U.S. executive order on drug price cuts raises hope

Domestic pharmaceutical industry expresses ‘more hope than concern about U.S. executive order on drug price cuts

U.S. President Trump signs executive order on “most favored nation status” for drug prices... “Up to 90% price cuts”

Improvements in distribution structure and reductions of high-priced drugs... Domestic biosimilars by companies such as Samsung Biologics and Celltrion are expected to benefit

Every administration had attempted to lower drug prices... its impact on the domestic pharmaceutical industry will be minimal.

U.S.

 

President Donald Trump has signed an executive order to significantly reduce drug prices in the United States.

 

This measure, which focuses on significantly reducing U.S.

 

drug prices in line with overseas prices, is expected to have a positive effect on domestic biosimilars.

 

However, some predict that the expected effects of this executive order will not be sufficient and that there will be no significant impact.

 

Trump signs executive order to lower drug prices in the US...

 

“Up to 90% reduction” According to local media reports on the 13th, President Trump signed an executive order on the 12th (local time) to lower the prices of prescription drugs in the US to the same level as other countries.

 

The order essentially applies the most-favored-nation policy to drug prices in the US.

 

Under the executive order, the US Secretary of Health and Human Services must promote a program that allows US patients to purchase drugs directly from pharmaceutical companies at a “most-favored-nation” price.

 

In addition, the Secretary of Health and Human Services must impose the most-favored-nation pricing on companies within the US pharmaceutical industry within 30 days.

 

This measure is interpreted as a move made to present a kind of price cap to pharmaceutical companies compared to drug prices overseas, and pressure them to lower their prices accordingly.

 

Ultimately, this is expected to improve the intermediate distribution structure of Pharmacy Benefit Managers(PBMs) and further reduce the prices of expensive drugs.

 

President Trump said at a press conference, “What we are trying to do is level the playing field for drug prices,” adding, “The American people will be able to purchase drugs at the lowest prices in the world.” He did not specify which drugs would be subject to price reductions.

 

However, the administration has hinted that the price reduction could be as high as 90%.

 

President Trump said at the press conference, “Drug prices in the United States could be reduced by 59%, 80%, or even 90%.” A day earlier, he had posted on his Truth Social account, “Prescription Drug and Pharmaceutical prices will be REDUCED, almost immediately, by 30% to 80%.” “Original drug price cuts expected to expand market for Korean biosimilars” The domestic pharmaceutical and biotech industry has responded with more optimism than concern to these measures.

 

There are expectations that the price cuts targeting original drugs will have a positive impact on biosimilars.

 

Celltrion said it expects the measure to create “a better business environment.” With the simplification of the intermediate distribution structure, it is expected that “this will provide positive opportunities for Celltrion's U.S.

 

business activities,” and that “the dominance of pharmaceutical companies making high profit selling original products is expected to weaken, which could present market expansion opportunities for biosimilar companies.” Furthermore, it is anticipated that “biosimilar manufacturers will be able to negotiate drug prices directly with the government rather than through intermediaries such as PBMs, which could benefit both the government and manufacturers.” Additionally, it predicted that the prescription of biosimilars will increase as the prices of high-priced drugs are reduced.

 

Currently in the US, through insurance companies and PBM systems, high-priced original drugs are prioritized for inclusion in formularies, followed by limited competition among biosimilar products, resulting in the addition of 2–3 products.

 

During this process, rebates are paid to intermediary distributors, so the burden associated with these rebates will be significantly reduced with the new system.

 

Celltrion stated, “Previously, biosimilar prices were set at the same high level as originals, making it impossible to provide substantial benefits to patients.

 

However, if the intermediate distribution structure is improved through this executive order, the actual prescription prices of biosimilars will decrease, ultimately expanding biosimilar prescriptions to European levels.” Furthermore, it is also expected to provide an opportunity to launch new products in the US market.

 

Celltrion explained, “If parallel imports are activated to supply medicines at most-favored-nation prices in accordance with this executive order, Celltrion will secure the opportunity to launch additional products that have not yet been introduced in the US market.” Another biosimilar company, Samsung Bioepis, is said to have shown a similar response.

 

A positive outlook on the newly announced measure is dominant both inside and outside the company.

 

The background is the expectation that the preferential policy for biosimilars will be strengthened to reduce medical costs.

 

However, a Samsung Bioepis official said, “We are closely monitoring this policy,” without further elaboration.

 

“It is premature to make specific judgements… Its impact on the Korean pharmaceutical industry will be limited The key issue is the strong opposition from the U.S.

 

pharmaceutical and biotech industry.

 

The U.S.

 

pharmaceutical and biotech industry has consistently opposed the U.S.

 

government's repeated attempts to lower drug prices, either by blocking them altogether or minimizing their impact.

 

As a result, the actual evaluated effect of the drug price reductions was then minimal.

 

In fact, President Trump signed an executive order for drug price cuts during his first term in 2018, but it was ultimately scrapped due to opposition from the pharmaceutical industry.

 

At the time, an attempt was made to lower drug prices through an international reference pricing system, but a federal court raised procedural issues and put the brakes on the plan.

 

President Joe Biden also conducted drug price negotiations with major pharmaceutical companies under the Inflation Reduction Act (IRA).

 

However, the actual drug price reductions were limited to 10 drugs, including Eliquis, Xarelto, Januvia, Forxiga, Entresto, Enbrel, Imbruvica, Stelara, and Fiasp.

 

Even these are limited to those who have Medicare - people aged 65 and older - in the United States.

 

The drug price reduction measures will take effect in 2026, and the annual savings in medical costs are estimated at USD 6 billion (approximately KRW 8 trillion).

 

This is considered insignificant compared to the total drug costs in the United States, which amounted to USD 805.9 billion (approximately KRW 1,142 trillion) last year.

 

In this situation, the Trump administration's push for more stringent drug price reduction policies in the second term is expected to face strong opposition from the U.S.

 

pharmaceutical industry.

 

Additionally, criticism has emerged locally that the executive order lacks specific policies.

 

The New York Times (NYT) criticized the executive order, stating that it “did not include specific policies such as pushing for legislation to reduce drug prices or revising drug payment regulations under government health programs.” In the same line, there are also projections that its impact on the domestic pharmaceutical and biotech industry will be limited.

 

A representative from the pharmaceutical industry stated, “So far, only the direction to pursue drug price cuts has been outlined; there are no specific methods for how the cuts will be implemented, nor have the target products been determined.” The official added, “Its impact on domestic pharmaceutical and biotech companies is currently unclear, and even if there is an impact, it is expected to be minimal.” Another industry insider noted, “The recent administrative order requiring the manufacture of pharmaceuticals within the United States, as well as the upcoming pharmaceutical tariff policy expected next week, are likely to have a greater impact on the domestic pharmaceutical and biotech industry than the recent drug price reduction administrative order.”