President Donald Trump is ramping up the heat on pharmaceutical companies, urging them in letters sent Thursday to cut down drug prices in accordance with an executive order he signed in May.
But Trump has limited authority to actually force drug companies to adjust prices, according to experts, and his effort equates to price control.
As a result, utilizing public pressure through these letters may be one tool he’s employing to get companies to comply, according to Benedic Ippolito, a senior fellow in economic policy studies at the conservative-leaning American Enterprise Institute think tank.
“One of the big questions has been just how much can the administration realistically pressure these drugmakers to do something that is at least nominally voluntary,” Ippolito told Fox News Digital Monday.
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Drug prices have dramatically climbed in recent years.
Prescription drug prices increased more than 15% from January 2022 and January 2023, reaching an average of $590 per drug product, according to the Department of Health and Human Services. Of the 4,200 prescription drugs included on that list, 46% of the price increases exceeded the rate of inflation.
Trump’s original executive order signed in May directs the Department of Health and Human Services to establish price targets for pharmaceutical manufacturers. Failure to comply will prompt the Justice Department and the Federal Trade Commission to “undertake enforcement action against any anti-competitive practices,” along with other consequences.
Additionally, Trump introduced plans to launch “most favored nations drug pricing.”
“The principle is simple – whatever the lowest price paid for a drug in other developed countries, that is the price that Americans will pay,” Trump said at the White House in May upon signing the order. “Some prescription drug and pharmaceutical prices will be reduced almost immediately by 50 to 80 to 90%.”
“We’re going to equalize,” Trump said. “We’re all going to pay the same. We’re going to pay what Europe pays.”
However, Ippolito said Trump’s ability to actually lower the cost of drugs will be dependent on the administration’s ability to present drug companies with a “credible threat” to pressure them into submission.
“The administration, realistically, does not have a ton of leverage to force drugmakers to change their behavior,” Ippolito said. “I think that’s the practical reality.”
Additionally, Ippolito said Congress has greater authority to establish new laws that would have “profound implications for drug markets.” But Trump’s views on the issue may not attract support from even members of his own party, he said.
“Congressional Republicans are generally more hesitant to do bold things on drug pricing, and the administration, the president, seems to have quite different views,” Ippolito said. “And so I think he probably looks at Congress and sees some people who may not share his vision on this particular issue.”
Michael Cannon, director of health policy studies at the Washington-based libertarian-leaning Cato Institute think tank, said the effort amounts to price controls since the executive order isn’t limited to government programs – it applies to the free market and private sector as well.
“This is government price controls,” Cannon told Fox News Digital Monday. “It is even worse than government price controls, because it is government price controls without Congress’ permission.”
Price control occurs when the government steps in to impose limits on how much one can charge for various goods or services in the free market.
While price controls may lower costs for some consumers, they have largely been ineffective in American history. For example, President Richard Nixon implemented price controls in the 1970s in an attempt to fix wages and other costs – which backfired and resulted in the gas crisis and other shortages across the country.
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Meanwhile, Cannon said there are plenty of other avenues that could lead to reduced drug prices, including reforms to Medicaid, Medicare and the tax code. But all those options would involve the legislative branch.
“Those things require Congress, for the most part, and it’s hard to get anything through Congress that would reduce wasteful spending in the health sector,” Cannon said.
The White House sent letters to the following drug companies Thursday, advocating for lower drug prices: AbbVie, Amgen, AstraZeneca, Boehringer Ingelheim, Bristol Myers Squibb, Eli Lilly, EMD Serono, Genentech, Gilead, GSK, Johnson & Johnson, Merck, Novartis, Novo Nordisk, Pfizer, Regeneron and Sanofi.