Trump pushes for 'most favored nation' drug pricing policy

According to a White House fact sheet, recent data shows that Americans pay three times the price for brand-name drugs as other Organisation for Economic Co-operation and Development (OECD) nations — even after accounting for manufacturer discounts provided in the United States — despite the fact the United States funds roughly 75% of global pharmaceutical profits. The executive order asks drugmakers to voluntarily reduce the prices of key medications in the United States or risk facing new government regulation and legal investigations.

The executive order calls on federal agencies to investigate why European countries get lower drug prices than Americans and "ensure foreign countries are not engaged in practices that purposefully and unfairly undercut market prices and drive price hikes in the United States."

According to a White House official, HHS will also negotiate direct-to-consumer prices with drugmakers "where appropriate," with an aim to achieve a "most favored nation" price for more drugs. This policy would make U.S. drug prices more comparable to other countries, which may be three times lower for brand-name drugs. 

Drugmakers receive few details about drug price negotiations

According to STAT, there has been little concrete information about the most favored nation drug pricing policy, including which drugs would be included and specific price targets. Instead, a White House spokesperson said the price targets drugmakers should aim for are the lowest prices offered by peer nations.

So far, drugmakers' discussions with the federal government about the policy have mostly focused on high-level ideas about the pharmaceutical market rather than pricing or other specific actions.

"The meetings were cordial, but they were not digging into the substance yet," said Pfizer CEO Albert Bourla. "It is just trying to understand high-level ideas and no commitments."

"Conversations are ongoing," said Merck CEO Robert Davis. "No clarity yet on where it's going to go."

According to people familiar with drugmakers' strategies, companies may be reluctant to make any pricing commitments in response to Trump's order, as there is a possibility that it could be overturned in court. However, drugmakers may also be concerned about the Trump administration singling them out if they don't comply with the order, STAT reports.

Currently, health executives are "very concerned about the messaging and the tone" in their responses to the administration, an advisor to drug companies said.

Amid ongoing uncertainty in the pharmaceutical industry, Karl Gregor, VP of pharmacy advisory services at Optum Advisory,* emphasized the need for actuaries and pharmacists to talk to one another and figure out how to manage these different shifts.

"Given the current pace of drug development, the clinical nature of new drugs, expanded uses of some existing drugs, and, of course, the evolving regulatory and policy environment, correctly planning for new therapeutic alternatives and forecasting for future drug costs, in general, has become more complicated," Gregor said. "It is critical that stakeholders across the pharmacy ecosystem are working together to anticipate and evaluate changes like the pharmaceutical industry pricing concession proposed by the administration."

"Predicting and managing future drugs costs are ultimately dependent on drug pricing and utilization rates. Both factors are dependent on regulatory and policy changes, among other complex market considerations," said Ian Smith, actuarial senior director of pharmacy advisory services at Optum Advisory. "To reduce future uncertainty associated with potential changes in variables like drug pricing, we work closely with our pharmacy colleagues to define, quantify, and forecast a range of scenarios that could ultimately play out."

*Advisory Board is a subsidiary of Optum. All Advisory Board research, expert perspectives, and recommendations remain independent.