I see a sea change coming on drug pricing from Trump 47
President Trump is famous for his fluidity on issues. He is unpredictable on healthcare and that is not more true than on drug price reform.
At various points of Trump 45, the president was proposing radical drug price controls that had never been seen before from a Republican president. In the case of Medicare Part B, he proposed that providers negotiate prices for the physician-administered drugs as an international reference pricing scheme rolled out over time. What’s more, he wanted most favored nation (MFN) pricing, so the U.S. price would be pegged to the lowest price in the rest of the world. The proposal did not go anywhere because of major process issues, but at the time Trump said he would do the same in Medicare Part D, the retail drug program.
Since leaving office and returning, Trump has been a bit all over the map on drug price reform. In one breath, he has signaled abandonment of such proposals and friendliness for Big Pharma brand drug makers. In the next breath, he is declaring that maybe he will attack drug prices after all.
So where does Trump stand on drug price reform?
Yes, where does he stand? It is a tough question and may depend on the last policy maker he speaks with. His administration is a curious mix of traditional Republican policymakers and adherents of Make America Great Again (MAGA) populism.
But if I were to bet, I would argue the populism in Trump may win over on the more traditional free-market guys in his administration – not that I think the drug market is a free market (see below).
There are some signs that the populist part of Trump is winning over already. In late January, Trump’s new Centers for Medicare and Medicaid Services (CMS) actually issued a statement in support (soft as it was) of continuing Medicare drug price negotiations. This was a blow to Big Pharma, which had hoped that it could convince Trump to ignore, slow roll, or sabotage the law if not repeal it outright. Trump’s CMS statement did commit to greater transparency and stakeholder input.
And then we saw the president in a Fox News Super Bowl interview being the truly populist Trump on drug prices. Trump went out of his way to mention weight-loss drugs, the popular GLP-1s that list at roughly $1,000 or more per monthly supply. They are prescribed for those with various disease states (such as diabetes and cardiovascular disease) to help people lose weight and get their conditions under control. By all indications, they work. Indeed, although I remain skeptical of the safety of GLP-1s given their relative newness, your intrepid blogger went on a GLP-1 targeted for his Type 2 diabetes as his HbA1C has been inching above 7.0. I have lost about 50 pounds in under a year. My cholesterol and triglycerides are now well within the normal range. My HbA1C dropped dramatically and is at the low end of the pre-diabetic range. (I tell my wife I now have the physique of a 20-year-old. I have yet to receive a reaction from her, though.) So, I am slowly converting to thinking that GLP-1s can help those with disease states control them and mass use could improve the health of the population as a whole.
More and more, people without underlying disease states are taking GLP-1s as well simply for weight loss. Simply check out Hollywood. Some employer groups allow coverage for just obesity even if an underlying disease state is not present. The outgoing Biden administration proposed coverage just for obesity in Medicare Part D.
The problem is that overall spending on such drugs is surging for employers, Medicare, and Medicaid. What’s more, while rebates are issued to pharmacy benefits managers (PBMs) by brand drug makers in return for formulary placement and looser prior authorization requirements, the cost-sharing on GLP-1 drugs mean they are inaccessible to most Americans. Rebates don’t make it to the point of sale in whole or at least part.
Still, given their popularity, the drugs have been in shortage. The shortages as well as high prices have led to a thriving telehealth industry that compounds generic versions of the drugs. This could be shut down as brand makers say it violates patent rights, at least once the manufacturers address their supply issues as they seem to be doing. Even then, the compound generics are often not covered by insurance and can cost hundreds of dollars a month.
Back to Trump’s comments on GLP-1s in his Super Bowl interview. In discussing potential tariffs that could drive up drug and medical device costs, he argued prices could rise in the short term, but they would ultimately be lower given his policies. He singled out GLP-1s, calling them the so-called “fat drug,” and seemed to imply he intends to try to end the fundamental unfairness of high drug prices in America compared with other developed countries.
Trump used the example of Ozempic costing $88 a month in the U.K., while it is $1,200 a month in America. Trump’s rough prices are entirely accurate and corectly represent what he said were GLP-1 prices that are roughly ten times more in America. Trump said the U.S. has been too nice on the issue of drug prices.
The significance of Trump’s statement
How significant is this? Quite. Rarely do you ever see a president get so specific on such policies. The king of social media was articulating hardcore facts. Trump has obviously studied the issue. He knows almost exact prices in the U.S. compared with other developed nations. He has already honed a policy viewpoint: the price disparity is intolerable and is unfair.
More importantly, the argument on drug costs ties directly to his view that Americans are taken for a ride every day by other nations. He wants to attack the inequity on many fronts:
- Stop jobs being exported from the U.S. only to have goods come back to be sold in America.
- Stop unfair tariffs levied by other countries in their domestic markets as well as domestic subsidies, which hurt U.S. goods and American consumers.
- Stop market manipulation and intellectual property theft that hurt American competitiveness and growth.
- In general, stop other nations taking advantage of Americans simply because they are the biggest consumer market in the world. Taken further, Trump also believes that other nations and foreign companies should pay a premium because they earn so much from American consumers. “Why shouldn’t Americans get a further discount if others are making money on us?” he might ask.
Now, I am not a Trump tariff guy. Far-reaching tariffs (unless closely crafted to address behavior violations) seem to go aganst what I remember from my college days that free markets create a rising tide that lifts all boats. I also find Trumpian economics to be discordant. But there is little question it resonates with Americans. The current free-market paradigm seems to hurt the common man because it is poorly executed. Thus, Americans see Trump’s economics as an alternative to the ongoing pain.
Within this vein, Trump is saying drug prices in other developed nations are discriminatory to Americans and the disparity with America must be addressed. Big Pharma has lobbied against any type of reasonable price negotiations in America given our market size. Why? Simple: Two-thirds to three-quarters of drug profits in a given year come from the American market due to high prices and artificially low ones in other nations. Brand drug makers are happy to adopt low prices in other nations as it is “gravy” for them. It adds to their margin if they are part of other developed countries’ negotiated formularies and prices. But they make their money in America.
Unfortunately, my Republican party has totally sold out to Big Pharma. While Big Pharma contributes huge sums to both parties, the GOP is seen by brand drug makers as the bulwark against the major change that would threaten their exploitive operations in America. With the exception of the Democrats’ Inflation Reduction Act’s Medicare drug price negotiations, GOP votes have always stymied drug price reforms.
My party labors under the illusion that somehow the drug market is a free market. It is not. Price is not governed by supply and demand but by numerous stakeholders in an opaque and perverse drug channel. While many are sinister, the brand drug makers most so.
My party also seems to believe that private sector innovation will shut down if we tackle or even fiddle with drug prices. But here are several points to counter their unfettered belief in market principles.
- The GOP fails to account for the huge investment governments make in innovation. The launch prices of drugs give no credit for the considerable public investment brand drug makers benefit from.
- Brand drug makers are more interested in innovating their bottom lines. That is not to say that you cannot find evidence that brand drug makers make people’s lives better. They show us these examples every day on TV even as they sell their wares. But too much if not most of it is tied to increasing margins and investor wealth than focusing on the most pressing healthcare crises.
- Instead of engaging in serious discussions on price and rationalizing it, Big Pharma has conspired with other drug channel stakeholders to manipulate price to further advantage them in the U.S. market and drive margins.
- And couldn’t prices be lower if other developed nations paid their fair share of innovation? America is wealthy, but so are many other nations. America has about 330 million people. The developed world population is over 1.12 billion. This, a case can be made that we should pay 30% of innovation costs. Even if you make allowances for our higher wealth in the developed world, it is hard to argue we should be paying two-thirds to three-quarters of brand drug makers’ profits.
The foreign brand drug makers
What’s more, many drug makers are not even based in the U.S. A majority of the 50 biggest drug companies are foreign firms. Foreign Big Pharma companies have become heroes in their native countries for how they disadvantage American consumers and drive their nations’ wealth. Take the second-largest drug maker, which is just behind America’s Eli Lilly. Novo Nordisk, is a Danish company, which makes Ozempic and Wegovy. Consider Novo’s and Denmark’s recent financial statistics:
- In 2023, Novo had about $34 billion in revenue.
- About $25 billion of it or just short of three-quarters came from the two GLP-1 drugs it makes.
- In 2023, Novo had a profit of $12 billion, or 35%, the largest since 1989.
- In Q4 2024, Novo said sales increased 30% year over year.
- Denmark’s exports increased by 13.4% in 2023 and were forecast to jump again by 7.4% in 2024. This was almost entirely tied to Novo’s growth.
- In December 2024, Denmark, with about 6 million people, revised its gross domestic product (GDP) growth upwards, from 1.9% as of August to 3.0%. It also revised GDP growth for 2025 from 2.2% to 2.9%.
- 30,000 people work for the drug company in Denmark. In 2023, Novo Nordisk accounted for 20% of Denmark’s employment growth.
- As of September 2024, Novo Nordisk’s market cap was over $600 billion, which is more than Denmark’s annual GDP.
In sum, whether it is its people, economy or national budget, Denmark is getting richer off the backs of Americans through high drug prices. The same can be said of other brand drugs and other foreign brand drug makers.
In testimony before Congress in September, Lars Jorgensen, the CEO of Novo Nordisk, argued that more than 80% of U.S. patients with insurance coverage for Ozempic or Wegovy are paying $25 or less for each prescription, and 90 percent of U.S. patients pay $50 or less. But it is propaganda that misses a few critical points. For the most part, only the well insured have access to these expensive drugs, whether via liberal formulary or because cost-sharing is low enough for a patient to afford the drug. And as noted above, employer groups and even government programs have been reluctant to expand coverage and lower out-of-pocket costs due to the obscene prices and how they soak up more and more of the drug spending pie. So, the statistic overall is meaningless – another twisted fabrication of Big Pharma. And whatever the cost-sharing stats, the entire healthcare systems in the U.S. pays the costs of the GLP-1s’ very high prices.
In the same testimony, the CEO went out of his way to discuss the massive investments Novo Nordisk has made in developing the drug. No doubt it was sizeable and certainly companies deserve a reward for the risk they take in bringing drugs to market. But two more points. First, a Yale study found that it costs less than $5 a month to manufacture a GLP-1. So that is a markup of at least 200 times against list price. Certainly, there is reason to believe Novo Nordisk and other GLP-1 manufacturers can be rewarded reasonably for their innovation investment at a price point less than $1,000 or more a month. Remember that Novo had an amazing margin of 35%.
Second, even in the context of innovation investment, how does one reconcile the excessively high price in America compared with the negotiated prices in other nations? Jorgensen in essence is arguing that Americans alone should pay for innovation because every other developed county has negotiated very low prices. That is inequitable.
Being taken for a ride
This ties back to Trump’s argument that Americans are taken for a ride everyday by other nations. This is most obvious on drug pricing. Whether a drug company is foreign or domestic, the GLP-1 price story repeats itself across almost all brand drugs. Americans pay manyfold more on average than similarly situated consumers in other developed world companies.
Americans have among the lowest (if not the lowest) life expectancies of any developed nation. A lot goes into that and for sure we can learn a great deal from other nations’ healthcare systems and by studying the disparities in mortality and morbidity. But at least a part of that discrepancy in life expectancy and health in general is tied to excessive costs in America’s healthcare system. This includes drug costs. The excessive drug costs create such a financial burden that many Americans forego medication. They take years off their life – and have comparatively poor health when living. Foreigners tend to scorn “fat Americans.” At the same time, a Brit, Frenchman, Dane and more live longer and healthier lives because Americans in part subsidize their longer life expectancies. America reduces the amount of outlays developed world single payer and socialized systems have to pay to properly take care of their people. Thus, these health systems’ money goes further.
So, as I noted in a recent blog, Trump can do a great deal to remedy the disparity on drugs. It is perhaps one of the greatest Make America Healthy Again (MAHA) agenda items. He can push Medicare drug price negotiations further in Medicare and beyond. He can benchmark prices against those other developed countries. And why shouldn’t America have the lowest price given the size of its market? While I am dubious of Trump’s tariffs policy, if it is to be a centerfold of the economy, he could force lower drug prices in return for no or limited tariffs on drugs.
Trump often notes we are way too generous, way too nice. He complains about other nations’ freeloading. Developed nations also argue it is not their fault that America has not done what they did and lowered drug prices.
So, Mr. President, drug prices are the perfect use case. Stop the freeloading. It is a great economic, health, and political move. Make it the second agenda item on the new MAHA commission, right after chronic disease.
Back in Denmark, the government and their happy Danes are content for now to live off high GDP and employment growth due to Novo’s get-rich-quick scheme in America. But leaders are beginning to worry that Denmark’s over-reliance on Novo Nordisk could be a long-term risk for the economy. They are fretting behind the scenes and trying to plan for change. I think they believe Donald Trump is a fundamentally different leader, whose populism throws aside the usual backroom and campaign-coffer dominance of Big Pharma in the U.S. Time will tell.
#drugpricing #ira #medicare #branddrugmakers #maha
— Marc S. Ryan
