The Trump Administration is reportedly mulling over a policy to match U.S. drug prices with those in other developed nations.
What Happened: The Trump Administration is contemplating a policy to align U.S. drug prices with lower rates in other developed countries. The policy is likely to be enforced by the agency responsible for Medicare and Medicaid health programs, reported Reuters citing sources from the pharmaceutical industry.
The sources highlighted this policy as the pharmaceutical industry’s primary concern, surpassing other government actions under consideration, such as tariffs on imported medicines. One source labeled it as the most significant “existential threat to the industry and U.S. biosciences innovation.”
Though the Trump Administration hasn't directly addressed reference pricing, the conservative America First Policy Institute suggested it could be included in Medicare's drug price negotiations.
The industry trade group, PhRMA, has already approached Congress earlier this year regarding this issue, known as international reference pricing. The first source expressed apprehension about the potential upheaval this policy could trigger in the healthcare market, beyond just pharmaceuticals.
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Why It Matters: Under Biden’s Inflation Reduction Act, the U.S. began negotiating prices for its costliest drugs. However, the negotiated prices for the first 10 drugs remain over twice as high--and sometimes five times higher--than what drugmakers charge in other wealthy nations. During his first term, President Donald Trump‘s attempt to implement an international reference pricing program was halted by a court ruling.
The current report by Reuters comes on the heels of President Trump’s executive order aimed at lowering drug prices and reducing Medicare costs signed earlier this month. The order instructed the Secretary of Health and Human Services to seek guidance for the Medicare Drug Price Negotiation Program for the initial price applicability year 2028 and how drugmakers should implement the set prices in 2026, 2027, and 2028.
This potential move is perceived as a major threat to the pharmaceutical industry. Boston University's Rena Conti told Reuters that drugmakers might respond to international reference pricing by raising prices in reference countries, potentially justifying higher U.S. prices and increasing global revenue.
Invesco Pharmaceuticals ETF (NYSE:PJP) and iShares U.S. Pharmaceuticals ETF (NYSE:IHE) declined 8.6% and 7.5%, respectively over the past month.
Price Action: During the pre-market session on Wednesday, Novo Nordisk A/S (NYSE:NVO) gained 2.39%, Eli Lilly And Co (NYSE:LLY) and Pfizer Inc. (NYSE:PFE) climbed 1.16% and 1.07%, respectively. Meanwhile, Johnson & Johnson (NYSE:JNJ) edged 0.48% higher.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
