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TWN
Info Service on WTO and Trade Issues (Aug25/04) Geneva, 6 Aug (D. Ravi Kanth) — In a seemingly clear display of double standards, United States President Donald Trump has called on major pharmaceutical companies “to provide MFN (most-favoured-nation) prices to every single Medicaid patient” in the US, while at the same time imposing non-MFN reciprocal tariffs on the members of the World Trade Organization, said people familiar with the development. On 31 July, President Trump announced two seemingly conflicting schemes – one to allegedly punish countries with modified unilateral reciprocal tariffs that will come into effect on 7 August, and the other to treat pharmaceutical companies with proverbial “kid gloves” treatment concerning price controls for Medicaid, which is a joint federal and state program that provides health coverage to millions of Americans. As part of his plan to “get Americans the best prices in the world for prescription drugs”, President Trump announced the following steps: * Calling on manufacturers to provide MFN prices to every single Medicaid patient. * Requiring manufacturers to stipulate that they will not offer other developed nations better prices for new drugs than prices offered in the United States. * Providing manufacturers with an avenue to cut out middlemen and sell medicines directly to patients, provided they do so at a price no higher than the best price available in developed nations. * Using trade policy to support manufacturers in raising prices internationally provided that increased revenues abroad are reinvested directly into lowering prices for American patients and taxpayers. According to a White House Fact Sheet, President Trump sent letters to the following 17 pharmaceutical companies: 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. These companies have been told that if they “refuse to step up” to President Trump’s call to lower the prices of prescription drugs in the US to match the lowest price offered in other developed countries, then, the federal government “will deploy every tool in our arsenal to protect American families from continued abusive drug pricing practices.” However, the letters did not specify any regulatory, monitoring or implementation steps that would follow in case of non-compliance by the pharmaceutical companies. Further, according to the White House Fact Sheet, “President Trump is taking decisive action to re-balance a system that allows pharmaceutical manufacturers to offer low prices to other wealthy nations while charging Americans significantly higher prices [in the US market].” It elaborated on the alleged monopoly prices being charged by the pharmaceutical companies. The White House Fact Sheet said: “According to recent data, the prices Americans pay for brand-name drugs are more than three times the price other Organization for Economic Cooperation and Development nations pay, even after accounting for discounts manufacturers provide in the US.” It added that “the United States has less than five percent of the world’s population, yet roughly 75% of global pharmaceutical profits come from American taxpayers.” It further said that “drug manufacturers benefit from generous research subsidies and enormous healthcare spending by the US Government.” “Instead of passing that benefit through to American consumers, drug manufacturers then discount their products abroad to gain access to foreign markets and subsidize those discounts through high prices charged in America,” the White House Fact Sheet suggested. Effectively, it claimed that “Americans are subsidizing drug-manufacturer profits and foreign health systems, both in development and once the drugs are sold”. Following severe criticism of the “Big Beautiful Bill” that reportedly cut the federal contribution to Medicaid, the latest scheme announced by President Trump appears to be a “face-saving move without biting Big Pharma”, said a pharmaceutical analyst, who asked not to be quoted. The White House claimed that the letters sent to the pharmaceutical companies “are an important step in President Trump’s work to get Americans the best deal in the world on prescription drugs.” According to the White House Fact Sheet, on May 12, 2025, President Trump signed an Executive Order, titled “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients”, directing the Administration to take numerous actions to bring American drug prices in line with those paid by similar nations. Subsequently, the Trump Administration “engaged pharmaceutical manufacturers in discussions to achieve MFN pricing in the United States.” According to the White House Fact Sheet, the letters sent to the pharmaceutical companies “indicate that industry proposals have fallen short, and from this point forward, President Trump will only accept from drug manufacturers a commitment that provides American families immediate relief from vastly inflated drug prices and an end to the freeriding by European and other developed nations on American innovations.” While criticizing “the unfair and outrageous prices Americans pay for prescription drugs,” President Trump said: “In case after case, our citizens pay massively higher prices than other nations pay for the same exact pill, from the same factory, effectively subsidizing socialism [abroad] with skyrocketing prices at home.” “So, we would spend tremendous amounts of money in order to provide inexpensive drugs to another country. And when I say the price is different, you can see some examples where the price is beyond anything – four times, five times different.” BIDEN PLAN In contrast to President Trump’s proposed scheme, former President Joe Biden’s plan to lower drug prices for Medicare (a federal health insurance program for people aged 65 or older and younger people with disabilities) was apparently more effective, said a TRIPS analyst, who asked not to be quoted. A law enacted by President Biden in his fight against “Big Pharma” to lower prescription drug prices gives Medicare “the power to negotiate drug prices.” According to the Biden plan, “Medicare will send initial offers to manufacturers of the first ten drugs selected for drug price negotiation to help bring down the price of these prescription drugs. This is the first time ever that Medicare is not accepting the drug prices the pharmaceutical companies set.” In 2022, nine million seniors on Medicare were prescribed the ten drugs selected for the first round of drug price negotiation. These seniors “spent an estimated $3.4 billion in out-of-pocket costs in 2022 alone for these drugs, which are used to treat some of the most common conditions like blood clots, arthritis, diabetes, cancer, heart disease, and more.” According to the Biden plan, “some seniors spent nearly $6,500 out-of-pocket for a single one of these drugs – while Big Pharma continued to make record profits, ripping off American taxpayers and the seniors their drugs aim to treat.” Apparently, “Big Pharma charged Americans two to three times more than what they charged people in other OECD countries for the same drugs, even when accounting for rebates and discounts.” It appears that “US gross prices for insulin – a drug that has been around for 100 years and costs drug companies just $10 a vial to make – were on average almost ten times the price in the United States than in comparison countries.” Further, the Biden Administration said pharmaceutical companies spent “nearly $750 billion on self-enriching stock buybacks and dividends over the last decade.” Big Pharma, however, did not agree to the Biden plan, and it had launched nine lawsuits against the Medicare drug price negotiation. CRITICISM Several representatives of health and consumer groups cast serious doubts on President Trump’s latest scheme for lowering drug prices. “It’s easy to call for lower prices on Twitter,” said Robert Weissman, president of Public Citizen. “What’s hard is actually standing up to drug corporations and passing policy that forces them to act.” Several groups like the National Consumers League (NCL), while welcoming the attention on high drug prices, questioned whether the White House is willing to back up its demands with meaningful regulation. “Consumers are desperate for relief,” said Sally Greenberg, executive director of NCL. “But we need more than finger-pointing – we need enforcement, price negotiation power for Medicare, and an end to anti-competitive practices.” Some public health organizations expressed concern that President Trump’s latest push is more political posturing than policy development. “The public deserves leadership, not slogans,” said Dr. Michael Sinha, a physician and drug policy researcher at Harvard. “Presidents from both parties have railed against high drug prices, but without legislation or regulatory muscle, not much changes.” Dr. Sinha pointed to past proposals like international reference pricing and transparency rules for TV ads – many of which were proposed but never implemented or were blocked in court. Several policy groups reportedly urged the White House to move beyond rhetoric and take specific steps, including: allowing Medicare to negotiate prices directly; capping out-of-pocket costs for seniors; reining in patent abuses and exclusivity deals; and importing safe, lower-cost drugs from abroad. “There’s no mystery to solving this,” said David Mitchell, founder of Patients for Affordable Drugs. “We know what works – what we lack is the political will.” President Trump’s scheme, according to some analysts, is not impinging on the prices of drugs that are sold by pharmaceutical companies in other countries. SECTION 232 TARIFFS Meanwhile, President Trump echoed that tariffs on pharmaceutical imports will be phased in over a year or more, and that they could ultimately reach a rate of 250%. Speaking to CNBC, he said, “we’ll be putting an initially small tariff on pharma, but in one year, one-and-a-half years maximum, it’s going to go to 150% and then it’s going to go to 250%. We want pharmaceuticals made in our country.” The US Commerce Department has been investigating two industries – computer chips and pharmaceuticals – under Section 232 of the Trade Expansion Act of 1962, which allows levies to be applied on goods considered essential for national security, the Wall Street Journal reported. In a nutshell, the Trump administration seems to be resorting to a new wave of “imperial preferences” that were implemented by the colonial powers in the 19th century, said people familiar with the development. +
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