Trump talks tough on drug prices but his demands have softened

The president on Thursday afternoon posted letters to his Truth Social platform that the White House had sent to 17 large pharmaceutical and biotech companies, saying they each have until late September to cut certain U.S. prices, or else the administration will “deploy every tool in our arsenal to protect American families.”

Drug stocks fell in response. The S&P 500 Pharmaceuticals industry group index was down 2.7% Thursday, while the S&P 500 was down 0.4%.

Still, the new demands Trump made on Thursday appear to require far less from the companies than had been implied by an executive order on drug pricing the president signed two months ago.

In May, the White House resurfaced a proposal from the first Trump administration that would peg prices paid for prescription medicines in the U.S. to the lowest prices paid in other wealthy countries, the so-called most-favored-nation price.

An executive order signed May 12 ordered federal agencies to determine most-favored-nation prices for drugs. It laid out penalties if the companies didn’t make “significant progress” toward lowering U.S. pricing to those levels.

The order suggested that the most-favored-nation prices would apply to all U.S. drugs, regardless of whether they were paid for by the federal government or private payers, and whether the drugs were new or had been on the market for years.

The new letters posted Thursday make narrower demands. Trump told drugmakers they must lower the prices of drugs already on the market to most-favored-nation rates only for Medicaid, the health insurance program for low-income Americans paid for jointly by state governments and the federal government.

Medicaid already pays a steeply discounted rate for drugs under pre-existing programs.

For all other payers, including Medicare and commercial plans, Trump says the most-favored-nation rates should only apply to newly launched medicines.

“I think Trump is, in some ways, softening his tone on most favored nation,” Raymond James healthcare policy analyst Chris Meekins told Barron’s. “Originally, he said the U.S. will get the best price that any other nation gets for all products. Now he’s carving out specific categories.”

Meekins said that the new approach is potentially more realistic. “Attempting to try to make sure the U.S. gets better prices on future products is something companies can work with the administration to try to do going forward,” he said.

Details about the plan remain scarce. The drug industry lobby group PhRMA, in a statement, criticized the effort.

“Importing foreign price controls would undermine American leadership, hurting patients and workers,” said PhRMA senior vice president Alex Schriver in a statement. “At a time when China is threatening to overtake the U.S. in biopharmaceutical leadership, we need to ensure America continues to be the most attractive place in the world to develop innovative medicines.”

Trump sent the letters to top executives at AbbVie, Bristol Myers Squibb, Novartis, Gilead Sciences, Pfizer, and other companies.

In the letters to Pfizer and Regeneron, he crossed out the surnames of the companies’ CEOs, Albert Bourla and Leonard Schleifer, and wrote in their first names by hand.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com