Trump’s EO Aims to Slash Prescription Drug Costs But Should Address More
I’m shocked the order does not mention patent policy. Want to bring down prices? Reform the drug patent policy!
President Donald Trump’s executive order Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients aims to lower prescription drugs:
The United States has less than five percent of the world’s population and yet funds around three quarters of global pharmaceutical profits. This egregious imbalance is orchestrated through a purposeful scheme in which drug manufacturers deeply discount their products to access foreign markets, and subsidize that decrease through enormously high prices in the United States.
The United States has for too long turned its back on Americans, who unwittingly sponsor both drug manufacturers and other countries. These entities today rely on price markups on American consumers, generous public subsidies for research and development primarily through the National Institutes of Health, and robust public financing of prescription drug consumption through Federal and State healthcare programs. Drug manufacturers, rather than seeking to equalize evident price discrimination, agree to other countries’ demands for low prices, and simultaneously fight against the ability for public and private payers in the United States to negotiate the best prices for patients. The inflated prices in the United States fuel global innovation while foreign health systems get a free ride.
This abuse of Americans’ generosity, who deserve low-cost pharmaceuticals on the same terms as other developed nations, must end. Americans will no longer be forced to pay almost three times more for the exact same medicines, often made in the exact same factories. As the largest purchaser of pharmaceuticals, Americans should get the best deal.
Foreign Countries
Trump’s main talking points centered around foreign countries..
My Adderall is $200 for 30 days. In Canada? Around $82.50.
My Rinvoq is around $6,000 a month, around $73,000 a year. In Canada? Around $11,915 a year.
“The Secretary of Commerce and the United States Trade Representative shall take all necessary and appropriate action to ensure foreign countries are not engaged in any act, policy, or practice that may be unreasonable or discriminatory or that may impair United States national security and that has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development, including by suppressing the price of pharmaceutical products below fair market value in foreign countries,” according to the EO.
Let’s talk about why drugs cost less in foreign countries. There is so much reform America should do that would help bring down pharmaceutical companies that other media outlets won’t elaborate.
Direct-to-Consumer
It appears the main purpose of the policy is to cut out the middleman, establishing direct-to-consumer (DTC) sales:
Sec. 4. Enabling Direct-to-Consumer Sales to American Patients at the Most-Favored-Nation Price. To the extent consistent with law, the Secretary of Health and Human Services (Secretary) shall facilitate direct-to-consumer purchasing programs for pharmaceutical manufacturers that sell their products to American patients at the most-favored-nation price.
It seems some pharmaceutical companies have already started DTC.
In August 2024, Pfizer and Eli Lilly established websites for customers:
At the end of August, pharmaceutical giant Pfizer announced a new website called PfizerForAll, which provides information on common health issues like migraines or the flu and connects patients to telehealth services and prescription delivery services so they can get treatments and diagnostic tests delivered to their homes. Pfizer promotes some of its own therapies, including Paxlovid for Covid-19 and Nurtec for migraines, on the site.
That move came after rival pharmaceutical company Eli Lilly started LillyDirect in January, through which the company delivers prescriptions straight to patients. Eli Lilly also partnered with Amazon Pharmacy in March to deliver some of its medications to consumers’ doorsteps, including Ozempic competitor Zepbound, a GLP-1 weight loss drug.
Major point in that article: “Eliminating some intermediaries could also be a huge cost-savings opportunity for pharma companies, he added. For example, when medications are sold through pharmacies, the pharmacies get a cut of the profit, but if drugmakers are selling directly to consumers, they don’t have to share that revenue.”
Also, DTC helps eliminate a significant problem: Insurance.
Many insurance plans won’t cover popular and more expensive medicines.
Having DTC allows people not to worry about denials.
A Nasdaq article noted that DTC also enhances transparency:
In the DTC model, the cost benefits are clear and substantial. By cutting out intermediaries, healthcare becomes more affordable for patients. But it’s not just about lower costs; it’s about pricing transparency, which has been historically opaque in traditional healthcare pathways. DTC health companies set themselves apart by being upfront about pricing, making them a beacon of clarity in a traditionally complex system.
In the realm of DTC, personalization is non-negotiable. Healthcare providers are expected to tailor their services to meet each patient’s unique needs, enhancing the quality of care. This level of personalization builds trust and ensures patient satisfaction, a standard that’s swiftly becoming the norm in healthcare. Through technological innovation, telehealth amplifies the extent of personalized healthcare for patients.
Patent Policy Not Mentioned
Something stuck out to me when I read the executive order: patent policy.
I remember the complications involved with the drug patent policy in one of my many FDA and drug law courses.
A pharmaceutical company gets a 20-year exclusive patent, which means a delay in competition. The patent starts the day the company files for the patent.
The market exclusivity is around 7-12 years. However, once that exclusivity patent starts, no company can market or sell any similar drug that the patent owner has until that patent runs out.
It allows the company to monopolize the market and set prices as it wishes.
For example, Humira hit the market in 2002. The patent should have ran out in 2016 (again, showing that market exclusivity is shorter than the patent exclusivity) but “the company applied for and obtained over 75 patents that would extend its monopoly to 2034 – and keep this enormously expensive treatment inaccessible to many patients.”
Another Middleman: Pharmacy Benefit Managers
This ties into DTC because many people don’t know about Pharmacy Benefit Managers (PBMs). I’m glad Psychology Today broke this down because I would make it an article!
I lashed out against this position in one of my classes because I’m like, “Is this why my Rinvoq costs $6,000 a month?”
Anyway, the PBM is one of those middlemen (emphasis mine):
PBMs date from the late 1950s, when they were created to manage medication reimbursements that were becoming part of medical insurance policies. Over time, PBMs repositioned themselves as critical middlemen between drug manufacturers and pharmacies and, thus patients. Currently, PBMs create the formularies that insurance companies use to determine which medications are covered by a given insurance plan. PBMs also provide “utilization management”, i.e., enforcing the stepwise gauntlet that patients must run and fail before they qualify for the next higher level of medication. Finally, PBMs negotiate prices with drug manufacturers on “behalf” of insurance companies and institutions.
In addition to these multiple “middleman” roles, PBMs are “vertically integrated” in most healthcare systems. That is, PBMs own or are owned by the very same major pharmacy chains that they are negotiating with. This leads to “market concentration” such that the top 3 PBMs account for 75% of all U.S. prescriptions. The top 6 PBMs account for 96% of all U.S. drug prescriptions filled.
The part I highlighted? That’s what we call a conflict of interest, my friend.
It also means the PBM interferes with competition, steering patients to specific pharmacies. A monopoly blossoms, allowing the pharmacy to maximize its profits and sell drugs at a higher cost.
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Comments
Somebody has to pay for research and ten-year approval gauntlets and failures. Traditionally it’s US consumers and then whatever the market will bear overseas, which sales also serve to reduce costs in the US below what they would have been otherwise. If the prices overseas go up, the market goes to zero and no cost offset for the US consumers.
the market goes to zero??
the socialists will have to explain to their people in public embarrassment that the usa has been mommy and daddy to them ( as they all know) and like
affrimaction/dei
they cant do it on their own
So they have to have a certain average price across the world, to make enough profit on the drug. They can have a lower worldwide price and astronomical US price, or a slighly higher worldwide price. If people need it anyway, they’ll pay up.
Or suppose that instead of the US having uniquely high prices, we let Canada and Mexico have the high prices and the US have the lower price of everyone else. Why not stick them with the problem rather than ourselves, actually it would make more sense since without us they would not have these products at all. We’re uniquely capable of giving the world these products — we should get them cheapest!
But that is the point Trump makes in his first paragraph of the EO. It’s not what the market will bare overseas reflected in the prices, it’s what the governments say they will pay in order for the companies to gain access. It does exactly what Trump says. Companies need to make a profit to repay the exorbitant cost of development and American consumers are paying it to subsidize the rest of the world. Just another way foreign countries in particular Europe have been sticking it to America for decades.
They say they’re offsetting costs of research with the price of drugs? “Between 2010 and 2019, NIH funding contributed to 99.4% of the 356 drugs approved by the FDA, amounting to approximately $187 billion. This investment averaged about $1.34 billion per drug target for basic research and $51.8 million per drug for applied research” seems like the taxpayer is already offsetting the cost.
Good news. The previous model of ‘shaft US consumers on RX prices’ is another not so hidden subsidy for our economic competitors. Remove enough of these sorts of subsidies and US workers and companies can win on a more level playing field.
My Eliquis costs be 400 for 3 months. Eliquis patent was supposed to run out a few years ago. They got it extended until 2026 or 2027.
Last year my Eliquis cost me 150 for 3 months (until I hit the medicare doughnut hole). Biden and crew hated medicare advantage plans because it means patient health is not managed by the government but by plan provider. The F’d with the plans. Consequently my plan had to rebalance everything so they made at least some money. One of the results was the change in cost of my Eliquis.
I don’t like some of the changes to my plan and now have to investigate whether to switch to medigap next year. This will require comparing costs and coverage under both systems. Math should not be involved to such an
extent.
I think this approach to cutting drug prices will not work. Yes, we have high pharmaceutical prices, but that is what funds R&D on drugs in the US. Most of the research is done in the US because that’s where the profits are. Pharmaceutical companies are not going to engage in R&D unless they can make money. On a personal note, I am alive today because of all the R&D that developed new medicines that were unavailable to my father as recently as 50 years ago. In any event, I would rather pay more for drugs and get the R&D than I pay bubkas and not get the R&D.
OTOH there are certain reforms that could be made that may possibly reduce the cost of drugs to American consumers, in particular patent reformation. For example, provide a 20 year patent when the drug company first registers rhe drug. Then when it is finally approved for market by the FDA, start the clock over again for another twenty years. That way the drug company can spread the recapture for its R&D over a far longer period than is currently the case, and that could easily lower drug prices without government intervention on pricing.
Jack –
“…I would rather pay more for drugs and get the R&D than I pay bubkas and not get the R&D.”
Surely there are some Frenchmen, Italians, Germans, and Norwegians (to name a few nationalities) who don’t want to die either? They just MIGHT to be willing to have their subsidized medical care programs pay a bit more for THEIR medications (in order to fund R&D). They could be paying quite a bit more and you (while paying the same amount they do) pay quite a bit less than you do now.
Exactly. R&D costs $. Most drugs in development don’t make it to the market and the ones which do have to be used as the vehicle to recover the costs of all the R&D investment. That said there’s no reason the US consumer should be paying anything like the 2 to 3 times often more than consumers elsewhere.
This plan basically sets reasonable boundaries on pricing by Pharma to equalize the prices across the developed world to a far more fair level. No way the US should be paying 2 to 3 times more than Nations of the EU, Japan, Australia, Canada,.Taiwan, Singapore. The rational response is for these developed Nations to STFU, be thankful for the many decades they were able to free ride on the backs of the USA and open up their checkbooks. The old globalist paradigm of the USA being taken advantage of is just about done and folks need to internalize the many changes that are gonna spring from this.
We’re paying that much more than others because they have price controls. I wonder how much they’re governments are paying to import these medicines?
The socialized health care systems in other countries will find it cheaper to let citizens die. Case in point is Canada, where the “health care” system recommends and will pay for suicide.
This price control policy will reduce research and innovation, it will not shift research costs to foreigners.
It will work, because we won’t be suckers for the whole rest of the world anymore. If we suffer, they’ll suffer worse, and something good will happen, good for us at least.
“in which drug manufacturers deeply discount their products to access foreign markets, and subsidize that decrease through enormously high prices in the United States.”
all made possible by usa political polices over the decades that has spent untold $$$$$$$$$$$$$$ to maintain the party when pols travel and to insure that the local welfare policies stay in tact
so as long as trumps policies replicate the tariffs agenda as in
reciprocity vs tax subsidies
americans win
when the middle class revolts against politicians taking money and NOT GIVING IT TO THEIR CAUSES ( we must have affordable housing…oh thanks for the $$$$ donation mr soros). they shout for
then and only then will this self infliction wounding stop
its not nor should it be illegal to give $$$ to pols
it should just be made “unfashionable” vs the above statement
Patents exist no only so the costs of developing the drug can be recouped but also to recoup the costs of all the failed drugs that were never brought to market. It also pays for the executives hugs salaries and the fancy buildings drug companies build. Something have to change.
A patent on a drug should only exist until the cost of R&D is recovered plus say 5 years. This should be enough and should still allow profit, fancy buildings, and excessive salaries. Just not as much.
“just not as much” then becomes ,once again, the government controlling the companies
and as we know that is the danger to the (tax paying)public
they get paid huge salaries b/c they make huge products people want/need
destroy the regulatory system that protects the con artists and merely enforce the laws that already state you cant defraud the public etc with jail time when appropriate
the job of the company as we know is to put out a superior product make lots and lots of money and reward their workers etc
the job of the government is to protect other companies that want to challenge other companies and to do so means no regulations
ONLY THE ENFORCEMENT OF LAWS that punish for crimes like fraud etc
regulations = money in the pockets of politicians and the fooling of the people with this “we will protect you” from these big mean companies ala the bernie sanders rhetoric ( and may rinos too)
enforcement of sane laws and jail time when appropriate insures americans get the best products and that there is true equality in the justice system
It is possible for two completely different things to be true at the same time, and not be fixable by a simple change.
1. Drug companies make out like bandits on certain drugs.
2. Drug companies lose tons of money on some drugs that never make it to market.
(also 3. Some drugs that make it to market are practically useless, and get power-sold to make back the money used to develop them.)
I’m a drug company. Through research costing $15m I have developed a pill to cure Pedal Paresthesia if taken daily. It costs me $1 to make a years worth of pills that I can sell in the US market for $10, with a potential market of 10m users. So I go for Foreign Country #1, which we will call EU. They will allow me to sell the pills, but only for $1 per years dose. I barely break even, BUT I agree to prevent a EU company from developing a competitor and selling it in the US for $4, or worse, producing the pills in a country we’ll call C and importing them for $2 per years dosage (Patent? What patent? This pill has..um…zinc in it. Totally different. Sue us. In EU court, or in C’s court. Good luck.)
Fine. Charge someone else the outrageous prices for a while, rather than it always being the US.
“Also, DTC helps eliminate a significant problem: Insurance.
Many insurance plans won’t cover popular and more expensive medicines.
Having DTC allows people not to worry about denials.”
Can you elucidate? If your insurance plan doesn’t cover Drug X, it doesn’t mean you are forbidden from buying Drug X. You can always buy it yourself from a pharmacy*. Why are denials a “difference” if you buy Drug X with your own money from a pharmacy, or from a DTC?
*Except, of course, if Drug X = Ivermectin, because special Democrat rules.
IMO the drug should have a transparent price that remains consistent regardless of who is paying. It should not change the price that an individual pays when using cash v uses an IN plan. Same for medical procedures and hospital billing. The cost to provide/deliver that billing item is X regardless of who is ultimately making the payment.
Patents serve an important function, but the way the Phrama companies use it is abuse. Rarely do the subsequent patents cover new material. Patent examiners and judges rarely have the expertise to evaluate the claims.
A typical problem with patents, not just for drugs. Minor changes to extend the patent.
If you want drug prices to be lower, then the duration of the patent needs to be LONGER, not shorter.
The problem here is, it costs a minimum of $2 Billion to develop a new product. The overwhelming majority of which is complying with the FDA approval process (which is another HUGE problem that, if addressed, would greatly reduce costs). By the time they bring the drug to market, the typical time remaining is a mere 7 years. After which, they have to turn over everything to any competing company that wants to make a generic version. All their research, testing data, even their production process. Everything needed to replicate their product.
The pill itself might only cost 25 Cents to produce. But, they have to recover their R&D costs or they go out of business. Or, stop even trying to create new products. And they have a mere 7 years to do it.
Double the duration of the patent, halve the cost of the drug.
As a musician, if I compose a new piece of music and copyright it, I get SEVENTY FIVE years of exclusivity. And there are ways to extend it beyond that, in 25 year chunks. For instance, Vivaldi’s “Four Seasons” is still under copyright and the man died in 1741. Not kidding.
And I don’t have a massive R&D cost. If I owned a pharmaceutical company, I’d only have 7 years.
The world has been freeloading on America’s back for decades and drug prices is just another of them.