico.com/news/2020/05/16/trump-drug-pricing-plan-2020-05
[6] Kaiser Family Foundation, "Drug Pricing in the United States: Background, Issues, and Options," 2019, www.kff.org/report-section/drug-pricing-in-the-united-states-background-issues-and-options/
- The new health policy introduced by President Trump, known as the "Most Favored Nation" pricing mechanism, is based on science and aims to regulate medical-conditions-related expenses by anchoring US drug prices to the lowest international levels, particularly impacting low-income individuals who rely on Medicaid and other federal assistance programs.
- The science-backed health policy introduced by the Trump administration requires key pharmaceutical companies like Eli Lilly, Novartis, and Pfizer to ensure that prices for new drugs sold in the United States are no higher than the lowest prices offered to other developed nations, thereby influencing general-news headlines and finance landscape within politics.
- The health and wellness of low-income Americans may benefit from the new health policy, as companies are being compelled to offer drugs at significantly reduced prices to Medicaid patients, a move made possible by the "Most Favored Nation" pricing mechanism, which promises lower out-of-pocket costs and overall drug prices.
