By Lev Facher and Nicholas Florko
President Trump on Friday said his administration would soon issue an executive order mandating a “favored nations” policy in which U.S. payments for drugs are capped at the lowest price paid by either a manufacturer or a developed country.
“Why should other nations — like Canada — but why should other nations pay much less than us?” Trump asked. “We’re working on a favored nations law where we pay whatever the lowest nation’s price is.”
The phrase “favored nations” is sometimes used in contracts to ensure that a purchaser of a good or service receives terms at least as favorable as any other purchaser. In other words, the clauses ensure no one else gets a better deal than the “favored nation.”
It was not immediately clear to what extent Trump’s announcement differs from one of the White House’s signature drug pricing proposals: an international price index that would similarly cap U.S. drug payments based on an average of prices paid in an index of developed nations.
That proposal, however, is only a pilot program, meaning it would only be tested until 2025 and would only apply to a subset of physician- administered drugs. The administration is also developing that proposal through the formal process for federal regulations, not through an executive order. Last month the administration moved to formally advance that proposal by submitting it to the White House’s budget office for review.
A Department of Health and Human Services spokeswoman said in a statement that the administration is “firmly committed to pursuing any and every solution — including importation and most favored nation policies — that will deliver real results and keep American patients safe.”
The spokeswoman referred further questions to a White House spokesman, who declined to elaborate.
While Trump has long fixated on the high cost of prescription drugs, his administration has yet to formally enact its most aggressive drug pricing reforms. The international price index proposal remains under review, and the administration has not finalized a separate administration proposal effectively eliminating most rebates paid by drug makers to pharmacy benefit managers.
A rule requiring drug companies to disclose list prices in television ads, however, takes effect later this month.
As Trump gears up for a reelection campaign in 2020, he has continued to cite high drug prices as an administration priority. Polling repeatedly shows health care costs as a top issue for voters across the country and shows drug manufacturers to be deeply unpopular.
While using payment caps derived from foreign prices has become a signature Trump administration push, health secretary Alex Azar warned lawmakers over a year ago that tying U.S. drug prices to overseas prices might cause companies to avoid foreign markets.
At a June 2018 Senate hearing, Azar said that he looked at the idea of giving the U.S. “favored nation” status, but said “I don’t think it would be effective” because companies could simply raise prices abroad to gain leeway in setting prices here.