Get ready to rumble. In one corner, it’s President Donald Trump. In the other, it’s the pharmaceutical industry.
Monday, Trump signed a sweeping executive order that he says will cut the price of drugs in the U.S. up to 90%. Trump announced the initiative on Monday morning at the White House.
The president is installing the price reduction through a most favoured nation (MFN) policy and is instructing the Department of Health and Human Services (HHS) to tie what government pays for drugs to the lowest prices paid by other economically advanced countries.
“Some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90%,” Trump said. “Big pharma will either abide by this principle voluntarily or we will use the power of the federal government to ensure that we are paying the same price as other countries.”
According to the order, companies will have 180 days to negotiate with the HHS before the agency will impose a rulemaking plan to impose MFN pricing. The HHS will establish target prices over the next 30 days.
In a note to clients, analysts with Jefferies said the EO is “vague with little detail on implementation.”
The initiative is designed to impact prices across Medicare, Medicaid and commercial markets, White House officials said on a call with reporters. Since executive orders don’t override federal law, the transformative, controversial measure is certain to face legal challenges from the pharmaceutical industry as well as providers, insurers and pharmacy benefit managers (PBMs).
Trump’s most pointed words on Monday were directed at PBMs.
“We’re going to totally cut out the famous middlemen,” he said. “Nobody knows who they are, middlemen, I’ve been hearing the term for 25 years, middlemen. Nobody knows who they are but they’re rich.”
In brief remarks, HHS Secretary Robert F. Kennedy Jr. aligned himself with long-time pharma adversary Sen. Bernie Sanders, saying his children, “who are Democrats,” had “tears in their eyes” when he told them about Trump’s EO.
“Congress is controlled in so many ways by the pharmaceutical industry,” RFK Jr. added. “This was an issue that people talked about but nobody wanted to do anything because it was radioactive.”
