Trump’s Draft Executive Order on Pharmaceutical Pricing: Dangerous Medicine for Consumers at Home and Abroad

BY: Professor Brook K. Baker, Northeastern U. School of Law, Health GAP Senior Policy Analyst

[click here to see recent post on this subject]

A draft of President Trump’s Executive Order (EO) on “Reducing the Costs of Medical Products and Enhancing American Biomedical Innovation” has been leaked, and the text provides a concerning first look at the administration’s dangerous medicine for consumers at home and abroad. As expected, the leaked text places significant blame for high US prices, not on the monopolies enjoyed by biopharmaceutical companies, but on foreign countries that “pay too little” for medicines and that “devalue American innovation,” for example by utilizing price controls or refusing to list for reimbursement drugs that are priced in excess of their therapeutic value. There is no evidence that these policy moves by foreign countries are responsible for high drug prices in the US.

Earlier this year, the president said the drug industry was “getting away with murder,” and if this Executive Order stands as written, he’ll be providing them a deadlier weapon to use.

Under the draft EO, President Trump would direct his executive agencies to engage in a three-part offensive against foreign countries:  (1) to study other countries’ procurement and supply systems and the price differentials they pay, (2) to review multilateral and bilateral agreements that need to be revised to promote greater intellectual property protection, and (3) to review potential violations of existing trade agreements including available enforcement options. These efforts would not result in price reductions in the US and would likely lead to price increases for consumers overseas, including in many poorer countries.

My previous blog detailed the precise complaints that the Trump administration has laid against eleven countries listed as priority watch list countries in the USTR’s 2017 Special 301 Report. Basically, the report seeks longer, stronger, and broader monopoly protections for biopharmaceutical patents and more stringent enforcement of IP rights through enhanced IP enforcement. 

The implication of the proposed actions to force higher drug prices on other countries is that Big Pharma would take it easy on US consumers and payers. To date, there is no evidence of any such price moderation by Big Pharma either on existing or new medicines despite much stronger IP protections in multiple bilateral, regional, and multilateral trade agreements since the 1990’s.

President Trump is placing a cynical bet that the American public is too stupid to see through his domestic and foreign policy proposals that actually strengthen Big Pharma’s monopoly power. Ideas like expedited drug approvals, value-based pricing, elimination of discount prices for hospitals primarily serving low-income patients, and draconian intellectual property protections overseas have all been on industry’s wish list for many years. Rather than actually redressing pharmaceutical exclusivities and abusive practices that exacerbate extortionate pricing, President Trump is signing an industry drafted set of proposals under the pretense that these proposals will reduce prices instead of what they’re actually doing:  shoring up pharmaceutical hegemony. Hopefully, informed outrage will send him back to the drawing table.

Selected Excerpts:

Section 1. Policy
It shall be the policy of the Executive Branch, to the extent consistent with Federal law, to:
e) Ensure that American citizens do not disproportionately subsidize medical product innovation for the rest of the world, or allow foreign governments to unfairly devalue American innovation.

Section 7. United States Trade Representative.
The United States Trade Representative (USTR), in consultation with the Secretary of State, the Secretary of Health and Human Services, and the Secretary of Commerce, and the Secretary of Commerce (sic), shall conduct a comprehensive review of the international drug purchasing and supply system including price differentials between foreign governments and the United States, multilateral and bilateral agreements that need to be revised to promote greater intellectual property protection and competition in the global market, and potential violations of trade agreements and what enforcement mechanisms may be available to the United States under such agreements.