President Trump sent letters to CEOs of 17 pharmaceutical companies including Pfizer, Sanofi, and Johnson & Johnson on Thursday, requesting them to lower prescription drug prices in the United States to align with prices overseas. The White House stated that Trump sent letters to executives of Lilly, Sanofi, Regeneron, Merck & Co, Johnson & Johnson, AstraZeneca, and other pharmaceutical companies, asking for a response within 60 days.
In the letter, Trump pointed out that most suggestions for drug price reforms received by his administration have been ineffective, shifting responsibility and demanding policy adjustments while allowing the industry to receive billions of dollars in subsidies.
The President requested pharmaceutical companies to provide “most favored nation” pricing for all patients covered under the Medicaid program in the United States, ensuring that the same pricing policy applies to new drugs. Additionally, Trump asked companies to ensure that pricing for new drugs in the United States is consistent with other developed countries.
The main goal of this requirement is to bring down the prices of prescription drugs in the U.S. to the lowest standard among members of the Organisation for Economic Co-operation and Development (OECD), most of which are developed countries.
Trump stated that if pharmaceutical companies try to compensate for the decrease in U.S. drug prices by raising prices in other countries, they must return the excess overseas profits to American patients and taxpayers. The White House will achieve this through signing agreements.
He also demanded that companies refrain from offering more favorable prices to other developed countries than those in the United States, indicating that if companies are willing to sell drugs directly to American consumers at the “most favored nation” prices, the White House will assist in eliminating intermediaries like pharmacies.
Trump requested all companies to commit to these conditions by September 29 and warned, “If you refuse to act, we will use all means to protect American families from the scourge of continuously exploiting drug prices.”
Furthermore, President Trump proposed plans to impose tariffs on the pharmaceutical industry, separating these tariffs from the recently completed country-by-country trade agreements.
This initiative traces back to an executive order signed by Trump in May of this year, where he demanded that pharmaceutical companies lower drug prices in the U.S. to match prices abroad. He warned that the White House would regulate or import cheaper drugs from overseas if companies do not comply. Trump expects price cuts of up to 80%.
Prior to this, Trump had encouraged voluntary adjustments to pricing policies by pharmaceutical companies, with some companies agreeing to build new pharmaceutical factories in the United States.
The prices for prescription drugs paid by American patients are significantly higher than those in other developed countries, often three times as much. Despite substantial research and development investments in the U.S., pharmaceutical companies argue that drastic price reductions would stifle innovation.
Companies including Pfizer, Novartis, AbbVie, and EMD Serono under the umbrella of the German Merck have expressed willingness to cooperate with the Trump administration.
Pfizer spokesperson Amy Rose stated that the company is closely collaborating with the Trump administration and Congress to enhance the access and affordability of medications for American patients, indicating that discussions have been constructive.
Following Thursday’s news, stocks of AstraZeneca, Merck, Regeneron, Lilly, Novo Nordisk, Pfizer, GlaxoSmithKline, and Gilead Sciences plummeted.
The NYSE Arca Pharmaceutical Index dropped by 3% on that day.
The S&P healthcare sector has already fallen by 2.7% this year.
This is not the first time Trump has demanded drug price reductions. In September 2020, he proposed a similar “most favored nation” pricing policy, which led pharmaceutical companies to file lawsuits and obtain court orders blocking related price adjustment measures.
Analysts, lobbyists, and experts on drug pricing suggest that pharmaceutical companies are unlikely to comply with Trump’s demands to lower drug prices in the U.S.
President Trump’s price reduction policy has sparked a significant increase in lobbying efforts by the pharmaceutical industry.
The largest lobbying organization in the industry, PhRMA, has already invested $20 million this year in an attempt to reverse these policies. Merck’s lobbying spending has also reached a record high, hitting $5 million in the second quarter of this year. Lilly’s lobbying expenses in the first half of the year also reached a 16-year high.
(This article references reports from Reuters and Financial Times)