President Donald Trump incorrectly placed the blame for high prescription drug prices in the U.S. on foreign nations, making the comments Monday when signing an executive order intended to lower their cost.
The order sets a 30-day deadline for drugmakers to electively lower prices in the U.S. or face new limits in the future over what the government will pay. If favorable deals are not reached, Health and Human Services Secretary Robert F. Kennedy Jr. will be tasked with developing a new rule that ties prices the U.S. pays for medications to lower prices paid by other countries.
Here’s a closer look at the facts.
CLAIM: “We were subsidizing others’ healthcare, the countries where they pay a small fraction of what — for the same drug that what we pay, many, many times more for, and will no longer tolerate profiteering and price gouging from Big Pharma. But again, it was really the countries that forced Big Pharma to do things that frankly, I’m not sure they really felt comfortable doing. But they’ve gotten away with it, these countries. European Union has been brutal, brutal.”
THE FACTS: This is misleading. Prices for most prescription drugs — unbranded generics are the exception — are higher in the U.S. than they are in other high-income countries. But, experts say, it is in large part the way drug prices are negotiated in the U.S. that drives up costs.
“There are structural differences in the way that we price drugs in the United States and in the way that other developed, industrialized countries price drugs,” said Mariana Socal, an associate professor of health policy and management at the Johns Hopkins University who studies the U.S. pharmaceutical market. “And those differences really are the ones that account for these differences in price that we see at the end of the day.”
A published by the RAND research organization found, using 2022 data, in the U.S. were 2.78 times higher than those in 33 comparable countries across all drugs. Brand-name drugs represented the largest gap. The U.S. made up 62% of sales out of $989 billion of total drug spending among the countries studied, according to the report, but only 24% of volume.
According to experts, drug companies in the U.S. are generally able to price medications higher in the U.S. because the country’s drug market operates as a fragmented system where companies negotiate with individual insurers or pharmacy benefit managers, commonly known as PBMs. Many countries with lower costs have one regulatory agency that negotiates prices on behalf of the entire population, a significant bargaining chip given that drug companies can’t divide and conquer as they can in the U.S. If a regulator walks away, the company loses out on profits entirely — in other words, something is better than nothing.
“Anything you can do to kind of bring more bargaining power to the table against the drug companies by making a decision for more beneficiaries, or more patients, that’s going to put more downward pressure on drug prices,” said Courtney Yarbrough, an assistant professor of health policy and management at Emory University.
As it stands, drug costs in the U.S. and other countries are not directly linked, though they can affect each other. Trump’s executive order establishes a “most favored nation” pricing model should drugmakers not voluntarily lower costs. This means that the U.S. would peg the cost of prescription drugs to the lowest prices in comparably developed countries. It’s unclear what — if any — impact the order will have on millions of Americans who have private health insurance. The federal government has the most power to shape the price it pays for drugs covered by Medicare and Medicaid.
But the U.S. paying less for prescription drugs doesn’t mean other countries will automatically pay more. For example, Yarbrough explained that instead of agreeing to higher prices, other countries could simply enter into secret arrangements for increased discounts and then hide what they actually pay.
“We’re not in a static global pharmaceutical market,” she said.
Manufacturers, wholesalers, PBMs and other members of the supply chain also have a motivation to maximize profits, not lower costs for consumers. In this spirit, manufacturers often use patents to make it impossible for cheaper versions of drugs to come to market. Although he repeatedly defended pharmaceutical companies at Monday’s news conference, Trump simultaneously threatened the companies with federal investigations into their practices.
“There are no saints in this industry, these are all for-profit companies,” said Geoffrey Joyce, director of health policy at the University of Southern California’s Schaeffer Center. “Their incentives are all wrong. Everybody makes more money off of higher list prices, so they just push list prices up.”
