CNN
–
President Donald Trump pledged Monday morning to crack down on “irrational or discriminatory” foreign practices, and to ensure that Americans pay far higher costs for prescription drugs.
“From today, the US will no longer subsidize foreign healthcare. This is what we were doing,” Trump said before signing the executive order.
Drugmakers must also start offering patients the lowest prices paid for drugs in fellow countries known as “most preferred countries” prices. He directed the Department of Health and Human Services to meet its price target within 30 days.
“Big Pharma voluntarily adheres to this principle or uses the power of the federal government to ensure that we pay the same prices as other countries to accelerate these price restrictions and reductions,” Trump said, although his authority to request a certain price, especially in the private market, is unclear.
The executive order directed HHS to create rules to enforce policies, to allow more drug imports into the United States, and outlined some potential impacts if manufacturers do not make significant progress in price reductions, including altering or revoking approvals granted to drugs that are inappropriate, ineffective or inappropriate markets.
Trump’s efforts to establish “most preferred country” rules for Medicare’s particular drugs during his first term were immediately blocked by federal courts for procedural reasons before being revoked by then-President Joe Biden in 2021. The new executive order goes far beyond that measure, as it is not limited to Medicare or certain drugs.
Trump also warned that countries that do not lower price demands could face higher tariffs, but it is unclear what authority the administration will have to gain in negotiating drug prices in other countries. He specifically denounced the European Union for forcing drugmakers to offer products at low prices, adding that in many respects trade with Europe is more “troubling” than China.
“We’re going to tell countries like the European Union that the game is up,” Trump said. “If they want to be cute, they don’t need to sell their cars to America anymore.”
The directive is because the Trump administration is trying to impose tariffs on drug imports that were exempt from such taxation enacted during his first term of office. Tariffs could exacerbate shortages of certain drugs, particularly generic drugs, and ultimately raise prices, experts warn.
However, drugmakers did not appear to be rattling with the announcement, and stocks generally rose early in the afternoon. American pharmaceutical research and manufacturers, the industry’s leading trade association, praised Trump for working hard in other countries.
“The administration is entitled to use trade negotiations to make foreign governments pay a fair share of medicines. U.S. patients should not create bills for global innovation,” Phrma CEO Stephen UBL said in a statement.
However, the industry has also warned of enacting the “most preferred country” policy in the United States.
“Importing foreign prices from socialist countries would be a bad deal for American patients and workers,” UBL said. “It means there are fewer treatments and treatment options, and it means that member companies risk the hundreds of billions of people they plan to invest in America.
Some industry analysts said the order was more bark than chewing and wasn’t as intense as some people feared.
“This announcement represents headline risks, with some people scaring about the industry’s oceans changing,” wrote Evan Sagerman, a pharmaceutical analyst at BMO Capital Markets, in a note to his client. “Overall, the most preferred country pricing could be more rhetorical than actual implementable policies.”
The legality of pricing negotiations for the “most favourable nation” is “cloudy” and he wrote that substantial long-term pricing reforms would require Congressional actions.
Americans have long paid far higher prices for drugs than patients in other countries, as other governments often determine costs. According to last year’s HHS report, US prices across all drugs (both brand names and generics) were nearly 2.78 times the price of comparable countries in 2022. For branded drugs, US prices were at least 3.22 times more than they had adjusted for estimated rebates.
Executive orders that are likely to be challenged in courts aim to reduce drug costs in a variety of ways. While US presidents and lawmakers have long criticized Americans for paying drug prices higher than patients abroad, politicians have generally avoided taking widespread action in line with America’s free market philosophy. This is especially true for Republicans.
While Medicare has gained the historic power to negotiate prices for a small number of drugs each year, Trump’s executive order applies to many drug therapy and commercial market prices, as well as Medicare and Medicaid. The president rebutted the idea that the directive amounts to “price management” by telling reporters that the current system includes price management because pharmaceutical companies set prices.
If prices aren’t dropping quickly, the administration will consider various policy levers that can be used to enforce drug costs, White House officials told reporters Monday. The executive order calls on the Department of Commerce and US trade representatives to ensure that other countries do not adopt prices hikes in the US while keeping them low overseas.
The order also aims to be a benefit manager at pharmacies, the so-called intermediary between manufacturers and insurance companies that Trump has denounced in the past. The HHS calls for patients to bypass these intermediaries and establish ways to purchase medication directly from the manufacturer.
It also follows Trump’s April executive order, calling for changes to Medicare’s drug price negotiation program to make it easier for the state to import drugs from Canada.
It is unclear when and when Americans will see lower prices.
In the Truthful Social Post on Monday Morning, Trump wrote that “drug prices will be reduced by 59%.”
“Prescription drugs and pharmaceutical prices will drop by 30% to 80% almost immediately. They will be equal and will rise all over the world to bring equity to America over the years! I will establish the most favorable national policy where the US will pay the same price as the lowest prices in the world.”
This story and headings have been updated with additional developments.