The Trump Administration is reportedly considering a proposal to link U.S. drug prices to those paid by other developed countries, a move that could significantly impact the pharmaceutical industry. According to two sources familiar with the matter, the potential policy is seen as a major concern by drugmakers, who warn it could pose a serious threat to innovation in the U.S. biosciences sector.
The sources, who spoke on the condition of anonymity, said they expect the policy to be introduced by the agency that oversees Medicare and Medicaid programs. One source indicated that government health officials had directly communicated their interest in exploring this approach, which they described as a mid-level priority for the Administration in its efforts to lower drug costs.
This potential policy is considered a more significant concern for the industry than other government proposals, such as tariffs on imported medicines. One source described it as an “existential threat” to the industry and U.S. pharmaceutical innovation. Earlier this year, the pharmaceutical trade group PhRMA lobbied Congress on the issue, which is commonly referred to as international reference pricing.
Currently, the U.S. pays the highest drug prices globally, often up to three times higher than those in other developed nations. President Trump has expressed a desire to address this price disparity, though he has not specified a clear path forward. In his first term, a proposed international reference pricing plan was blocked by a court.
The Administration had projected that such a pricing plan could save U.S. taxpayers more than $85 billion over seven years, reducing the country’s annual spending on prescription drugs, which exceeds $400 billion. However, some industry insiders caution that the proposal could have negative consequences for U.S. innovation and the broader healthcare market.
The sources speculated that the Medicare agency may test the policy through a pilot program, following previous discussions by health officials about testing drug pricing models. Requests for comment from the White House, the U.S. Department of Health and Human Services, and PhRMA went unanswered.
In the past, drug pricing pilots have typically been managed by the Centers for Medicare and Medicaid Services’ innovation center (CMMI), with potential impacts on both Medicare and Medicaid. While Trump has not publicly revisited the idea of international reference pricing, the conservative think tank America First Policy Institute recently suggested that it could be integrated into Medicare’s drug price negotiations.
Under President Biden’s Inflation Reduction Act, the government is now allowed to negotiate prices for the costliest prescription drugs. However, the first ten drugs negotiated under the program are still priced much higher than what drugmakers have agreed to in other high-income countries.
