Trump executive order demands pharma industry price cuts

By Steve Holland, Michael Erman and Patrick Wingrove

WASHINGTON (Reuters) - U.S. President Donald Trump signed a wide-reaching executive order on Monday directing drugmakers to lower the prices of their medicines to align with what other countries pay that analysts and legal experts said would be difficult to implement.

The order gives drugmakers price targets in the next 30 days, and will take further action to lower prices if those companies do not make "significant progress" toward those goals.

The order was not as bad as feared, investors, analysts and drug pricing experts said, and they questioned how it would be implemented. Shares of drugmakers, which had been down on the threat of "most favored nation" pricing, recovered and rose on Monday.

Trump told a press conference that the government would impose tariffs if the prices in the U.S. did not match those in other countries and said he was seeking cuts of between 59% and 90%.

"Everybody should equalize. Everybody should pay the same price," Trump said.

The United States pays the highest prices for prescription drugs, often nearly three times more than other developed nations. Trump tried in his first term to bring the U.S. in line with other countries but was blocked by the courts.

Trump's drug pricing proposal comes as the president has sought to fulfill a campaign promise of tackling inflation and lowering prices for a host of everyday items for Americans, from eggs to gas for their cars.

Trump said his order on drug prices was partly a result of a conversation with an unnamed friend who told the president he got a weight-loss injection for $88 in London and that the same medicine in the U.S. cost $1,300.

If drugmakers do not meet the government’s expectations, it will use rulemaking to bring drug prices to international levels and consider a range of other measures, including importing medicines from other developed nations and implementing export restrictions, a copy of the order showed.

Trump's order directs the government to consider facilitating direct-to-consumer purchasing programs that would sell drugs at the prices other countries pay.

Trade groups representing biotech and pharmaceutical companies decried the move.

"Importing foreign prices from socialist countries would be a bad deal for American patients and workers. It would mean less treatments and cures and would jeopardize the hundreds of billions our member companies are planning to invest in America," Stephen Ubl, CEO of industry trade group PhRMA, said in a statement.

Ubl said the real reasons for high drug prices are "foreign countries not paying their fair share and middlemen driving up prices for U.S. patients."

The order also directs the U.S. Federal Trade Commission to consider aggressive enforcement against what the government calls anti-competitive practices by drugmakers.

During a briefing, a White House official pointed to tactics the pharmaceutical industry uses to prevent competition, such as deals with generic companies to delay market entry of cheaper alternatives, as enforcement targets.

'A FLOOD OF LITIGATION'

The executive order is likely to face legal challenges, particularly for exceeding limits set by U.S. law, including on imports of drugs from abroad, said health policy lawyer Paul Kim. "The order's suggestion of broader or direct-to-consumer importation stretches well beyond what the statute allows."

Such challenges are likely months away, and will come after the Trump administration takes more concrete action to force companies to lower prices instead of the “scattershot threats” included in the executive order, according to Lawrence Gostin, a professor of health law at Georgetown Law.

“At the point when there are actual consequences and we know what they are, and when companies feel that they have to lower the price of their drugs, at that point we're going to have a flood of litigation,” Gostin said.

The Federal Trade Commission has a long history of antitrust enforcement actions against drugmakers and other healthcare companies. Trump last month ordered the FTC to coordinate with other federal agencies to hold listening sessions on anticompetitive practices in the drug industry.

On Monday, Trump was expected to ask the FTC to consider taking enforcement action, sources said.

"President Donald Trump campaigned on lowering drug costs and today he’s doing just that. Americans are tired of getting ripped off. The Federal Trade Commission will be a proud partner in this new effort," said FTC spokesperson Joe Simonson.

Shares of major drugmakers, after initially falling during premarket trading, rallied on Monday along with the broader market. Shares of Merck & Co closed up 5.8%, while Pfizer gained 3.6% and Gilead Sciences finished up 7.1%. Eli Lilly, the world's largest drugmaker by market value, rose 2.9%.

Analysts said the order did not contain the kinds of detailed plans for price cuts that would raise concerns.

"Implementing something like this is pretty challenging. He tried to do this before and it was stopped by the courts," said Evan Seigerman, analyst at BMO Capital Markets.

Trump's order directs the government to consider facilitating direct-to-consumer purchasing programs that would sell drugs at the prices other countries pay.

It also orders the Secretary of Commerce and other agency heads to review and consider actions regarding the export of pharmaceutical drugs or ingredients that may contribute to price differences. The Commerce Department did not immediately respond to a request for comment.

(Reporting by Patrick Wingrove and Michael Erman in New York; Steve Holland, Susan Heavey and Jarrett Renshaw in Washington D.C., Additional reporting by Jody Godoy, Karen Freifeld and Dietrich Knauth in New York and Maggie Fick in London; Editing by Caroline Humer, Mark Porter, Alistair Bell and Bill Berkrot)