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Forbes
03-05-2025
- Health
- Forbes
Trump May Explore Most Favored Nation Model To Lower Drug Prices
The Trump administration may resurrect a prescription drug pricing initiative, the most favored ... More nation model, which would peg U.S. prices of certain medications to the prices paid in peer countries. The Trump administration may resurrect a most favored nation model which would peg what healthcare providers get paid for certain medications in the Medicare program in the United States to prices in peer countries. It's unknown which prescription drugs could be targeted or whether such a model could be implemented through executive or legislative action. Should it be pursued, it would face considerable challenges in terms of implementation. At the beginning of the year, I cited an interesting nugget posted by Fierce Pharma, which suggested that a most favored model could be revisited by the then incoming Trump administration. Eli Lilly CEO David Ricks had met with then President-elect Trump and pointed to the possibility of raising pharmaceutical prices in other wealthy nations as a key strategy to offset potential reductions in prices in the U.S. This seemed to hint that international price referencing for certain prescription drugs could be on the table during the second Trump administration, specifically a most favored nations model that would pay (reimburse healthcare providers) no more for high-cost physician-administered drugs than the lowest price drug manufacturers receive in other countries with similar gross domestic product per capita, adjusted for purchasing power. In 2018 and 2020, the Department of Health and Human Services proposed different methods to reduce Medicare prescription drug spending in the U.S. by tying prices of physician-administered drugs to those in other comparably wealthy countries. This effort was blocked in the courts. Nevertheless, Reuters reported last week that the Trump administration is again weighing the policy. There are several options that may be considered. Under an Affordable Care Act provision, the Centers for Medicare and Medicaid Services have the authority to test payment models through demonstration or pilot projects. In this context, the Center for Medicare and Medicaid Innovation—also known as the 'Innovation Center'—is authorized under the ACA to design, implement and test novel healthcare payment models to address growing concerns about rising costs, quality of care and inefficient spending. In lieu of an executive order that instructs the Innovation Center to pursue international price referencing in Medicare, legislators could pass a separate law. Or, the administration may try and leverage the existing Inflation Reduction Act, which already allows for drug price negotiations, except with a set of parameters and rules that does not include international benchmarks. These executive and legislative branch policy options would face formidable logistical and potential legal challenges. For one thing, what to do with prescription drugs that are approved in the U.S. by the Food and Drug Administration, but either haven't (yet) been granted marketing authorization in reference nations or are not (yet) reimbursed (and therefore lacking an ex-U.S. price). There is also an issue that arises when countries don't post what they pay for drugs on a net basis. Courts could intervene to block the federal government from doing something unprecedented in the U.S.: Setting prices based on international benchmarks, which rely on price controls. Using such references could violate the Commerce Clause contained in the U.S. Constitution. Should, however, international price referencing be implemented in some way, shape or form, drugmakers may react by delaying launches outside of the U.S. or withdraw their products altogether in certain countries. Alternatively, they could respond to the imposition of lower U.S. prices by attempting to re-negotiate contracts with reference countries to increase ex-U.S. prices. In fact, in a letter published by the Financial Times in April, CEOs of pharmaceutical firms urged the European Union to 'fairly reward innovation' with higher drug prices. But this would be very difficult to achieve, given the severe budgetary and legal constraints across Europe with respect to the prices of medicines. In addition, European systems of healthcare must contain costs to guarantee the sustainability of universal access to pharmaceuticals, which are often free for patients (or with nominal charges) at the pharmacy counter. Allowing for higher prices could undermine this objective. Capping what is paid or reimbursed to healthcare providers based on an international price referencing system would probably result in lower net prices than have thus far been achieved in IRA price negotiations. Politico reported last year that the Congressional Budget Office issued a report in which a most favored nation model would in fact yield comparatively sizable cost savings for the Medicare program. Nonetheless, if the Trump administration revives a most favored nation model it would be confronted with logistical and possible legal challenges that may be hard to overcome.
Axios
01-03-2025
- Business
- Axios
A new era of Made in America drug manufacturing
Last week, President Trump threatened tariffs on pharmaceuticals if manufacturers don't relocate operations to the U.S. On Wednesday, the CEO of Eli Lilly stood with Trump's commerce secretary in Washington, D.C., to announce a $27 billion plan to build four manufacturing "mega-sites" in the U.S. Why it matters: The commitment illustrates the dance much of Big Pharma is engaged in as it tries to make inroads with a new administration bent on reshoring business activity and reducing dependence on China. The big picture: Reshoring pharmaceutical manufacturing would be a shift for the industry, which still sources most drug ingredients from overseas and has seen its global supply chains buckle from disease outbreaks and natural disasters. Now, political winds from Washington could force a reckoning. Hanging over it all is Trump's focus on cracking down on economic competition from China. CEO David Ricks said his company's expansion would prove key to expanding U.S. capabilities in synthetic chemistry and reduce its reliance on foreign suppliers. The pharmaceutical giant — whose products include the blockbuster GLP-1 drugs Mounjaro and Zepbound — focused on its role in economic growth, saying its plan will create 3,000 jobs, as well as 10,000 construction jobs. "This is a national announcement, one that will catalyze American health, economic growth and global competitiveness when we see a significant ripple effect, a greater opportunity that will flow to thousands of Americans and their local communities," Ricks said. State of play: Lilly has a wide footprint in China and most recently announced a $200 million expansion of a manufacturing site in Suzhou. It also partnered with contract research firm WuXi AppTec on the active ingredient in anti-obesity drugs and a drug for lowering blood lipids, per Fierce Pharma. Lilly has been on a global expansion binge, launching multibillion-dollar plant projects in Germany and Ireland, per Fierce Pharma. The new plants announced Wednesday will come on top of a $3 billion upgrade to an injectables facility it bought in Wisconsin, as well as two new sites in North Carolina and Indiana. The company would not disclose how much of Lilly's manufacturing will occur at these sites, but said the new facilities won't replace others elsewhere. What they're saying: Ricks credited Trump's tax cuts from 2017, calling them "fundamental to Lilly's domestic manufacturing investments." When asked about the pain caused by tariffs, he said the company hopes medical supplies are exempt because that adds cost in the near term. "It's clear to everyone, including us here today, that the administration intends to use tariffs as a tool to drive the outcomes they're looking for to bring manufacturing capacity back to the U.S. In that sense, it's a stick or it's a punishment," Ricks said in response to a reporter's question. "But we point out here today, as a company, that actually tax reform was the carrot," he said. Between the lines: The pharmaceutical industry has been positioning itself as a key partner for Trump in addressing chronic illness. Yes, but: The Trump administration's pressure on the pharma industry to bring production to the U.S. may represent a shift from Trump's first term, when lowering drug prices and increasing price transparency were the stated priorities, Anna Chorniy, a health economist at Icahn School of Medicine at Mount Sinai, told Axios in an email. Bringing production to the U.S. could ultimately result in higher production costs, which could be passed on to consumers, she said. Efforts to onshore drug ingredients for security purposes don't do much if they're not targeted at generic drugs, of which the vast majority come from China, said Mariana Socal, associate professor of health policy and management at Johns Hopkins University.
