President Donald Trump last week sent letters to 17 of the biggest drugmakers in the world demanding they reduce the prices of select drugs in the United States to the rates they charge other wealthy countries, and on Tuesday, said pharmaceutical tariffs could reach as high as 250%.
Trump demands drugmakers lower US prices
Trump posted the letters on Truth Social that were sent to the CEOs of companies including Novo Nordisk, Eli Lilly, GlaxoSmithKline, Abbvie, and Pfizer, demanding a "binding commitment" to a most-favored nation policy of drug pricing within 60 days.
During his first term, Trump unsuccessfully attempted to enact a most-favored nation policy to reduce drug prices for Medicare. The plan would only have applied to 50 drugs administered at clinics and hospitals paid for by Medicare, however a federal court blocked the policy, ruling the administration had skipped steps in the policymaking process.
In May, Trump signed an executive order asking drugmakers to voluntarily reduce the prices of key medications in the United States or risk new government regulation and legal investigations.
The order also called 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."
Since then, many drugmakers have submitted proposals to the administration, but in his Truth Social post, Trump said most of those proposals were inadequate and were "shifting blame and requesting policy changes that would result in billions of dollars in handouts to industry."
The letters also said that pharmaceutical companies need to establish a direct-to-consumer sales method so manufacturers can "cut out middlemen" and sell drugs at the prices private insurers pay.
Trump added that if drugmakers "refuse to step up, we will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices."
The White House said the administration would use trade policy to support drugmakers in raising prices abroad to match U.S. prices if the increased revenues are directly reinvested into lowering drug prices for American patients.
Wall Street analysts at the investment bank Leerink said in a note to investors last week that "the demands outlined in the open letter are unachievable" partly because of how hard they would hit drugmakers' revenues and profits.
"Importing foreign price controls would undermine American leadership, hurting patients and workers," said Alex Schriver, a spokesperson for the Pharmaceutical Research and Manufacturers of America (PhRMA), the main lobbying group of the pharmaceutical industry.
However, some pharmaceutical executives agree that European countries pay too little for drugs. "I personally believe that the president is right to say that price equalization should happen," said Pascal Soriot, CEO of AstraZeneca. "The cost of R&D in our industry should be shared more fairly across rich countries."
Soriot added that AstraZeneca has submitted proposals to the Trump administration "that would lead to price reductions of our products."
In the letter, Trump also urged drugmakers to increase prices in other wealthy countries but said they shouldn't keep that additional revenue for themselves but should instead pass it on to Americans in the form of lower prices in the United States.
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Trump says pharma tariffs could reach 250%
Meanwhile, in an interview with CNBC on Tuesday, Trump said that planned pharmaceutical tariffs could eventually reach up to 250%.
"We'll be putting initially a small tariff on pharmaceuticals, but in one year — one and a half years maximum — it's going to go to 150% and then it's going to go to 250%," Trump said. "We want pharmaceuticals made in our country."
Trump added that an announcement would be coming "within the next week or so" alongside a new tariff on semiconductor imports.
Back in April, Trump said that pharmaceutical imports would soon be subject to "major" tariffs as part of an effort to drive manufacturing back to the United States.
Then, in July, Trump suggested he would impose much higher tariffs. "If they have to bring the pharmaceuticals into the country, the drugs and other things into the country, they're going to be tariffed at a very, very high rate, like 200%," he said during a Cabinet meeting.
However, Trump added he would "give people about a year, year and a half" to prepare for any pharmaceutical tariffs.
Later in July, a White House official told STAT that Trump's tariffs on pharmaceuticals coming from the European Union (EU) would be set at 15% following a trade agreement reached by the United States and the EU.
A spokesperson for PhRMA wouldn't comment on Trump's most recent remarks but said that tariffs on medicine would be "counterproductive."
A report from Ernst & Young commissioned by PhRMA in April found that a 25% tariff on pharmaceutical imports to the United States could increase national drug costs by almost $51 billion a year.
(Robbins, New York Times, 7/31; Weixel, The Hill, 7/31; Reed, Axios, 7/31; Gardner, BioPharmaDive, 7/31; Constantino, CNBC, 8/5; Reed, Axios, 8/6; Dunleavy, Fierce Pharma, 8/5)
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