Will Trump's Plan Cut Drug Prices?

The U.S. pays more for prescription drugs than any other country. President Trump says it’s time to change that—with a bold plan to tie American drug prices to those paid in Europe and beyond.

In this episode of CareTalk: Healthcare. Unfiltered., hosts John Driscoll and David E. Williams debate whether Trump’s so-called Most Favored Nation policy will actually cut drug prices or just cause chaos.

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CareTalk is a weekly podcast that provides an incisive, no B.S. view of the US healthcare industry. Join co-hosts John Driscoll (President U.S. Healthcare and EVP, Walgreens Boots Alliance) and David Williams (President, Health Business Group) as they debate the latest in US healthcare news, business and policy. 

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Transcript

David: 0:00

The United States pays more for prescription drugs than any other country. President Trump says it's time to change that with a bold plan to tie American drug prices to those paid in Europe and beyond. But what will the so-called most favored nation policy actually do to cut costs? Or is it just gonna cause chaos? Welcome to Care Talk, America's home for incisive debate about healthcare, business, and policy. I'm David Williams, president of Health Business Group. And I'm John Driscoll, the chairman of UConn Health. John, let's start off with the basics. What is the so-called MFN policy?

John: 0:42

So it's a little bit unclear because the president's been for this before he dropped any interest. But the most favored nation po uh, policy would require conceptually that all. Uh, in the United States are priced at no more No, no, no. Higher than the lowest priced, averaged either of the industrial West, you know, the big countries like Germany, Japan, and the uk. Um, or actually the, the, the, the, the lowest price internationally, which could get as lowest Africa, and this could be pretty substantial. A most favored nation drug require, uh, pricing requirement for US pharmaceuticals for drug sold in the us. Could represent anywhere between a 50 to a 90% reduction in the cost of drugs to consumers in the US tomorrow.

David: 1:39

And John, this is very different than the traditional methods of controlling drug costs, which would be things like negotiation under Medicare rebates or nothing.

John: 1:47

Or nothing. Or nothing. I mean, the, the real, the, the reality, uh, uh, Dave, is that for American consumers, one out of every three prescriptions isn't filled, one outta three or one outta four, depending on the estimate, because prices are so high that the consumers can't even afford. Even with. Insured coverage, the out-of-pocket costs. And so I, I would argue that we've, we got a massive problem, and regardless of what people say is being done about it, consumers are still getting screwed by paying higher prices in the US than any other part of the world for drugs that are created, manufactured, and priced in the United States.

David: 2:31

It sounds fairly straightforward as healthcare policies go. Why is it a controversial policy?

John: 2:38

Because big pharma makes big bucks. Uh, you know, Dave, come on. You're acting like an innocent here. Pharma, pharma has the absolutely the, some of the highest margins of any business, uh, in the country outside of cigarette manufacturers. I mean, the margins are insanely high. Now. Part of those margins are appropriately high because they are creating. The drugs that are, that are doing things like curing cancer and sickle cell, and there's an extraordinary amount of innovation that is funded by some of the margin. But because the United States has historically the United States government not been willing to negotiate prices. With pharma, unlike any other industrial country, uh, we are paying more and, uh, actually, uh, uh, consuming less than folks in other parts of the world who can afford the drugs at the prices that their governments negotiate. And I'm talking about, you know, rich countries like Germany, the uk, France, Japan, they're all paying less. And for the drugs that are, are actually created in the us.

David: 3:48

So the president is often talking about, uh, other countries, uh, ripping us off and thinking in many cases. It doesn't make sense to me. You know, you know, you have free trade. Uh, there's countries make investments in all sorts of things, but this is an area where it seems like, hmm, maybe we are subsidizing the rest of the world.

John: 4:08

David, I mean, David, David, of course we are. I mean, the president is completely right here. We're being ripped off. Unfortunately, it's a little bit like the taco trade. You know, Trump always chickens out. He's already played this game in the first administration and, you know, perhaps, uh, you know, he, he actually came into office when he was. President the last time and talked about, uh, big deals and big discounts and getting a deal with pharma, and he got nothing, absolutely nothing. In fact, the co the, the ability to negotiate drug prices and the res and the reduction of cost in insulin, those were Biden policies that. Trump talked about in some cases during and, and actually made no progress as president, although when he was running for President against Biden, he some sometimes would mistakenly take credit for policies that Biden actually executed on as president to reduce the, the, the prices of things like insulin. But let's, let's be clear, the president's absolutely right here. Big Pharma has overstepped and is overcharging. Uh, Americans every day, and it's because they're not negotiating with anybody. David, did you realize that drug companies can raise their prices every month? Every month? I mean, there's there that, that's just remarkable when you think about the fact that they really rely on, for the most part, public dollars to create the research that funds the early development. That's from the US taxpayers. Uh, they actually rely heavily on Medicare and Medicaid government payers. To actually pay for the drugs, and yet they can raise prices at will. And consumers, you know, don't, you know, are increasingly in the US can't afford the drugs they're prescribed.

David: 5:59

John, it is right to note that, uh, under President Biden, you had the first real progress on drug pricing in the form of the inflation, uh, reduction act. Which, uh, so let's, let's, uh, let's, let's give credit where credit's due and let's talk about how. While Trump tried this in the first term, it didn't work, and why it might be different now. So the first time he tried it, you know, there was a legal pushback, there was political opposition, and it's just sort of complex to, to deal with, you know? Why might that be different now? Well, one is that there's a really increased bipartisan and public pressure for drug pricing reform. You see it in the form of, I'll let you talk about some of the, uh. What do we call it? Odd, uh, partners of bed, strange bedfellows, uh, in, uh, in Congress that don't

John: 6:40

get into personal relationships.

David: 6:41

David. Um, PBMs being demonized. And then I think some of the legal and administrative groundwork has been laid, uh, from some of those, uh, you know, past, uh. Failures. So I think there's more of a chance of it actually working. So you don't wanna talk about strange bedfellows, John? I,

John: 6:55

I, I, well, let's, let's, let's start with the history of this. The president really is right here. And, and the reason why you're seeing your, the, the bipartisan. Uh, act, uh, movement in Congress on between senators and the Republican and the Democratic side. The Peter Welsh from the People's Republic of Vermont and Josh Hawley, a very far right wing Republican is because both the far right, if you listen to Republican talk radio or democratic talk radio, that doesn't really exist, uh, the progressive and the very conservative commentators agree that. Big pharma companies are ripping off the American consumer 'cause their, their constituencies are feeling it when they go to the, the drug store and they can't afford the drugs. So there, there's a lot of, uh, interest there. But the, the question here is whether the president really wants to push it. I mean, he came in to the administration, um, with this as a key priority and, and look, if he could deliver on this for the American people, it would be an amazing success. But big pharma, very publicly has said they breed a huge. Uh, amount of relief when what happened is it's kind of, again, taco Trump. We didn't see. Anything of a legislative nature. In fact, there's sort of an ag uh, there, an agreement to agree and conversation. And when you push on what Secretary Kennedy and Administrator Oz have talked about, it's really they're fixing to have a conversation about fixing the drug problem. And I will tell you that pharma has won this fix and to have a conversation, conversation for the last 50 years. Drug prices have gone up. It's a major source of, of, of, of healthcare inflation. And it's a major source of excess corporate profits often for just the extension of patents, for generic drugs. I mean, one of the major sources of large pharma profitability has been gaming the patent system, which actually in the first Trump administration, the administrators took on. Um, so I do think there's, there's potential. Real policy progress here, but based on what pharma has is saying the the com, the White House has not committed to actually pass a law. It hasn't committed to take any particular executive action here. It's just fixing to have a conversation. And I don't know David, but that doesn't sound like. Real pressure to me. What, what do you think?

David: 9:22

Well, John, we have all these conversations, whether a fix and two or not, and it hasn't resulted in any prices dropping or maybe anything else. So I agree. You know, the, the, this is also, this issue is emblematic of some broader issues. These very strongly worded executive orders, um, do not actually carry the weight of law. I. When you say 30 days, you're gonna do this, especially for something that's very complicated, it's just not gonna happen. And you can wait out the clock and wait for the next, uh, excitement to occur. And John, I know you, you accused me before of being naive and I'm, I'm at the risk of sounding naive again, I'm not gonna ask a naive question, a basic question, which I think gets to part of the challenge here. What exactly is the price of a drug in the us? We say we pay more. What, what is the price?

John: 10:11

Well, I, I, I think BE you know, at, at, uh, the glib answer is what the consumer currently has to pay out of pocket and what the, that consumer can't afford in, in, in one out of three or one out of four cases, which is super painful. Um, but the pricing of drugs goes through a lot of. Twists and turns because drugs are, uh, covered drugs by insured entities. You know, when you're getting it through your commercial health insurance, Medicare or Medicaid are often going through the insurance company who often outsources it to something called a pharmacy benefits manager, which is the specialty of actually negotiating with. The, uh, the big, big pharma for the insurer, for allegedly for the consumer. And because of the, the multiple parts of the supply chain, kinda how the drug gets from, uh, research creation, manufacture, distribution, and then eventually to your local drugstore or through the mail. Uh, there's a lot of. Fingers, uh, or hands touching that drug. So the price goes up and down a fair bit, but I wouldn't be confused by that. The bottom line is that we, if we have a drug, uh, uh, industry, um, that we, we created, um, that's. That's somehow that's, that's, that's getting the majority of the profits in the system on a percentage basis and sometimes in a real total dollar basis and consumers can't afford it. We have a system that's broken and we need to fix it, but there's a lot of, uh, of hands that, that, that touch drugs. David,

David: 11:48

John, this is, in a way I was thinking about this most favored nation as a. Kind of logical extension and big expansion of the idea that's been kicked around for a long time about reimportation of drugs from Canada, which is our next door neighbor, which has many of the same products. And the drugs are a lot, a lot cheaper. So this is in a way of saying we're not gonna actually physically reimport them, which seems stupid anyway, but we're just gonna take the price that others have. Um, others have negotiated

John: 12:14

that. That's exactly right. And, and let's not confuse most favored nation 'cause it's sort of a, that's a technical phrase. From trade, this is what, this is, what people are really aiming at is the fair average price for other industrialized countries. And just to be clear, uh, the prices for drugs, uh, that are identical to those in the US are 50 to 90% cheaper in, in Montreal than they are in Montana. That's crazy at some level now, the, there's been a lot of interest in reimportation of drugs from either Europe or Canada. But the reality is those there's not enough excess drug, uh, supply in those countries and pharma controls that supply. So the minute you were to increase Reimportation in, you know, the state of Connecticut's. Um, uh, passed a law saying that, uh, they're looking into it. Florida has been trying to do it for over a year now, but that's just a, it's just a sideshow. The real question is, can we leverage the bipartisan pressure to get fair prices for the us, um, um, to, to get pharma to the table. Uh, Josh Hawley from Montana and Peter Welsh from Vermont have a bill that would say, look, we just, we just want. Drug prices in the US to be the average of the six largest industrialized countries. Like just give us a, make sure the US has a fair price and if you want to charge more, you have to pay a a penalty. That's 10 times the difference between what you wanna charge and what those countries have to pay. It just doesn't seem to be crazy to me that American consumers shouldn't have to pay any more than someone in London or Paris or Tokyo should pay. I just think that's just.

David: 13:56

So, John, we've done a good job, I think, laying out what this policy, uh, proposal actually is and what some of the initial reaction to it, uh, is and why it makes general sense. Let's close out on a couple of topics. One, let's talk about some of the unanticipated, uh. Downstream consequences of this and then potentially how the parties are gonna react besides just, uh, you know, fixing to have a conversation and then it's all fixed after that. So maybe starting with these downstream consequences, I've heard concern about the Medicaid rebate program and especially about the three 40 B program. Can you say what those are, first of all, and whether that's those concerns are valid.

John: 14:35

Medicaid. Um, that's the state, the federal state program that that covers, um, health insurance for the poorest and the poorest and the disabled in the US that covers about 70 million Americans. Um, they currently have access to something called Medicaid Best Price, which is the best price available for, um, for consumers in the Medicaid program. Um, and there's also something called three 40 B where. Hospitals that are serving high need populations in like urban or rural settings also get a, uh, have the ability to buy drugs at a very low price and then are able to get reimbursed at a higher price, which is, and it's effectively a. A subsidy to those vulnerable hospitals that's paid for with x, the margin that would otherwise go to, uh, the, the, the, the, it would add to the excess profits of the big pharma manufacturers. And so, but, but I, I, I think let's not get distracted whether it's a focus on PBMs or supply chain or three 40 B or Medicaid best price. Pharma's keeps throwing all of these other issues in here. Medicaid best price in three 40 Bs are simply ways to shift some of the burden of the excess profits away from a system that serves the poor. And back at pharma, what pharma's trying to do is just muddy the waters in the conversation. I think pharma has a legitimate argument. Around novel Biotherapeutics that are new therapies where they should be able to charge a high price around, uh, these really novel, new technologies. But 70% of the profitability of, uh, of, of, of pharma in general is, you know, standard chemical compounds. Uh. Generics, uh, branded drugs that have been out there for a while, that around which there's no novelty at all. There's just, we're just paying excess profits to the, the executives and the shareholders of those companies. And so I think it would be, it'd be more constructive for pharma to really make a very, uh, to, to make the legitimate argument that we have, to make sure that they're paid a lot to do more with new drugs and be honest about how. They're charging too much to us consumers for old drugs, for which they've already been paid for multiple times.

David: 17:04

John, I think it's very fair. I was just pointing out that there may be some surprising, uh, constituencies, uh, here that would be opposed to so, oh, I, I,

John: 17:11

no, you're, you're, you're, what, what pharma's trying to do is to, if, if the federal government takes money from one part of their. Um, uh, you know, sort of excess profit pool to sh shift it away from something else where they're subsidizing somebody else who's on a government benefit. I think that's shameful, but I'm, it's not unexpected because their attachment to their own current and future profitability is pretty aggressive, and they have, they have the largest amount of lobbyists in Washington and right now. You can kind of buy your way to, to policy apparently. So they are, they're worked very aggressively investing in, uh, in DC lobbyists to muddy the waters and find new ways to make more money, even if there's some agreement on some discounts somewhere else in the supply chain. So it shouldn't supply surprise us, but neither should we let it distract us from what's a a, a genuine structural flaw where our consumers are paying too much. For drugs that cost a lot less anywhere else in the Western world.

David: 18:18

So let's talk about, uh, something that pharma might do if it gets beyond the, uh, conversational stage and this were actually to be implemented. So we talked about at the simple level, uh, let's say there's six countries that you're averaging the price from. Well, right now, uh, you know, a country like New Zealand, I don't know if they're on on the list, it's a tiny country in terms of population known to, uh, be pretty cheap about the drug pricing. Right now, say, you know, who cares? I'm gonna have not that many customers. I'd rather have some rather than not that many, and I'll just give 'em a low price if all of a sudden the price that I offer in New Zealand is gonna have an impact on the price in the us. Is a pharma company gonna act differently? Are they gonna raise the price? Are they gonna actually not participate in those markets? Yeah,

John: 18:57

I, I, I, I would expect that in the large industrial countries. This is where the president's really got a legitimate point. Why shouldn't people in England, France, Italy, Japan, Germany for example, pay a little bit more so we can pay a lot less? Uh, I, I think that's completely reasonable and I would expect that pharma would raise the prices abroad. Um, but you know, the GLP ones, which are really transformative drugs, cost a thousand dollars a month in the US and a hundred dollars a month in the uk. That's crazy. Um, there are drugs that, uh, uh, cost, you know, a thousand dollars, uh, uh, uh, you know, let's say a hundred dollars, uh, uh, a month in, uh, in New York City. Then in Egypt costs like $5 a month. There, there, the, the pricing differential between countries that small countries. Well, Egypt's not that small, but really third world countries, uh, and industrial countries in the us, everybody's almost an order of magnitude cheaper on any, on any, on any drug. And that's crazy. But I think certainly other wealthy western countries can pay a lot more. And frankly, that's where a lot of the drugs are going. And so I, I think that's a, that's where the president has a really legitimate argument. I just like him to put some muscle behind this the way he has in, um. On, on some other policies, like, you know, lowering taxes for super rich people.

David: 20:28

Well, that's it for yet another episode of Care Talk. We've been talking about most favored nation status as a result, as it, uh, attempts to reduce the price of drugs paid here in the United States. I'm David Williams, president of Health Business Group,

John: 20:42

and I'm John Driscoll, the chairman of Yukon. If you liked what you heard or you didn't, we'd love you to subscribe on your service.