President Donald Trump has dramatically escalated his campaign against high medicine costs. He issued a stark ultimatum to 17 of the world’s leading pharmaceutical firms. In a move aimed at achieving lower pharmaceutical prices, the President demanded that they slash prices for American consumers. He wants them to match what is paid in other developed nations, setting a 60-day deadline for voluntary compliance.

The move targets industry titans including Pfizer Inc, Eli Lilly & Co, and Novo Nordisk A/S. Trump warned that if the companies do not act, his administration would “deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices”. Lower pharmaceutical prices are central to this strategy.

Markets React as Trump Targets ‘Big Pharma’

The aggressive stance sent immediate ripples through the financial markets. The Standard and Poor’s 500 Pharmaceuticals Index tumbled by 2.7%. This marked a significant reaction from investors aiming for reduced pharmaceutical expenses as part of Trump’s strategy to lower pharmaceutical prices.

Shares in major drugmakers felt the pressure, with Merck & Co and Bristol-Myers Squibb Co leading the declines. Eli Lilly saw its shares fall by 2.6% in New York trading. Meanwhile, AbbVie Inc, another recipient of the President’s letter, saw its earlier gains pared back. The market anticipates steps towards lower drug costs.

The President’s Demands: A Four-Point Plan

At the heart of Trump’s ultimatum is the “Most Favoured Nation” principle. This principle insists that the US should pay no more for drugs than the lowest-priced comparable foreign nation. The letters outlined four key demands in achieving lower pharmaceutical prices:

Medicaid Pricing:Immediately provide their entire portfolio of medicines at a Most Favoured Nation rate for the US government’s low-income healthcare programme, Medicaid, to achieve lower pharmaceutical costs.

Future Medicines Guarantee: Ensure all newly launched medicines are sold in the US at the lowest MFN rate across Medicaid, Medicare, and commercial insurance plans.

Global Negotiations: Negotiate tougher deals with “foreign freeloading nations” and pass the savings back to American consumers through a formal agreement with the government. This should prioritize lower pharmaceutical prices.

Direct Consumer Sales: Offer high-volume drugs directly to consumers and businesses at the same discounted prices currently given to third-party pharmacy benefit managers.

Trump added that he would leverage US trade policy to assist companies in negotiating higher prices abroad. This assistance would depend on using the financial gains to lower costs for Americans.

Innovation and Global Competition at Risk

The pharmaceutical industry has expressed strong opposition to the President’s proposals. The sector’s primary trade organisation, PhRMA (the Pharmaceutical Research and Manufacturers of America), contended that tying US prices to international benchmarks would hinder essential research and development. This could otherwise help lower prices for pharmaceuticals.

Alex Schriver, a spokesperson for PhRMA, said importing foreign price controls would undermine American leadership. It would hurt patients and workers. He stressed that the focus should be on reforming pharmacy benefit intermediaries and addressing the lower prices paid by other countries.

Schriver also invoked the spectre of rising competition from China, a known area of concern for the President. He said that at a time when China is threatening to overtake the US in biopharmaceutical leadership, we need to ensure America remains the most attractive place.

While PhRMA took a firm line, individual companies offered more measured responses. Pfizer stated it is working with the White House on access, focusing on affordability and how to lower pharmaceutical prices for Americans. Novo Nordisk said it “remains focused on improving patient access and affordability”. AstraZeneca, Amgen and GSK declined to comment.

Analysts Question Legal Standing

For many observers, this latest move is reminiscent of a similar executive order from Trump’s first term. That order ultimately failed after facing legal challenges. This history has led to considerable scepticism among analysts concerned about the feasibility of achieving lower medicine prices through this route.

Furthermore, critics point out that to participate in the Medicaid programme, drugmakers must already provide substantial discounts. This raises questions about how much additional saving could be realised. With the 60-day clock now ticking, the pharmaceutical industry faces a high-stakes standoff with the White House. Hopes for lower pharmaceutical prices remain uncertain.

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