President Donald Trump has ramped up pressure on pharmaceutical companies by sending letters to major drugmakers, urging them to cut prices in line with an executive order he signed this May. The order aims to establish price targets for pharmaceutical manufacturers, with the threat of legal action from the Justice Department and the Federal Trade Commission against those found guilty of anti-competitive behavior. However, experts suggest that these executive actions lack the authority to enforce binding price cuts, instead relying on public and corporate pressure to sway drugmakers toward cooperation. This approach, while symbolic, highlights the limitations of the administration’s ability to directly intervene in the market. Trump’s initiative, while well-intentioned, faces significant challenges as the pharmaceutical industry resists government interference, and the effectiveness of the strategy hinges on the willingness of companies to comply voluntarily.
Drug prices have surged in recent years, with prescription drug costs rising by more than 15% from January 2022 to January 2023, reaching an average of $590 per drug product, according to the Department of Health and Human Services. Of the 4,200 prescription drugs on the list, 46% of price increases exceeded inflation. Trump’s executive order, which seeks to implement ‘most favored nations drug pricing,’ aims to align U.S. prices with those in other developed countries, claiming this could reduce costs by up to 90% for some drugs. While the president has framed this as a win for consumers, critics argue that this method is equivalent to price controls, which have historically failed to generate sustainable reductions in market prices.
Analysts like Benedic Ippolito of the American Enterprise Institute suggest that Trump’s administration lacks the legal leverage to enforce price cuts, leaving the strategy dependent on a ‘credible threat’ from the government to pressure companies into compliance. However, Ippolito notes that Congress holds greater authority to introduce legislative reforms that could reshape the drug market, though Trump’s plan may not garner support from even his own party. Meanwhile, the libertarian-leaning Cato Institute’s Michael Cannon has criticized the executive order as an unconstitutional form of price control, likening it to the failed price controls implemented during President Richard Nixon’s administration. This approach, he warns, could lead to unintended consequences such as shortages or reduced innovation in the pharmaceutical sector.
The White House has sent letters to a wide range of major pharmaceutical companies, including AbbVie, Amgen, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Eli Lilly, EMD Serono, Genentech, Gilead, GSK, Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer, Regeneron, and Sanofi, urging them to respond to the administration’s demands for lower prices. Despite the potential for public backlash or regulatory pressure, the actual impact of these actions remains uncertain. With limited legal tools at its disposal, the administration must rely on persuasive tactics and political influence to influence the market. As the debate over drug pricing continues, the effectiveness of Trump’s policy will likely depend on how well the administration can navigate the complex balance between regulatory authority and corporate resistance in the pharmaceutical sector.