In a significant move aimed at reducing prescription drug costs within the United States, President Donald Trump signed an executive order on Monday, issuing a 30-day ultimatum for pharmaceutical companies to voluntarily slash prices or face future government-imposed payment restrictions. The directive mandates the Department of Health, under the leadership of Robert F. Kennedy Jr., to negotiate new, lower price amounts for prescription medications within the forthcoming month. Should these negotiations fail, Kennedy will be responsible for crafting a new regulation that aligns U.S. drug prices with the lower prices currently offered in other countries.
Addressing the matter at a morning press conference, President Trump asserted, โWeโre going to equalize. Weโre all going to pay the same. Weโre going to pay what Europe pays.โ The potential effects of this executive order on the millions of Americans with private health insurance remain uncertain, as the federal government wields more significant influence over the prices it pays for drugs through Medicare and Medicaid.
This development comes on the heels of the Republican-led House presenting a strategy to reduce Medicaid spending by $880 billion. Taxpayers annually contribute hundreds of billions of dollars towards medications administered via Medicare, which serves nearly 70 million older citizens, and Medicaid, which offers nearly no-cost healthcare to about 80 million economically disadvantaged and disabled Americans.
However, the nationโs pharmaceutical lobby, representing the primary U.S. drug manufacturers, has expressed strong opposition to Trumpโs executive order, terming it a โbad dealโ for American patients. The industry fears that a reduction in profits could cripple research funding for drug development.
Stephen J. Ubl, president and CEO of PhRMA, cautioned that importing price controls from foreign countries deemed as socialist could result in diminished treatments and cures, thus endangering substantial investments planned by their member companies in the U.S.
This controversial โmost favored nationโ strategy for Medicare drug pricing echoes Trumpโs previous attempt during his initial term, when he signed an analogous executive order in the waning days of his presidency. This prior order intended to price certain drugs based on the lower rates paid by other nations and encountered a judicial blockade under the Biden administration.
President Trump has consistently pointed to other countries as catalysts for high drug prices in the U.S., placing less blame on pharmaceutical companies themselves. Accompanied by key health figures such as Kennedy, CMS administrator Dr. Mehmet Oz, FDA commissioner Dr. Marty Makary, and NIH director Jay Bhattacharya, Trump threatened the industry with federal investigations and floated the idea of increased drug imports if cooperation is not forthcoming.
He expressed that pharmaceutical profits majoritively derive from the U.S., describing this scenario as โnot a good thing.โ Over the weekend, Trump hyped the anticipated cost-saving benefits of his plan, boasting potential savings that could reach โTRILLIONS OF DOLLARS.โ Nevertheless, no specific savings figures were provided by the White House on Monday.
Heeding the order, health department leaders will engage with drug companies over the 30-day window to align medication prices based on international standards, according to Dr. Oz. Meanwhile, immediate financial relief from rising drug costs for American patients appears unlikely, as stated by Rachel Sachs, a health law scholar at Washington University.
โThe plan appears to depend on voluntary price reductions by manufacturers, undefined within this order,โ Sachs commented. She further explained that should manufacturers fail to comply, any actions by HHS would involve protracted processes, potentially lasting years, which may ultimately lead to lower drug prices.
While the health department can shape medication costs within Medicare and Medicaid due to regulatory powers, its impact on privately insured drug prices is more limited. The U.S. stands out for its high drug expenditure compared to other affluent nations, yet Congress has struggled to enact a permanent resolution.
Early in his presidency, Trump criticized pharmaceutical firms as committing figurative โmurderโ and accused foreign governments with fixed drug prices of exploiting Americans. Amidst frequent Twitter usage, he reassured the public that he intends to combat excessive pharmaceutical lobbying and campaign contributions, promising that, with regard to drug pricing, โWe are going to do the right thing.โ
Notably, the stock market reacted positively, with Merckโs shares climbing 3.9%, while Pfizer saw a 2.5% increase, and Gilead Sciences rose by 5.8%, reflecting confidence from investors.