The fight is real: Donald Trump is waging war on drug prices that cripple families, and Big Pharma now stands on trial before the American people.
America is a
country where a single pill can cost more than a week’s groceries, and somehow
I am told this is the price of progress. America has built a pharmaceutical
empire where innovation is the crown jewel, but the crown sits heavy on the
heads of ordinary citizens who pay three times more for their medicine than
people in other wealthy nations. The irony is rich: the land of the free has
drug prices that chain its people.
President Donald Trump has promised to break those chains
with his so-called most favoured nation rule. He has thundered that if
drug companies do not lower their prices to match the cheapest rates in other
rich countries by September 29th, he will unleash every tool in our arsenal
against what he calls abusive drug pricing. And if that threat was not
enough, he has promised a 100% tariff on branded drugs starting October 1st
unless companies move their factories to American soil. In theory, this sounds
like the cavalry riding to save the day. In practice, it may be a stampede that
tramples innovation under its hooves.
The numbers cannot be denied. In 2022, American drug
prices were more than three times the average in other rich countries. America
shoulders 70% of global pharmaceutical profits despite only half of global
sales. That is not just a statistic—it is a sign that the American patient has
become the world’s most reliable cash cow. Drug companies fatten their profits
on our wallets while selling the same products for far less abroad. As the
proverb goes, the cow that gives the most milk is also the one most often
milked dry.
The structure of the American system makes this madness
possible. On the supply side, the drugs we consume rely on ingredients churned
out in low-cost factories in places like India, while research happens in the
U.S., Europe, and increasingly China. On the demand side, however, we do not
have a government standing firmly at the bargaining table. In Europe,
governments stare drugmakers in the eye and demand fair prices. In America, we
have a web of insurers, employers, and middlemen called pharmacy-benefit managers,
or PBMs, who twist the system to their advantage. Medicaid and Medicare cover
nearly half the population, but they only negotiate prices on a handful of
drugs. Even Joe Biden’s Inflation Reduction Act—hailed as a breakthrough—will
only allow Medicare to negotiate on ten drugs in 2026, 15 in 2028, and 20 in
2029. At this pace, I may need a prescription for patience before I ever see
the real benefit.
Patents add fuel to this fire. In 2024, 90% of the $490
billion Americans spent on prescription drugs went to branded, patent-protected
drugs that have no generic alternatives. Branded drugs make up only 7% of
prescriptions, but they devour the lion’s share of costs. It is like a banquet
where a few guests eat most of the food while everyone else goes hungry. And
yet, drugmakers defend this feast by arguing that Americans fund the innovation
the rest of the world enjoys. According to RAND data, other governments pay
57–75% less for the same pill after rebates and purchasing power adjustments.
Some say this means Americans are paying too much; others say foreigners are
paying too little. Either way, the patient in the U.S. gets the shorter end of
the stick.
Trump’s answer to this puzzle is simple in his mind: stop
the rip-off. Yet his MFN plan is clouded in uncertainty. He has not explained
how the prices will be defined or enforced. Will it cover government programs
only? Will it include private insurers? Will it demand legal changes? No one
knows. There are whispers that the FDA might step into the pricing arena for
the first time, expediting drug approvals for firms that pledge to equalize
global prices. Officials even toy with a “TrumpRx” website to link patients
directly with cheaper suppliers. But even these flashy ideas may not survive
legal battles. The last time Trump tried a narrow version of MFN in 2020, drug
companies dragged him to court and stopped it cold.
The potential fallout is not small. Analysts at Jefferies
predict that tariffs and MFN pricing together could slash drugmakers’ earnings
by a sixth. Already, the stock prices of pharmaceutical firms in the S&P
500 have dropped 4% this year, even while the overall index rose by 13%.
Executives warn that a 10% drop in expected revenues could cut new drug
innovation by as much as 15%. This is not just corporate whining. Developing a
drug takes a decade and costs over $2 billion. Less than one in ten candidate drugs
ever reaches the market. A patient may shout for lower prices today, but
tomorrow that same patient may be left waiting for a cure that never arrives. If
you kill the goose that lays the golden egg, you may end up with no egg at all.
Drug companies, of course, are not just sitting still.
They may raise list prices abroad to push up the MFN benchmark, then quietly
hand out secret discounts overseas to keep their foreign buyers happy. They may
delay launches in poorer countries so that low prices there do not set a
precedent. They may even change drug formulas to make comparisons harder. A
2023 study already showed that MFN-like rules in Europe delayed launches in
low-income nations by up to a year, while doing little to reduce prices in wealthy
countries. If America forces its own version of MFN, it risks exporting that
same delay worldwide.
And tariffs? They will sting, but perhaps less than
advertised. Generics, which make up 90% of prescriptions, are exempt. Companies
that invest in U.S. plants are spared too, and many have already promised to
build them. But factories take years to rise, and costs will climb once they
are running. In the end, tariffs may add more smoke than fire.
Meanwhile, drugmakers point the finger at the middlemen.
IQVIA data shows that in 2024, American drug sales topped $1 trillion, but
manufacturers pocketed only $487 billion after rebates and discounts. More than
$500 billion went to intermediaries, especially PBMs. With three firms
controlling nearly 80% of prescription claims, they act like toll collectors on
the highway to health. They profit from high list prices, encouraging the very
inflation the president wants to fight. Regulators are circling PBMs, but so
far, drugmakers remain the public villains.
Some companies are experimenting with direct-to-patient
sales, offering blockbuster drugs like Eliquis at 40% discounts and obesity
treatments at half-price. But such models only work for simple medicines.
Complex therapies still depend on the entrenched network of insurers and PBMs.
So here we stand: a nation with sky-high prices, a
president wielding tariffs and MFN rules, and an industry warning of fewer
cures. I cannot ignore the absurdity. We live in a country where the same pill
costs a fortune here and a fraction abroad, and the man promising to fix it may
end up breaking the system instead. The road to hell is often paved with
good intentions, and Trump’s plan, however bold, may prove that truth once
again. If America’s most inventive sector spends the next four years surviving
instead of thriving, we may all pay the price—not just at the pharmacy, but
with our health.
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