Trump Pushes Big Pharma on Controlling U.S. Prices

Following up on a previous post of mine, let's check in on the Trump administration's efforts to lower drug prices in the U.S. market. A White House fact sheet from last week explains that "Trump sent letters to leading pharmaceutical manufacturers outlining the steps they must take to bring down the prices of prescription drugs in the United States to match the lowest price offered in other developed nations (known as the most-favored-nation, or MFN, price)." The steps identified in the fact sheet were as follows:

• Calling on manufacturers to provide MFN prices to every single Medicaid patient.
• Requiring manufacturers to stipulate that they will not offer other developed nations better prices for new drugs than prices offered in the United States.
• Providing manufacturers with an avenue to cut out middlemen and sell medicines directly to patients, provided they do so at a price no higher than the best price available in developed nations.
• Using trade policy to support manufacturers in raising prices internationally provided that increased revenues abroad are reinvested directly into lowering prices for American patients and taxpayers.

According to the fact sheet, the letters also "inform manufacturers that if they 'refuse to step up,' the federal government 'will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices.'"

Now let's take a look at one of the letters. Here's how it starts:

On May 12. 2025, I signed an Executive Order - Delivering Most-Favored-Nation Prescription Drug Pricing  to American Patients - to stop global freeloading and guarantee that Americans pay the same prices enjoyed by other developed nations. Right now, brand name drug prices in the United States are up to three times higher on average than elsewhere for the identical medicines. This unacceptable burden on hardworking American families ends with my Administration.

It then calls on the drug companies "to take the following actions within the next 60 days":

• Extend Most-Favored-Nation (MFN) pricing to Medicaid: Provide your full portfolio of existing drugs at MFN rates for every single Medicaid patient.
• Guarantee MFN pricing for newly-launched drugs: Contract with the United States to guarantee Medicare, Medicaid, and commercial payers receive MFN prices on all new drugs -- both upon launch and moving forward.
• Return increased revenues abroad to American patients and taxpayers: Domestic MFN pricing will require you, and all manufacturers, to negotiate harder with foreign freeloading nations. U.S. trade policy will endeavor to support this. However, increased revenues abroad must be repatriated to lower drug prices for American patients and taxpayers through an explicit agreement with the United States.
• Provide for Direct Purchasing at MFN Pricing: Participate in Direct-to-Consumer (DTC) and/or Direct-to-Business (DTB) distribution models for high-volume, high-rebate prescription drugs so all Americans get the same low MFN prices that manufacturers already offer to third-party payers.

The link to foreign price controls is particularly important here. While it's clear that low foreign prices are not the reason for high U.S. prices (manufacturers are just charging the highest price they can in each market), the foreign price level is being used as an incentive to get manufacturers to lower their domestic prices. Foreign price levels are heavily influenced by foreign government efforts to negotiate lower prices, and the Trump administration is trying to undermine those efforts, thereby generating additional revenue for the drug companies from foreign sales. That additional revenue will then be treated as compensation to the drug companies for the lower domestic prices the administration wants them to charge. (Whether foreign governments will go along with this is one of the big open questions).

I'll close with this definitional, and perhaps narrative-driving, question: Does what the Trump administration is doing here constitute "price controls"? Maybe not in the traditional sense, but nevertheless this does represent an effort to control prices, as the administration is making it clear that it would like to see U.S. prices lowered. It's just that rather than using their purchasing power to negotiate directly with drugmakers on prices, as many governments do, it is using other forms of leverage ("deploy every tool in our arsenal") to push the drugmakers to bring domestic prices down. I'm not sure whether this effort will work, but I do think price controls is a fair characterization of what it is doing.