Trump signs ‘Most Favored Nation’ order to cut drug prices

President Donald Trump signed a major executive order (EO), telling drug manufacturers to either lower the cost of prescription drugs in the U.S. themselves or see the government lower the amount they are willing to pay for medication.

The order will see the U.S. Health and Human Services Department negotiate lower prices for prescription drugs with companies directly over the next 30 days. If no deals are reached, the department will develop and implement a new “most favored nation” rule that ties the price the U.S. pays for medications to lower costs paid by other countries.

Dr. Swapna Reddy, Assistant Dean and Clinical Associate Professor at ASU’s College of Health Solutions, joined “Arizona Horizon” to discuss what the order means and what effects it could have on drug pricing.

“Basically, what he stated is that he wants the United States to join an ‘the most favored nation’ status for drug pricing in the world,” Dr. Reddy said. “The way to do it, according to the executive order, is that he directed drug makers to reduce all their non-generic prices of drugs to make those of the same drug prices in peer nations, so other developed nations.”

If drug manufacturers do not voluntarily lower drug prices however, the EO leaves open the possibility of other federal actions to punish them. “Federal investigations, direct to consumer sales, importing drugs, etc,” Dr. Reddy said.

While it is true many other developed countries have lower prices for drugs than are seen on U.S shelves, Dr. Reddy pointed out a key difference between the U.S and its peers that the EO cannot replicate alone.

“When you look at who those peer countries are that we’re talking about, we’re talking about places like France, we’re talking the U.K., we’re talking about Canada, etc,” Dr. Reddy said. “They all have some form of socialized or nationalized healthcare. All of those countries directly negotiate their drug prices or they set drug price caps.”

Dr. Reddy added, “Drug prices are not like a book and a shelf, and we can decide to pick that out of the shelf and say we want to do it just like that; it’s part of a larger health care system.”