Trump's executive order to lower drug prices may not do much of that
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Trump, FDA commissioner Marty Makary and HHS secretary Robert F. Kennedy Jr. during a press conference in the White House on Monday. Photo: Andrew Harnik/Getty Images
The White House's executive order to lower drug prices is largely an exercise in applying leverage, rather than actual policymaking — and it may not amount to much, experts said.
The big picture: President Trump says his directive will dramatically reduce drug costs for U.S. consumers, and quickly. But there are few details as to how he plans to accomplish that.
- Instead, Trump appears to be adapting the playbook he's used on universities over Gaza protests: Threaten administrative actions that could be financially painful, set a deadline — in this case 30 days — and then see what happens.
- "It reminds us of how in President Trump's first term he was 'all bark, no bite' on drug pricing," Chris Meekins, an analyst at Raymond James, wrote in an investor note Monday.
- "We don't completely discount the possibility that the EO could eventually lead to some one-off deals, but the order itself is so vague that it's difficult to predict the exact impact it may have," Capital Alpha's Kim Monk wrote in a note.
State of play: The order calls for drugmakers to voluntarily cut prices or face the threat of a "most favored nation" pricing regime that would peg the cost of their medicines to what's paid in other wealthy nations, where they often sell for less.
- The timeline for the administration to actually secure lower drug prices is slippery. Trump posted on social media Sunday that American consumers would "almost immediately" see their drug prices fall by 30% to 80%.
- In reality, it would take much longer than that. The executive order gives administration officials 30 days to come up with new target drug prices and to communicate them to companies. If the companies don't agree to lower prices voluntarily, Health and Human Services will kick off a rulemaking process and other enforcement actions — all of which take considerable amounts of time.
- That includes actions such as certifying drug importations from other developed nations, increased antitrust enforcement and the potential modification or loss of drug approvals.
Yes, but: The order is almost certain to be challenged in court, just like a similar most favored nation policy for Medicare was during Trump's first term.
- "If people thought Harvard was well capitalized enough to fight back against Trump's lawsuits, wait until they see the drug industry," John Barkett, managing director at BRG and former senior policy adviser in the Biden White House.
- Trump's 2020 attempt to tie Medicare Part B drugs to the lowest price paid by other OECD countries was blocked by a federal judge after the drug industry sued.
- This time, the administration may be hampered by last year's Supreme Court decision that struck down the so-called Chevron deference and could limit executive branch agencies' ability to compel drugmakers to cut prices without action from Congress.
- Trump said during a press conference Monday that he spoke to the Republican leaders of the Senate and the House of Representatives about passing legislation to lower drug prices. But government price negotiation has historically been very unpopular with Republican lawmakers.
Between the lines: The EO also calls for pushing other countries to increase what they pay for drugs to share the costs for biomedical innovation.
- It is unclear how the U.S. intends to push other countries to do that, although the economics would suggest that pushing prices down in the U.S. could drive up prices elsewhere, Yunan Ji, assistant professor of strategy in the business of health initiative at Georgetown's McDonough School of Business.
- Most favored nation pricing generally works better for smaller economies, Ji said.
- "When a really large economy factors prices against some smaller economies, that's going to affect the whole global equilibrium," Ji said. "So it's not certain that the U.S. will actually save money. It could, but it's going to set off a whole lot of reshuffling because the European contracts will have to be renegotiated."
Reality check: The pharmaceutical industry doesn't seem excessively worried.
- "The Administration is right to use trade negotiations to force foreign governments to pay their fair share for medicines. U.S. patients should not foot the bill for global innovation," PhRMA CEO and president Stephen Ubl said in a statement.
- Still, industry leaders warned against the dangers of "importing foreign price controls."
The intrigue: Given all the uncertainty, some are speculating the order may do little more than distract from the grinding Medicaid debate in Congress.
- "At the end of the day, was this just a distraction to try to get reporters not to focus on GOP efforts to cut Medicaid? That is probably as good of an explanation as any," Raymond James' Meekins wrote.
