Pharma investors shrug off Trump threats

Toothless executive order ignores easy steps the new administration could take to lower drug prices.

“Spin straw into gold,” King Trump I ordered and pharmaceutical stocks soared. Investors knew drug firms already had the gold and there was no way HHS Secretary Robert F. Kennedy Jr., last seen swimming with his grandkids in contaminated Rock Creek, could carry out the order.

I am offering just a quick take this morning on the inanity of the president’s executive order demanding drug companies lower their prices or face the consequences. If he wanted prices equal to those negotiated in Europe and Japan, all he had to do was dust off the midnight regulation issued in late 2020 (after losing the election) that would have accomplished that. That rule, by the way, was withdrawn by the Biden administration because it was opposed by many members of his own party.

Or, he could have demanded the Republican majorities in both houses of Congress include so-called international reference pricing in his one big beautiful tax breaks for billionaires bill being marked up in the House today. Actually, he asked, but House Speaker Mike Johnson (R-LA) told him there was no support on the Republican side of the aisle for something that would benefit their voters.

To be fair, a good portion of the Democratic Party House and Senate members are also opposed to international reference pricing. Ditto for importing drugs from abroad, the other major threat in the executive order.

It is a bipartisan affair when it comes to refusing to rein in the outsized profits and bloated marketing budgets of pharmaceutical firms. Most of the science-based industry is headquartered and conducts research in the deep Blue enclaves of Boston, New Jersey/Pennsylvania, suburban Washington, D.C., San Diego and San Francisco/Silicon Valley.

Instead of taking concrete steps, Trump pulled another switcheroo. I’ll give you 30 days and then I’m turning the hot stinking mess over to RFK Jr. As senior writer Matthew Herper opined on STAT, “President Trump could have walked softly and carried a big stick. As pharmaceutical investors see it, he instead stomped loudly and wielded a wet noodle.”

Assuming the HHS secretary doesn’t catch another brain worm from his weekend swim, he does have another option that wasn’t included in the executive order. He could expand the Medicare drug price negotiating authority included in the Biden administration’s Inflation Control Act, passed by the Democratically-controlled Congress in 2022. Instead of negotiating for just 15 additional drugs each year, they could add 30, or 50, or have negotiations cover all branded drugs.

I doubt the Trump administration will get very far with its threat to force other advanced industrial countries with rational drug pricing systems to pay more for drugs. The order stated:

“The United States Trade Representative shall take all necessary and appropriate action to ensure foreign countries are not engaged in any act, policy, or practice that may be unreasonable or discriminatory or that may impair United States national security and that has the effect of forcing American patients to pay for a disproportionate amount of global pharmaceutical research and development, including by suppressing the price of pharmaceutical products below fair market value in foreign countries.”

Establishing “fair market value” is precisely how most foreign countries decide what they will pay for new drugs. First, their government-backed scientific panels determine new drugs’ medical value in terms of improved life expectancy and quality of life. Then, purchasing authorities use the studies to set a reasonable price. If drug companies refuse to meet that price, those countries don’t include the drugs on their reimbursable drug lists.

Fair market value in the U.S., on the other hand, is based on allowing drug firms to use their patent monopolies to set a price that is best described as whatever the market will bear.

I hope the new HHS team dusts off the international reference pricing rule and expands the Center for Medicare and Medicaid Services’ negotiating authority. We may know more in 30 days. Or, if it is anything like the daily changes in tariff policies, we won’t.

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