Why Trump Faces Stiff Fight to Slash Drug Prices: QuickTake Q&A

Pharmaceutical executives briefly celebrated Donald Trump’s election to the U.S. presidency, expecting the businessman to be friendlier to their industry than his opponent Hillary Clinton, a tough critic. But foreboding about Trump’s unpredictable ire soon set in, and the fears proved justified nine days before the inauguration, when Trump said the industry was “getting away with murder.” He vowed to bring prices down by making pharmaceutical companies bid for the government’s business.

Unlike other rich countries, the U.S. doesn’t directly regulate the price of drugs. As a result, Americans spend more on prescription medicines than anyone else. The main U.S. government health programs for the poor and the elderly spent almost $195 billion on prescription drugs in 2015. Medicaid, the program for the poor, gets fixed rebates from drugmakers. Yet Medicare, the program for the elderly, spends almost three times as much and is prohibited by an industry-backed law from negotiating with drug companies. The Department of Defense and the Veterans Health Administration by law get fixed rebates from drugmakers, and also negotiate for better deals. According to a 2015 poll, the vast majority of Americans favor allowing the U.S. to negotiate on behalf of Medicare, which accounts for almost 30 percent of prescription drug spending in the U.S. Overall, the U.S. relies on private insurers and pharmacy-benefit managers to negotiate pricing deals with drug companies, including in Medicare’s drug coverage program.