Trump announces he’ll sign executive order that aims to cut drug prices
President Donald Trump plans to sign an executive order to reduce drug prices by implementing a 'Most Favored Nation' policy, which bases payments for certain medicines on the lowest prices found in other countries. This policy, initially introduced during his first term, was blocked by federal courts and later rescinded by President Joe Biden. The new directive remains unclear in its scope regarding which payments or drugs it would affect, but it aims to achieve significant reductions in prescription drug costs. However, the initiative may face opposition from the pharmaceutical industry and could potentially limit patients' access to medications. The administration also considers imposing tariffs on pharmaceutical imports, which could lead to drug shortages and increased prices, complicating the potential benefits of the new order.
Context:
President Donald Trump plans to sign an executive order to reduce drug prices by implementing a 'Most Favored Nation' policy, which bases payments for certain medicines on the lowest prices found in other countries. This policy, initially introduced during his first term, was blocked by federal courts and later rescinded by President Joe Biden. The new directive remains unclear in its scope regarding which payments or drugs it would affect, but it aims to achieve significant reductions in prescription drug costs. However, the initiative may face opposition from the pharmaceutical industry and could potentially limit patients' access to medications. The administration also considers imposing tariffs on pharmaceutical imports, which could lead to drug shortages and increased prices, complicating the potential benefits of the new order.
Dive Deeper:
President Donald Trump announced plans to revive a controversial policy from his first term intended to cut drug prices by adopting a 'Most Favored Nation' approach, linking U.S. Medicare payments for drugs to the lowest prices offered in other countries.
The 'Most Favored Nation' rule, finalized in late 2020, was blocked by federal courts and reversed by President Joe Biden in 2021. The new executive order aims to lower drug prices by 30% to 80% almost immediately, but specifics on which payments or drugs it will target remain unspecified.
The Trump administration is also considering imposing tariffs on pharmaceutical imports, which could worsen drug shortages, particularly for generic medicines, and potentially raise drug prices, complicating the expected benefits of the new order.
While the executive order could lead to savings for Medicare and its beneficiaries, it may also restrict access to medications, depending on how the policy is structured. Experts suggest that the proposal could save money in out-of-pocket costs and premiums, which are influenced by drug prices.
The initial 'Most Favored Nation' proposal faced strong opposition from the pharmaceutical industry and was part of a broader strategy to meet Medicaid spending cuts in a House GOP tax and spending cuts package. The revival of this idea suggests a renewed focus on drug pricing in Trump's policy agenda.
Initially introduced in 2018, the 'Most Favored Nation' model would have allowed Medicare to pay the lowest price available among peer countries for certain drugs, potentially saving about $86 billion over seven years according to the Trump administration's estimates.
The Democrats' Inflation Reduction Act of 2022, which granted Medicare the power to negotiate drug prices for a limited number of drugs each year, represents a shift in policy that could impact the implementation and effectiveness of the revived 'Most Favored Nation' proposal.