President Trump signed an executive order on Monday requiring drugmakers to voluntarily lower the prices of key U.S. drugs.
But the order does not cite obvious legal powers to authorize lower prices. The order says that if drugmakers do not comply, the government will consider future regulatory actions or importing drugs from other countries.
It's a win for the pharmaceutical industry, and the policy is more destructive to one's interests.
Last week, Mr. Trump hyped up the upcoming announcement that the news was “as big as possible.” On Sunday night, he raised the order in the “Truth Social Position” and wrote that he would connect our drug prices to people in his peer country under the “favorite country” pricing model, a policy that failed in his first term in a small percentage of drugs in Medicare.
His executive order did not do so on Monday. The news showed an increase in pharmaceutical stocks on Monday.
Mr. Trump's executive order comes hours after House Republicans provide a wide range of health care policy changes that would cut about $700 billion from Medicaid and Obamacare markets over a decade and result in an estimated 8.6 million Americans getting insurance. Congress refused to include any provision to directly limit the price of drugs in the plan.
The executive order also calls on federal agencies to investigate why European countries are cheaper and push them to pay more. The Trump administration has limited leverage and cannot raise prices in Europe.
“I'm not knocking on drugs companies,” Mr. Trump said Monday before signing the order. “I'm really more than pharmaceutical companies.”
By executing the order, Mr. Trump chose not to propose measures that might have more teeth, such as calling on his administration to work with Congress to legislate or develop regulations to change how government health plans pay for certain drugs.
“The executive order reads more like an aspiring statement than a serious attempt to initiate policy changes,” said Harvard Medical School's pharmaceutical policy research.
Many Republican lawmakers oppose control of drug prices, but Mr. Trump has long opposed the current system where pharmaceutical companies charge significantly higher prices to the United States than the rest of the world.
“We will help pharmaceutical companies in other countries,” he said at an event on Monday.
Mr. Trump threatens to use trade policies to push European countries to pay more for prescription drugs. But drug companies have been locked in contracts with the government, and European countries may cover them up if they try to charge more for new drugs. Drug pricing experts warn that rising prices in Europe may not necessarily lead to lower prices in the United States.
During his first term, Mr. Trump tried to develop more substantial policies to reduce the prices of some of the drugs paid by Medicare, a health insurance plan for Americans over 65 or with disabilities. The program only applies to 50 drugs administered in clinics and hospitals. The federal court blocked it, ruling that the government skipped the steps in the decision-making process.
It is unclear whether the policy could be called by law if the book pursues. Some experts said in an interview that Mr. Trump will need a law to be passed by Congress.
The White House mocked the news as an earthquake. Facing Monday’s executive order, wider changes than Mr. Trump proposed during his first term, affecting more drugs and all Americans, not just some Medicare patients. But this lacks a clear mechanism for implementing price reductions.
“It almost sounds like: We're just asking for lower prices and knowing the situation,” said Stacie Dusetzina, a health policy professor at Vanderbilt University. Unless it takes more substantial action, she said, “I don't expect a drop in the near future.”
The order says that if the initial action did not make enough progress in reducing drug prices in the United States, the Trump administration could “propose a plan to create rules to implement the most popular national pricing.”
Democrats have proposed a number of bills to make U.S. prices more in line with foreign counterparts, and legislation passed during the Biden administration allows Medicare to negotiate directly on the prices of limited drugs used in the program. Overall, policies to lower drug prices are very popular among Republican and Democratic voters.
The pharmaceutical industry has also been punishing tariffs on imported drugs, and Mr. Trump vowed to impose them as soon as possible. Tariffs are likely to raise prices for some drug products in the United States and reduce profits for drugmakers, even if they can pass some additional costs.
Pharmaceutical investors breathed a sigh of relief, and Mr. Trump did not propose a more substantial policy he threatened. After the pre-selling deal, drug stocks rebounded when details of Mr. Trump's move became clear. Merck shares rose 6% on Monday. Pfizer closed nearly 4%. The smaller biotech inventory index rose 4%.
“Better than worrying,” Wall Street Bank analyst Jefferies wrote in a note to investors. “Baring more than biting,” said TD Cowen analyst.
In a statement Monday, lobbying groups to drugmakers said the U.S. should not seek the fees paid for drugs from other countries.
But the major industry group PHRMA also praised Mr. Trump for threatening to use trade negotiations to push foreign governments to “pay fair share of drugs.”
“U.S. patients should not pay bills for global innovation,” said Stephen J. Ubl, CEO of PHRMA.
The average price of branded drugs in the United States is three times that of the drug in the same country.
Drugmakers often design their business strategies around the huge profits they bring from the United States.
Pharmaceuticals believe the higher the U.S. price: Industry-funded analysis found that patients in the U.S. get more medications faster than elsewhere and have fewer insurance restrictions.
In other wealthy countries, governments usually pay prescription drugs for the entire population, thus making substantial discounts from drugmakers. Many other countries have made their own comparisons with their peer countries to help determine what they are willing to pay.
But in the United States, the government has little formal participation in setting drug prices, except for the limited program of the Medicare drug program in the Biden-ers era. The Trump administration is now monitoring the program.
This month, Republican Senator Josh Hawley from Missouri and Democratic Senator Peter Welch, Vermont, introduced a bill that would limit the average price of drug prices in the U.S., which is the price paid by a group of peer countries.
Mr Welch said in an interview that he agreed with Mr Trump that Americans are overpaid and that international comparisons can help set fairer prices. But he believes Congress needs to address this issue to ensure lasting policy.
“It’s really important to do this in legislation,” he said.
Mr. Trump's executive order gave his administration a month to tell drug companies about voluntary “price targets” for certain drugs. A White House official said weight loss medications called GLP-1, such as Zepbough and Wegovy, may be in it.
Mr. Trump complained at a press conference on Monday that the cost of “fat shooting” in Europe is much lower than that in the United States.
In most cases, Americans can buy these drugs for $500 a month without insurance. European pharmacies usually charge several hundred dollars. Most European patients pay extra for drugs because their national health systems generally do not cover them.
