The U.S. faces significantly higher prescription drug costs compared to other developed nations due to regulatory issues, market dynamics, and lobbying efforts. Former President Donald Trump previously attempted to address this through an Executive Order aimed at encouraging pharmaceutical companies to voluntarily reduce their prices.
The Executive Order directed the Department of Health and Human Services to negotiate drug price reductions with pharmaceutical companies within a month. Failure to achieve “significant progress” could lead to regulatory actions against drugmakers or the importation of cheaper drugs from other countries.
Trump, at a press conference, hailed the order as potentially groundbreaking.
Trump stated the order would significantly reduce prescription drug costs and bring fairness to the American market, asserting that Americans pay substantially more for prescription drugs than their counterparts in other nations. He attributed the disparity to other countries benefiting from artificially low prices at the expense of the U.S., rather than blaming drug companies directly.
A previous attempt by Trump’s administration to lower drug prices for those administered in doctor’s offices was blocked by a court order.
Lobbying groups representing drug manufacturers have voiced criticism of the Executive Order, while experts suggest that its effectiveness will depend on the specifics of its implementation, which remain largely undefined.
Here’s a breakdown of the order and its potential effects on U.S. drug prices.
Could the Executive Order actually lower drug prices?
Experts remain uncertain about the Executive Order’s ability to lower drug costs in the U.S.
Robin Feldman, a professor at the University of California Law San Francisco specializing in drug markets, believes it “has the potential,” but the key lies in the implementation details.
Lawton Robert Burns, a professor at the Wharton School of the University of Pennsylvania, suggests the order might exert enough pressure on manufacturers to curb drug price increases.
However, Burns doubts companies will lower prices unless generic versions become available, which is distant for many specialty drugs.
Burns emphasizes the uncertainty surrounding the order’s impact, but suggests that even just slowing the rate of price increases would be a substantial achievement.
Trump stated the order’s goal is to “equalize” drug prices with those in Europe.
Burns, however, considers aligning U.S. drug prices with or below those of other countries a challenging task.
How has the drug industry responded?
John F. Crowley, the president and CEO of Biotechnology Innovation Organization, an industry trade group, described the Executive Order as a “deeply flawed proposal” that would harm small- and mid-sized biotech companies.
Crowley argued that importing “socialized medicine” would not benefit Americans’ health but would empower adversaries like China and undermine U.S. economic and national security. He further warned that the policy would stifle innovation and investment in U.S. biotech firms.
Stephen J. Ubl, president and CEO of PhRMA, another industry trade group, attributed higher U.S. prices to foreign countries not paying their fair share and middlemen inflating costs for American patients.
Ubl cautioned that importing foreign prices from “socialist countries” would be detrimental to American patients and workers.
Which drugs might be affected?
Feldman and Burns suggest the Executive Order could affect public insurance programs like Medicare and Medicaid. While it’s unlikely to directly impact drugs covered by private insurance, experts believe changes in public insurance pricing could eventually influence the private market.
Due to unclear implementation details, determining which specific drugs will be most affected is difficult. However, Feldman suggests that GLP-1 weight-loss drugs could be impacted, given their higher prices in the U.S. compared to other nations, particularly in Europe.
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