Trump exaggerates the speed and certainty of prescription drug price cuts

Trump exaggerates the speed and certainty of prescription drug price cuts

President Donald Trump expressed high hopes for an executive order to lower drug prices.

On May 11, the day before he was due to leave the White House to sign the executive order, Trump was broadcast on the social network of truth.

However, the text of the executive order issued on May 12 undermines the president's description of how soon consumers might experience this potential boon.

The idea of ​​the executive order, he said, was to bring high prescription drug costs in the United States down to levels typical in other countries.

“We will compensate,” Trump said at the contract signing. "We will all pay the same. We will pay what Europe will pay."

Experts said Trump's actions could reduce the cost of prescription drugs, possibly by 30% to 80%, Trump said, but warned that the order's necessary procedural steps would not make it so immediate.

The executive order says administration officials must identify the "most competitive price targets" within 30 days and communicate with the most competitive nation price targets to get the companies to "bring prices for American patients in line with comparatively developed nations."

After an unspecified period of time, the administration will assess whether “significant progress” has been made toward lower pricing. If not, the order requires the Secretary of Health and Human Services to “propose a plan for establishing the most appropriate pricing arrangements,” which could take months or years to take effect.

“Executive orders are wish lists,” said Joseph Antos, a fellow emeritus in health care policy at the conservative American Enterprise Institute. The order "hopes that manufacturers will unilaterally reduce U.S. prices. The legal authority to intervene in the market is unclear if this implausible scenario does not take place."

When contacted for comment, the White House provided no evidence that the executive order would produce immediate results.

Why do Americans pay more for prescriptions?

There is widespread agreement in the United States that drug prices are unusually high. The prices Americans pay for pharmaceuticals are nearly three times higher than a group of other developed countries in the Organization for Economic Co-operation and Development.

A study by the Rand Corp., a nonpartisan research organization, found that U.S. prices for all drugs were as high as average prices in 33 OECD countries. The gap was even wider for brand-name drugs, with U.S. prices averaging 4.22 times higher.

The U.S. has lower prices than comparable nations for unbranded generic drugs, which account for about 90% of filled prescriptions in the U.S., but generics account for only a fifth of U.S. prescription drug spending.

Experts cite several reasons for this price discrepancy.

One is that the U.S. has more limited price negotiations with drug manufacturers than in other countries. If another country does not justify the additional cost of a new drug by improved outcomes, it will often decline to use the drug. Some countries also impose price controls.

Another factor is the exclusivity of the patent. Over the years, U.S. pharmaceutical companies have used strong legal protections to accumulate patents that can keep general competitors out of the market.

Drug companies have also argued that high prices help pay for research and development of new and improved pharmaceuticals. When Trump released the executive order, Stephen J. UBL, president and CEO of the drug industry group Pharmaceutical Research and Manufacturers of America, said in a statement: "It would mean fewer treatments and cures and would jeopardize the hundreds of billions our member companies invest in America." (In Trump's May 13 interview with Fox News' Sean Hannity, Trump offered a different picture of what drug company officials have told him.

Recent studies have cast doubt on the idea of ​​paying high prices for research and development. A 2023 study found that from 1999 to 2018, the world's 15 largest biopharmaceutical companies spent more on sales and general administrative activities, including marketing, than on research and development. The study also found that most new drugs developed during this time offered little to no clinical benefit over existing treatments.

The long-standing reality of high U.S. drug prices has driven Democratic and Republican efforts to lower them. Then-President Joe Biden signed legislation to require Medicare, the federal health care program that covers Americans over 65, to negotiate with the makers of some popular, low-cost drugs. And Sen. Bernie Sanders (I-Vt.) has made this a cornerstone issue throughout his political career.

During his first term, Trump tried to lower prices for certain drugs under Medicare, but courts blocked the move on procedural grounds.

Trump's drug price push could attract bipartisan support, experts said.

Jonathan Cohn, who has worked for several media fraternities on the left and written two books on health policy, offered measured praise for Trump's executive order in the Bulwark, a publication generally critical of Trump, calling it "a serious policy initiative that credible people could get behind drug prices."

Andrew Mulcahy, a senior health economist at Rand Corp., said part of Trump's statement - the possibility of a price cut of 30% to 80% - was plausible.

“Of course the devil is in the details of policy design and implementation,” Mulcahy said. “But first blush, a saving of about two-thirds on what we now spend on drugs” appears to be in the queue. “

What would Trump's executive order do?

Regarding high U.S. drug prices, Trump told Hannity that “I ended it” by issuing the executive order. But that's not how the order is structured.

The Executive Order makes it clear that actions will not occur quickly.

“The ‘almost’ in ‘almost immediately’ does a lot of work,” Mulcahy said, referring to Trump’s statement.

The executive order, like Trump's First Executive Order, could face trial in court.

“It is unlikely that the federal government can set drug prices outside of the Medicare program,” Antos said. If Trump wants lower prices to benefit all U.S. consumers, Congress will likely have to pass new laws. While executive orders direct federal agencies what to do, actions taken by privately held companies will likely need to be passed by Congress, experts said.

If Congress gets involved, it will not only set the time extension but also draw opposition from the Republican majority in one or both chambers. Historically, Antos said, “Federal price controls are anathema to many Republicans in Congress.”

Our decision

Trump said prescription drug prices would be reduced “almost immediately” as a result of his new order.

Experts said if the executive order's goals were met, price cuts would not happen "almost immediately."

The order includes a 30-day period to develop pricing targets for drugmakers, followed by an unspecified period of time to determine whether companies are meeting the targets. If not, a formal settlement process would begin that would take months or even years. And if Trump intends to lower prices for all consumers, Congress will likely have to pass a law to do so.

Trump gives the impression that Americans will soon see a sharp decline in prescriptions. But even if the executive order works as intended, it could take months or years.

The statement contains an element of truth but ignores evidence that would give the impression otherwise. We usually evaluate it incorrectly.

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