Analysis: Trump’s ‘Most-Favored-Nation’ Drug Pricing Order May Not Lower Prices
TL/DR –
President Donald Trump signed an executive order introducing a most-favored-nation prescription drug pricing policy, which requires drug companies to charge Americans the same prices as those in other referenced countries. However, it is argued that such a policy alone may not effectively address structural issues in the U.S. pharmaceutical system due to the nation’s unique free-market dynamics and lack of strict government price controls, which have traditionally been key factors in driving global innovation. As it stands, the U.S. pharmaceutical market significantly differs from other markets due to its near absence of price regulation, its variety of distinct pricing strategies, and its dominance by the private sector.
Trump’s Attempt to Lower Drug Prices – An Uphill Battle?
President Donald Trump’s executive order titled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” is part of a consistent attempt to reduce drug prices for Americans. However, there are doubts about the order’s effectiveness.
The order endorses a transformative shift towards a most-favored-nation (MFN) prescription drug pricing policy for the United States. Based on the claim that U.S. citizens are paying higher prices for the same drugs as non-Americans, thereby supporting global pharmaceutical profits, Trump’s policy aims to align U.S. drug prices with those of other countries using a mechanism similar to external reference pricing (ERP).
Despite the U.S. pharmaceutical market being the engine of global innovation, drug prices in the U.S. have consistently outstripped those of other countries. A recent RAND report showed U.S. list prices for brand-name drugs were over four times higher than those in 33 OECD countries in 2022.
The European Union is currently undergoing a reform in the pharmaceutical sector, with a focus on innovation and reducing dependence on foreign countries. In contrast, the U.S. is primarily focused on lowering drug prices to correct perceived imbalances and trade distortions.
Examining the Viability of ERP for U.S. Drug Pricing
The potential implementation of Trump’s proposed ERP scheme to lower drug prices for U.S. consumers warrants careful examination. The viability and possible consequences of such a policy, both domestically and internationally, need to be explored. It is argued that ERP alone may not effectively address structural issues in the U.S. pharmaceutical system.
Pharmaceutical markets are distinctly different from other markets due to their heavily regulated nature. Many developed countries have implemented policies to regulate pharmaceutical prices and reimbursement, including ERP. However, such policies have pros and cons and can lead to divergences in drug price levels across countries.
The U.S. Pharmaceutical Pricing Conundrum
The U.S. system is characterized by the almost complete absence of price regulation and restrictions on pharmaceutical launch prices. This has resulted in significantly different prices for the same drug to different buyers. While manufacturers usually sell drugs to wholesalers at a list price, discounts and rebates negotiated with payers mean that the net price they receive is usually less. However, consumers frequently do not benefit from these rebates.
Recent changes to federal involvement, such as the Inflation Reduction Act of 2022 and the introduction of the Medicare Drug Price Negotiation Program, have started to shift the landscape. However, these measures are considerably more limited than the frameworks adopted abroad.
Is an MFN Drug Policy a Good Option for the U.S.?
In the U.S. drug pricing debate, numerous proposals have been made, some of which reference practices in other markets. Trump’s executive order on drug pricing is not the
—
Read More Health & Wellness News ; US News