On May 12, President Donald Trump signed a sweeping executive order (EO) mandating that pharmaceutical companies have 30 days to set lower prices for prescription drugs in the U.S. If drugmakers fail to do so, per The Associated Press (AP), the U.S. Department of Health and Human Services will force their hands.
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“We’re going to pay what Europe pays,” Trump said in a press conference reported by AP.
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Could Trump’s executive order really help lower costs for prescription meds? Also find out if it can also offset inflation.
It Could Trigger Lower Prices
In an ideal, yet unlikely, scenario, if prescription drug companies voluntarily reduce prices or reach an agreement with the Department of Health, retirees might see some savings on some prescription drugs.
But without clear incentive to do so, it’s unlikely drug manufacturers will accept reduced profits. The pharmaceutical industry made more than $100 billion in profit from U.S. sales, according to a press release from Vermont Senator Bernie Sanders.
At best, the Department of Health could negotiate agreements for Medicare recipients. In 2024, then-President Joe Biden successfully negotiated a cap on insulin and gave Medicare the power to negotiate drug prices. The law only covered 10 prescription drugs but is projected to save Medicare D recipients as much as $1.5 billion in out-of-pocket costs in 2026. Extending this legislation to other medications would yield additional savings.
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It Could Reduce Access to Necessary Medications
Pharmaceutical lobbyists, notably PhRMA, argued in a statement that lowering prescription drug prices could hinder research and development.
“It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America,” Stephen J. Ubl, the president and CEO of PhRMA, said in a statement reported by AP.
Trump’s executive order could also reduce patient access to life-saving medications and increase U.S. reliance on drugs from China.
It Could Have No Effect
In his White House press conference, Trump said, “Drug prices will come down between 59 and 80, I guess even 90%.”
The statement left it unclear how much savings, if any, Americans might see. It’s worth acknowledging that also Trump introduced a plan seven years ago, which failed to drop prescription drug prices substantially.