Trump aims to address rising drug prices, but experts see serious side effects of his moves

The Trump administration has issued a series of orders aimed at lowering drug prices, but experts worry these measures will achieve that goal.

The latest step in Trump’s ongoing campaign to lower drug prices came late last month when the White House announced a deal between the government and Pfizer (PFE), the multinational company that makes COVID-19 vaccines, Viagra and other widely used products.

Under the deal, which could serve as a model for agreements with other major manufacturers, the company will sell its products to Medicaid at prices on par with those offered to other developed countries. In addition, the company will offer the drugs directly to consumers at a discount on Trumprx.gov, a site scheduled to launch in 2026. In return, the company will be exempt from the punitive 100% tariffs that Trump threatens to impose on drug imports.

The deal appears to address a long-standing complaint from Trump and consumer advocacy groups in the United States: sticker prices for many drugs are much higher in the United States than in Europe. In some cases, drugs that cost thousands of dollars in the United States are available at low cost or free to Europeans. For example, in 2021, a single injection of the arthritis drug Humira cost American patients $3,000, while the generic version was available in Germany for $10, according to reports.

Pricing controls will not change much in the United States

Pricing controls Pfizer agreed to return to Trump’s executive order in May. The order requires that government health agencies, including Medicare and Medicaid, purchase drugs at a cost no higher than most-favored-nation pricing – that is, at a price similar to that of other developed countries. This is important because the government is the country’s largest purchaser of drugs through the health insurance programs Medicare and Medicaid.

However, drug pricing is very complex, making it easy for companies to hide what customers actually pay. In both the United States and Europe, most medications are not sold directly to consumers, but rather through insurance companies and other intermediaries, who often receive various discounts and rebates that may not be reflected in the list price.

When all is said and done, Medicaid already pays similar prices for drugs as its European counterparts, making it unlikely that the MFN policy will change much, said Jeffrey Joyce, an economist and director of the Schaeffer Center for Health Policy and Economics at the University of Southern California.

“Although the MFN policy correctly reflects the urgent need to address unaffordable U.S. drug prices, it is unlikely to meaningfully reduce prices due to legal, operational, and market barriers,” say Harvard professors Amar H. Kelkar and Edward R. Schiffer Cliff in an editorial for the Journal of the American Medical Association in July.

Joyce said MFN pricing could ultimately affect the costs of newly introduced drugs, driving down prices in the United States and raising them in Europe. He estimated that this could start to happen within the next three to five years.

In the meantime, the industry can use many tactics to keep its profit margins intact.

For example, in circumstances where drug prices actually need to be lowered, pharmaceutical companies may instead stop offering their medicines in foreign countries. Darius Lakdawala, chief scientific officer at USC Schaeffer, and Dana Goldman, founding director of USC’s Schaefer Institute for Public Policy and Government Service, wrote in an op-ed.

“Faced with a choice between deep cuts in their U.S. prices or the loss of poorly profitable foreign markets, we can expect many companies to withdraw from foreign markets at the earliest opportunity, leaving American consumers with the same prices, drug manufacturers with lower profits, and future generations with less innovation,” they wrote. “In short, everyone loses.”

Trump RX replicates private companies

The direct-to-consumer portal is also unlikely to change much, Joyce said.

Only about 10% of people buy prescription drugs directly rather than through insurance. Other companies already offer discounted drugs directly to uninsured consumers, including GoodRx and Mark Cuban Cost Plus, so it’s unclear what advantage the government-run store will have over its private counterparts.

Tariffs can raise prices

Economists said that if Trump implements drug tariffs as promised, import taxes would likely push up prices.

In a social media post last month, Trump said the tariffs would be 100% capped, would only affect brand-name drugs, and appeared to exempt generic drugs, which account for 90% of drugs sold in the United States.

Even without the new tariffs, Trump’s current tariffs on India and China could push drug prices higher.

Prices will rise gradually as stocks run out and contracts are renegotiated, economists at ING said in a commentary. Prices of generic drugs from India are expected to eventually rise by 25%, they wrote. It is also possible that the prices of locally manufactured products will rise, as many manufacturers import their components from other countries.

Big, beautiful bill that undermines Medicare price negotiations

Another factor contributing to rising drug prices is massive tax and spending legislation known as the “Big Beautiful Bill,” which Trump signed into law in August.

The bill includes a provision that allows pharmaceutical companies to exempt more products from Medicare price negotiations established by the administration of former President Joe Biden. The BBB allows more drugs to be considered “orphan drugs” that treat previously untreated conditions.

This requirement undermines a way to lower drug prices that was actually set up to push prices down somewhat, Joyce said.