Trump vows US drug price cuts of up to 80% in industry blow

[WASHINGTON] President Donald Trump said that he plans to order a cut in US prescription drug costs by mandating that Americans pay no more than people in countries that have the lowest price. 

Trump announced that drug prices will be cut by “59 per cent, PLUS!” in a social media post on Monday (May 12). 

Over the weekend, Trump informed that he would sign an executive order in Washington to institute what he called a most-favoured nation policy. While he did not provide details on how the plan would be implemented, investors grappled with the potential implications for the world’s largest pharmaceutical market.

Shares in US drugmakers dropped before the official open on trading in New York, with Eli Lilly, Pfizer, Bristol-Myers Squibb and Merck & Co all down. European drugmakers including Novo Nordisk, Sanofi and AstraZeneca slid, missing out on a broader market rally, while in Asia, the pharmaceuticals subgroup in Japan’s Topix Index posted its biggest one-day loss since August. 

Trump said that his plan would see the US “pay the same price as the Nation that pays the lowest price anywhere in the World”. Predicting that pharmaceutical prices could drop 30 per cent to 80 per cent in the US, Trump also noted that prices would likely “rise throughout the World in order to equalise and, for the first time in many years, bring FAIRNESS TO AMERICA!”

Americans pay the most in the world for medicines, fuelling innovation and driving the growth of the pharmaceutical industry. Drugmakers have said that revamping the system will slash revenue and stifle the development of breakthrough therapies that have the potential to lengthen and improve lives.

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Trump cited the industry’s argument, but said that it meant that “the ‘suckers’ of America” ended up bearing those costs “for no reason whatsoever”.

The US government already negotiates prices for some of the highest-cost medicines used in Medicare health insurance under the Inflation Reduction Act, which passed in 2022 under former President Joe Biden, with more slated to be added every year. The first two rounds of drug price negotiations have not included physician-administered drugs, but the next round might.

Trump’s Truth Social post – preceded by an earlier one that promised “one of the most important and impactful” posts he has ever issued – did not offer specifics on the order. He also did not outline potential limits on the policy, such as whether it would apply only to government programmes such as Medicare or Medicaid, if it would be limited to certain drugs or categories of drugs or if the White House sees a way to apply this more broadly. 

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While it is still unclear which drug companies will be affected by the executive order, investors are most worried about blockbuster drugs in Medicare Part-B and drugs serving large Medicaid populations, according to Jared Holz, a health-care strategist at Mizuho Securities USA.

Billionaire hedge fund manager Bill Ackman suggested that Trump might have been inspired by an idea he floated on X in March, when he said that the best way to reduce US drug prices “is to make it illegal for drug companies to sell the same drugs abroad for lower prices than they sell them for here”.

In his first term, Trump proposed a Medicare pilot programme for drugs with no low-cost generic competition that are given in doctor’s offices, saying that he wanted to bring prices in line with countries like France and Japan where they cost dramatically less.  That plan, which would have phased in over three years, aimed to ensure Medicare paid the lowest price offered to a group of 22 nations.

The effort was struck down in federal court after drug companies challenged it, claiming the administration had not properly carried out the rulemaking process. The Biden administration did not appeal that finding, and instead pursued legislation that led to the Inflation Reduction Act.