Checking In On the Trump Administration's Drug Price Control Plans

Following up on two previous posts I did on this issue, let's see how the Trump administration's plan to push drug prices in the U.S. down while pushing drug prices in other countries up is going.

At the end of September, Trump announced "the first agreement with a major pharmaceutical company, Pfizer, to bring American drug prices in line with the lowest paid by other developed nations (known as the most-favored-nation, or MFN, price)." The broad outlines of the agreement were as follows.

In terms of domestic pricing, "[t]he agreement will provide every State Medicaid program in the country access to MFN drug prices on Pfizer products, resulting in many millions of dollars in savings and continuing President Trump’s historic efforts to strengthen the program for the most vulnerable." In addition, "[t]he agreement requires Pfizer to offer medicines at a deep discount off the list price when selling directly to American patients."

On the foreign side, "[t]he agreement ensures foreign nations can no longer use price controls to freeride on American innovation by guaranteeing MFN prices on all new innovative medicines Pfizer brings to market."

Then on October 10, Trump announced a second deal with a pharmaceutical company, this time AstraZeneca. At a White House press conference that day, Dr. Oz, the administrator of the Centers for Medicare & Medicaid Services, referred to "the inherent unfairness of the European model of global freeloading off our innovation." Also at the press conference, Virginia Governor Glenn Youngkin – who I think is likely to make a run for president in 2028 – said: "The most favored nation clause is a groundbreaking moment. It's a groundbreaking moment because, as you've heard, American customers have been paying 3, 4, 5 times what international customers have been paying. That is just not fair."

What will these deals with pharmaceutical companies mean in practice? For domestic prices, in the context of the Pfizer deal, a Washington Post article explained that "[d]etails on the pact are scant and terms remain confidential: of the three Pfizer drugs to be sold at discounts and announced at this week’s news conference, none are top sellers." It also noted:

Many of the cuts Pfizer is promising are aimed at the government Medicaid program, which analysts say account for less than 5 percent of the company’s U.S. revenue. And Pfizer’s agreement to list discounted drugs for direct purchase on the president’s TrumpRx website resembles an initiative already being promoted by the industry. ...

Along the same lines, John Cassidy of the New Yorker wrote that:

A closer inspection of the Pfizer agreement shows that Trump has turned out to be a paper tiger. “It’s a lot of nothing,” Craig Garthwaite, the director of the health-care program at Northwestern’s Kellogg School of Management, told me. “For most people, it will have very little effect on drug prices.” Rena Conti, an economist and expert on the biopharmaceutical industry who works at Boston University’s Questrom School of Business, issued a similar assessment: “Top line is: it’s a win for Pfizer, but not a win for American patients.” Rather than radically restructuring drug pricing and distribution, the agreement amounted to “fiddling around the edges,” she said.

...

In place of real reform, we now have the Pfizer agreement, and its headline proposal to launch TrumpRx. In a press release about the deal, Pfizer said it would offer many of its primary-care medications at prices averaging half their list prices. This sounded promising, but industry analysts quickly pointed out that about ninety per cent of Americans get their prescribed medications through insurance plans. For these people, it would still likely be cheaper to get the drugs the traditional way and pay the co-payment. Garthwaite said buying drugs through TrumpRx could conceivably benefit “a small subset of people,” principally among the population that doesn’t have any insurance coverage. But many medications would still be prohibitively expensive.

We'll have to wait and see how much this actually lowers domestic drug prices, and whether U.S. consumers notice any of it.

On the other side of the equation, how are other countries reacting to all this? Politico noted that the UK government "has drawn up proposals to increase the amount the National Health Service pays pharmaceutical firms for drugs, in a bid to steer U.S. President Donald Trump away from his threatened tariffs on the sector. ... The core element of the plan includes raising the National Institute for Health and Care Excellence (NICE) threshold by 25 percent."

And the FT reported that "Eli Lilly has raised the UK price of its popular weight-loss drug Mounjaro by as much as 170 per cent, as it tries to address complaints by Donald Trump’s administration about 'foreign freeloaders' who rely on the US to pay more for medicines," saying the price increase would "address pricing inconsistencies compared with other developed countries, including in Europe." At the same time, the FT noted that Eli Lilly said "it was not raising the price paid by the NHS, to ensure continued supply of the drug."

Down in Australia, a few weeks ago Trade Minister Don Farrell had this exchange on the subject:

Journalist: Trump has demand[ed] US drug companies guarantee US prices for new drugs are no more expensive than in other countries saying it will require them to negotiate harder with foreign freeloading nations. Do you have any concern that that will impact drug prices in Australia?

Minister for Trade: Look, I don't believe that that statement will have an impact on Australian drug prices. But in terms of pharmaceuticals, we have made it very clear that at no stage will we put at risk the PBS system. Australians will continue to get cheaper drugs under the Albanese Government.

What I'm curious about on the foreign side is the domestic politics of all this in the affected countries. It seems clear that many foreign governments feel as though they have to do things like this as part of their effort to try to avoid Trump's tariffs and other forms of pressure. They are doing a calculation as to how to get the best overall outcome, and some of them may decide that going along to some extent on drug pricing is the right move. But ordinary citizens can't easily discern that calculation, and are affected differently by it than are the government officials making the deals, so I can imagine some of them will just see higher drug prices and be very unhappy.