The letters say that other countries are 'freeloading' off the U.S. because its drug prices are, on average, three times higher than other nations and so produce substantial portions of the pharmaceutical industry’s revenue.Nam Y. Huh/The Associated Press
The White House has issued letters to 17 major pharmaceutical companies demanding they raise drug prices in other countries and use the revenue to lower prices in the United States within 60 days.
The letters, sent Thursday, say other countries are “freeloading” off the U.S. because its drug prices are, on average, three times higher than those of other countries and so account for substantial portions of the pharmaceutical industry’s revenue.
The Trump administration says the drug industry must follow most favoured nation pricing by offering U.S. Medicaid patients the lowest comparable international price. The administration also said it would use “trade policy to support manufacturers in raising prices internationally provided that increased revenues abroad are reinvested directly into lowering prices for American patients and taxpayers.”
The letters follow an executive order President Donald Trump signed in May that said drug makers should offer most favoured nation pricing within 30 days.
The White House said the letters were sent to AbbVie, Amgen Inc., AstraZeneca, Boehringer Ingelheim, Bristol Corp. Myers Industries Inc. Squibb, Eli Lilly, EMD Serono, Genentech Inc., Gilead, GSK, Johnson & Johnson, Merck, Novartis AG, Novo Nordisk, Pfizer, Regeneron and Sanofi.
The Pharmaceutical Research and Manufacturers of America (PhRMA), the U.S. lobby group for patented drug makers, has been critical of the most favoured nation policy, which it said Friday amounted to “importing foreign price controls,” although it agreed with the general goal of increasing prices elsewhere.
“To reduce price differentials with other countries, policymakers should rein in health care middlemen driving up costs for Americans and get foreign countries to pay their fair share for innovative medicines,” PhRMA senior vice-president Alex Schriver said in a statement.
The White House letters do not cite a legal authority in demanding lower prices, but they do threaten to “deploy every tool in our arsenal” if companies do not follow through.
The U.S. has a limited number of tools to control drug prices, unlike most other developed countries.
For example, Canada has three national bodies responsible for monitoring drug prices: the Patented Medicine Prices Review Board, a quasi-judicial body that intervenes if a drug is brought to market at an “excessive” price; Canada’s Drug Agency, which issues recommendations on whether insurers should cover a drug using criteria such as cost-effectiveness; and the pan-Canadian Pharmaceutical Alliance, which negotiates directly with drug makers on pricing on behalf of all federal and provincial public health plans.
The letters also reiterate a proposal from the executive order that would encourage drug makers to sell directly to consumers. Some companies have expressed interest in this route, as it would allow them to lower costs by cutting out industry middlemen.
“That would be one of the easiest ways to impact pricing for the patient without destroying innovation,” Thomas Schinecker, the chief executive officer of Roche Holding AG, told analysts on a July 24 call.
While the Trump administration tries to pressure drug companies to lower prices, it has also spent months threatening tariffs on the sector in a bid to get companies to move more manufacturing to the U.S.
Mr. Trump recently said pharmaceutical tariffs could go as high as 200 per cent, although there could be a phase-in period of a year or more.
The vast majority of pharmaceutical ingredients consumed in the U.S. are produced elsewhere, with a recent estimate from US Pharmacopeia suggesting domestic production accounts for only about 12 per cent.
That means tariffs could lead to drug shortages as inputs become more expensive and companies try to reconfigure their supply chains.