Monday saw a seismic economic shift courtesy of an executive order by President Trump cramming down the prices Americans pay for prescription drugs.
President Donald Trump declared Monday that the U.S. “will no longer tolerate profiteering and price gouging from Big Pharma” as he signed an executive order implementing what his administration is calling “most favored nations drug pricing.”
“The principle is simple — whatever the lowest price paid for a drug in other developed countries, that is the price that Americans will pay,” Trump said at the White House. “Some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90 percent.”
Trump said that “starting today, the United States will no longer subsidize the healthcare of foreign countries, which is what we were doing. We’re subsidizing others’ healthcare, the countries where they paid a small fraction of what for the same drug that what we pay many, many times more for and will no longer tolerate profiteering and price gouging from Big Pharma.”
“Even though the United States is home to only 4 percent of the world’s population, pharmaceutical companies make more than two thirds of their profits in America. So think of that with 4 percent of the population, the pharmaceutical companies make most of their money. Most of their profits from America. That’s not a good thing,” Trump continued.
In a press release, the administration put out a number of talking points about how this would work…
- The order directs the U.S. Trade Representative and Secretary of Commerce to take action to ensure foreign countries are not engaged in practices that purposefully and unfairly undercut market prices and drive price hikes in the United States.
- The order instructs the administration to communicate price targets to pharmaceutical manufacturers to establish that America, the largest purchaser and funder of prescription drugs in the world, gets the best deal.
- The Secretary of Health and Human Services will establish a mechanism through which American patients can buy their drugs directly from manufacturers who sell to Americans at a “Most-Favored-Nation” price, bypassing middlemen.
- If drug manufacturers fail to offer most-favored-nation pricing, the order directs the Secretary of Health and Human Services to: (1) propose rules that impose most-favored-nation pricing; and (2) take other aggressive measures to significantly reduce the cost of prescription drugs to the American consumer and end anticompetitive practices.
It remains to be seen how this would work in detail, but it’s not a surprise that Trump would push to cram down drug prices. This is likely going to be a very popular move with the folks, as drug prices have been a sore spot for as long as anyone can remember.
It seems strange to see Bernie Sanders agreeing with the president, but that’s what happened after the executive order was announced. Naturally, though, Sanders found a way to make this about himself…
Will the executive order be thrown out in the courts? It’s quite possible — without dragging the reader through the legal weeds, the pharmaceutical industry has very good, very expensive lawyers and they’re more than capable of venue-shopping to find a federal judge who will buy their arguments against the federal government’s efforts at “price-fixing” through Medicare and Medicaid — which are right about half of all the money spent on prescription drugs in this country.
And it’ll absolutely happen again. In a statement to Reuters, the pharmaceutical industry’s lobby group said as much following Trump’s press conference.
“Government price setting in any form is bad for American patients,” Alex Schriver, a spokesperson for the top U.S. drug company lobbying group, the Pharmaceutical Research and Manufacturers of America, said in a statement when asked about Trump’s planned executive order.
Back in 2020, Trump tried something similar, and it was tied up in the courts. And naturally, once bought-and-paid-for Joe Biden took office in 2021, the federal government gave up on trying to cram down drug prices. That cost the U.S. taxpayer something like $85 billion over seven years, which was the first Trump administration’s projection attached to his first effort at “government price-setting.”
But is price-setting what’s really happening?
As Trump noted, practically every foreign country operates as a bulk buyer of pharmaceuticals, while the federal government in the U.S. does not. Neither Medicare nor Medicaid directly dictates drug prices for their enrollees in the way that foreign countries’ health bureaucracies do, and naturally, private health care plans don’t have the power to do anything of the sort.
Meaning that there’s a lot of price-setting happening in the international pharmaceutical market. It just happens everywhere else but here.
What Trump is attempting to do is play the same game those countries play to cram down drug prices.
That isn’t an assault on the free market. There is no free market in prescription drugs. Since World War II, it’s been a cartel market, and it’s simply been the American people getting hammered by it.
And we see this argument from the status quo crowd again and again — Trump, or MAGA, or the NatCons, or whoever — are attacking the free market. We get this on trade again and again. (RELATED: American Prosperity Depends on Free Trade)
Imposing tariffs on China or some other country in order that a trade relationship that saps away at American producers and destroys manufacturing jobs is an assault on free trade, don’t you know. (RELATED: The ‘Most Bad’ Option: Trump’s Tariff Uncertainties)
As if free trade exists with China.
When you’re trading with a communist dictatorship that systematically steals your intellectual property, freezes your producers out of their markets, and undercuts you on cost by using labor practices no civilized country would, you aren’t going to be able to characterize that trade as “free.” It takes two to dance that tango. (RELATED: China’s ‘Low Human Rights’ Advantage)
And Trump’s tariffs are almost certainly going to produce the effect of opening markets and creating freer trade than what existed before. (RELATED: The Tariff Reckoning: America’s Economic Resolve in Trump’s Second Act)
Assuming that this time Trump will be able to continue the fight on drug prices, similarly, the effect is almost certainly going to be freer — or at least, less manipulative — trade in pharmaceuticals across the globe.
There’s that old saying about how if you’re trading with a country with an industrial policy and you have no industrial policy, then their industrial policy will shortly be yours.
Somehow, this is mistaken for the presence of a free market by people who claim to be intelligent.
I’ve always wondered about that, and I’ve become jaded enough to simply assume those geniuses are corrupt.
We should all want to see free markets. Free markets are a great thing. But with respect to pharmaceuticals, Americans have been forced to subsidize drugs for the rest of the world for decades and it’s been left to the Bernie Sanderses of the world — whose solution, if he could get away with it, would be to nationalize the whole industry — to complain about it while the rest of us are supposed to grin and bear it while Germans and Canadians get the same pills for a tiny fraction of what Ohioans and Arizonans pay.
The same pills from the same factories, most of which are owned by American companies.
And they call that a free market.
A few years ago, there was a big hue and cry over the idea of reimportation — meaning, buying up the foreign supply of prescription drugs in bulk at the rates the pharmaceutical companies were selling to foreign markets, and then flooding the U.S. market with that surplus in order to push the prices down. Florida has a program, officially approved last year, which does this in Canada, and estimates of that state’s savings range from $150 million to $180 million yearly. But otherwise, reimportation is generally still illegal.
For the life of me, I can’t understand why, other than that Big Pharma owns Congress.
And guess who they own more than anybody else? Well…
Yes, you read that correctly. That was TWENTY-THREE MILLION DOLLARS that Big Pharma has greased Bernie Sanders to the tune of.
Do you trust Bernie to codify Trump’s executive order in federal statute? Yeah, me neither.
Nobody is saying Trump’s EO is a perfect solution. There is no perfect solution to this problem when most of the money spent on prescription drugs, or healthcare generally, across the globe is spent by the public sector.
But the prescription drug market in the United States is $400 billion per year, and we are being grossly overcharged compared to the rest of the world. Cramming down those prices and resetting the global pharmaceutical market, while at the same time instituting some real reforms which de-cartelize that market, is an idea whose time should have come a long time ago.
At some point, we could use a conversation about how big the drug market ought to be in the first place, because this is the most medicated society in the history of the world, and we can’t claim to be healthier for it. But that’s another column.
Trump shouldn’t be castigated for “price-setting,” by Big Pharma or anyone else. That ship sailed in the years following World War II. Trump simply noted how far from land we are.
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