White House Most-Favored Nation Analysis Reflects Trump’s Unserious Attempt at Drug Pricing Reform
Americans pay too much for drugs. In the U.S., drug manufacturers price new brand name products at 422% of prices in comparable countries and prices remain over three times as high as other nations even after accounting for rebates.
The Trump administration is right in identifying the problem; the U.S. should pay similar prices to other peer countries for medicines. Achieving this goal requires a more serious approach and likely legislation.
Trump has a record of failing to implement his drug pricing policies or achieve lower drug costs, in part because proposals were advanced before addressing necessary details and workability. It is important to assess whether the current proposals may face similar barriers.
Currently, the Trump administration is cutting secretive deals with big pharma and throwing our allies and patients in Europe under the bus. Now, Trump is declaring victory with unsubstantiated claims of savings it is unlikely to be able to deliver.
Messaging Trumps Reality
After months of Trump and his surrogates falsely claiming the President got Americans the world’s lowest prices on drugs, the White House Council of Economic Advisers analysis acknowledges that is an exaggeration and not the true aim of their MFN framework. The analysis calls for the U.S. to get the second-lowest price paid by comparable countries.
Yet the administration still insists on doubling down on these misleading claims.
“We have an agreement that we will get the lowest prices in the developed world,” Department of Health and Human Services Secretary Robert F. Kennedy Jr. said in a video clip posted by HHS online May 7, two days after the CEA analysis was released. Kennedy also falsely said the U.S. is getting the lowest prices on the most popular drugs that already exist, like GLP-1s.
Impact From Secret Deals Is Likely Overstated
The Trump administration dramatically announced 17 deals with drug companies to advance its MFN plan. But as of early April, many of these deal were not finalized.
The specifics of the arrangements have not been made public, making it nearly impossible to fully judge their impact. Public Citizen sued the Trump administration to get access to these agreements.
There are several reasons to believe the deals will have minimal impact on consumers:
- Most importantly, drug companies have not indicated they anticipate major financial impacts from the deals.
- The agreements are reported to be of short-term duration –mostly three years – far shorter than the period the CEA projected savings ($64.3 billion over 10 years).
- The primary near-term concessions in the deals are MFN pricing in Medicaid, but it is not clear which drugs are subject to these MFN price points and thus how much savings, if any, the U.S. will see. The CEA analysis acknowledges that in some cases Medicaid prices are lower than MFN prices. Most U.S. consumers will not see benefits from these deals as patients already have little to no out-of-pocket costs in Medicaid.
- The drugmakers with MFN deals are supposedly exempt from more impactful MFN pricing plans the Trump administration has proposed. Excluding these companies from Trump’s broader MFN plans could significantly negate their impact as these companies account for the top companies in the world based on sales. Meanwhile the industry is getting valuable perks for striking these deals like tariff exemptions and vouchers for speedier FDA reviews.
Trump’s direct-to-consumer drug discount site, TrumpRx, also offers minimal impact. Most Americans have health insurance and will do better purchasing drugs through their insurance plans. If a consumer needs a cash pay option, TrumpRx may lead them to overpay as many of the drugs on the site have cheaper generic competitors available at lower price points.
Trump Hasn’t Built Support to Advance His Plan
Trump’s CEA claims that the bulk of MFN savings will come from tying the prices of new U.S. drug launches to those in other high-income countries, saving $529 billion over the next decade. People on government and private health plans would benefit from the lower drug prices. But this estimate assumes Republicans in Congress will support such a plan and codify it into law; a move congressional Republicans have not appeared interested in. To the contrary, Trump and congressional Republicans recently provided drug corporations an $8 billion giveaway by delaying further and exempting more drugs from government price negotiations.
The drug industry is also warning against MFN codification. Pharma was willing to play ball on much smaller, shorter deals that are expected to offer more perks for industry than financial losses. But pharma has made clear it will lobby against more expansive plans and permanent codification.
Trump Misplaces Blame, Letting Pharma Off the Hook
The CEA analysis assumes that Trump’s plan will not “reduce the total revenue available” to drug manufactures because other countries will agree to pay more for medicines. CEA says it is not trying to address “inflated manufacturer revenues overall, but rather the inequitable distribution of the revenue across countries and overreliance on the U.S. to fund the drug innovative enterprise.” This assumption puts team Trump on the same side as Big Pharma which is currently bullying other countries and threatening that drugmakers may stop supplying drugs to their residents unless countries pay the industry more. In a few cases, pharma has already made some drugs inaccessible in certain countries.
Trump’s analysis perpetuates the myth that the current premium prices paid in the U.S. are necessary to ensure continued pharmaceutical innovation. But drug prices are not linked to the costs of research and development and pharma does not spend the majority of its revenue on R&D. Pharma can afford to charge Americans much lower prices and still easily cover their global R&D budgets. To achieve real success on drug pricing policy, leaders must be willing to call out big pharma and its greedy tactics and develop more thoughtful policies that will help Americans without compromising the health of people in other nations. Drugmakers can and should be cutting outlandish executive salaries and ultra-wealthy investor returns, not drug access.
The reality is that taxpayer-funded research supports most new drugs and that the U.S. government, which grants valuable market monopolies to industry, has levers to push back on pharma bullying and require affordable pricing and equitable access in return for the government subsidies the industry receives. The U.S. could also choose to invest more money directly in government-funded research so that health, not greedy corporate interests, drive new medicine development.
Flawed, Misleading Assumptions
Trump’s MFN framework relies on drug manufacturers voluntarily providing the U.S. accurate and complete data on the currently confidential net prices they negotiate with the G-7 nations plus Denmark and Switzerland. The U.S. will ultimately use the second lowest price overseas as its benchmark, adjusted by the ratio of gross domestic product (GDP) per capita in comparison to the U.S., using a purchasing power parity adjustment. It is not clear whether the administration will be successful in compelling disclosure of this information from manufacturers. The analysis also fails to account for how the U.S. will get lower prices on drugs if products launch in the U.S. first, an outcome that is likely given pharma’s threats.
The White House analysis also makes a variety of other problematic assumptions:
- The savings are based on a comparison of list prices in the U.S. versus list prices in other countries, not the net prices post rebate each country receives, which likely exaggerates the U.S. savings.
- The analysis highlights the savings cash-pay patients will receive on GLP-1 obesity drugs by comparing the TrumpRx website prices to the drugs’ list prices. The Trump savings are much less if compared to the lower price points cash pay patients were already getting before TrumpRx.
- The White House analysis doesn’t account for all costs, like the tens of billions expected to be pulled from the Medicare Trust Fund to pay for Trump’s obesity drug pilot known as Bridge. Discounts negotiated for this pilot are still higher than GLP-1 prices in other countries.
What Trump Should Do
The White House and other policymakers should embrace an international reference pricing agenda that does not hinge on pressuring other countries to pay more for drugs or losing access to medicines.
The drug industry can afford to sell its medicines to Americans for less without harming people in other countries and without harming innovation. The U.S. government has levers to make this possible.
Public Citizen supports using international prices as a ceiling in Medicare price negotiations to lower U.S. drug costs and extending those prices to all Americans.
Pairing measures that dramatically lower drug prices with increased government support for biomedical research and development can ensure innovation meets our health needs.
The U.S. can increase NIH funding and build reasonable pricing and access conditions into all licenses and contracts. NIH could also be directed to prioritize licenses and contracts with companies that have strong commitments to investments in R&D. The government can also experiment with prize funds to delink drug company revenue from the quantity of medicines sold and provide incentives for innovation to fulfill needs neglected under the monopoly-based business model. U.S. tax policy could further incentivize companies that commit higher proportions of their revenue to R&D.