Explainer-What does Trump’s deal with Pfizer mean for drug prices?

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By Deena Beasley

(Reuters) -President Donald Trump, who has long argued that the U.S. pays more than it should for prescription medicines, on Tuesday said Pfizer had agreed to cut prices for drugs it sells to the Medicaid program for low-income Americans and to ensure the U.S. would not pay more for new medicines than other high-income nations. Trump said he expects other drugmakers to follow suit.

Here are details of the agreement:

THE “TRUMPRX” WEBSITE

Early next year the U.S. government plans to launch a website called TrumpRx that will help consumers search for a drug to see if they can buy it directly from its manufacturer. Nearly all of these existing direct-to-consumer sales platforms require patients to buy their medicines out-of-pocket, usually at a higher cost than they would pay if they had health insurance. That is very different from filling a prescription at a pharmacy that handles insurance claims, charging the patient only a flat co-pay or a percentage of the drug’s cost. For people without health insurance, drugmakers often offer lower-cost or free drug programs.

MORE PRICE CUTS FOR MEDICAID

Pfizer pledged to reduce prices for a majority of its treatments covered by Medicaid, the joint federal and state health insurance program for low-income individuals and families. There were few details on timing and discount amounts.

Drugmakers are already required by statute to give Medicaid, which accounts for about 10% of U.S. drug spending, substantial discounts off the lowest available price for a medication. 

The Trump administration did not say whether lower Medicaid prices would also impact the more substantial pharmaceutical sales passing through commercial insurers or other government plans, including Medicare.

MOST-FAVORED NATION PRICING   

Pfizer also committed to launch new drugs at the same price in the United States as in other high-income countries. 

Studies have shown that the U.S. pays more than three times as much for brand-name pharmaceuticals as other wealthy countries.

U.S. prices for newly launched pharmaceuticals more than doubled last year to $370,000 from $180,000 in 2021, as companies leveraged scientific advances to develop more therapies for rare diseases, which typically command high prices, a Reuters analysis found. 

Some drugmakers had already pledged to bring launch prices more into alignment. Bristol Myers last week said it would launch schizophrenia drug Cobenfy in Britain next year at a price matching its U.S. list price. The drug, as is often the case in with new pharmaceuticals, was approved in the United States some 18 months before its anticipated UK launch. 

Questions remained about whether any announced prices would be final prices or whether drugmakers could still offer confidential discounts to governments or other buyers.

The Trump administration said it would press other countries to pay more for medications, allowing drugmakers to fund additional research and development work. Other governments have bristled at the idea that they should pay more for branded drugs, although there has been talk of concessions.

A RETURN ON PFIZER’S INVESTMENT

Trump has said he will impose a 100% tariff on imports of branded or patented pharmaceutical products from October 1, unless a drugmaker is building a manufacturing plant in the U.S.

Pfizer pledged to onshore 100% of the value of all imports that it currently brings into the United States, and in return the company will receive a three-year grace period during which its products will not be subject to pharmaceutical-targeted tariffs.    

(Reporting by Deena Beasley; Editing by Stephen Coates)