The president has an opportunity to pressure foreign leaders into delivering a fair prescription drug market for Americans.
I n September, while he was in Europe, President Trump did an interview on the Fox News Channel in which he discussed the interaction of tariffs and prescription drug prices. He accurately pointed out that, for years, European countries, Canada, and Japan have been paying far less than the United States for the same name-brand prescription drugs. “If countries don’t agree to [fair market value] pricing,” Trump said, “I will use tariffs to get them to agree.”
Recently, Trump reiterated this point during remarks at the White House in which he unveiled his “TrumpRx” website. The site will allow Americans to purchase prescription medicines directly from manufacturers without dealing with middlemen. Trump noted that “foreign freeloading” results in much lower drug prices in Europe than in the United States for the same name-brand medicine.
Conservatives should support President Trump’s efforts to exert pressure on countries with socialized medicine to end their price-controlled prescription-drug freeloading and thereby lower drug prices in America. If there is one policy area where the president’s instinct to use “soft power” on tariffs and trade can be very helpful, it’s this one.
The latest iteration of Trump’s plan to lower prescription-drug prices has two components: get socialized medicine foreign regimes in Europe, Canada, and Japan to pay more, and impose a price control on U.S. drug manufacturers at home equal to the lowest price negotiated overseas (a concept known as “most favored nation,” or MFN).
Understandably, free market conservatives and drug manufacturers are of two minds on this strategy. We hate the “foreign freeloading” that happens today, where Hillarycare technocrats in Belgium or Spain pay half the price for drugs that we do, all because their governments control the purchasing process from the top down and can impose price controls as the cost of doing business. But our distaste for price controls extends to both sides of the Atlantic — we certainly don’t want to see them here.
What’s so bad about price controls? Historically, they have backfired every time they have been tried. Milton Friedman and others have explained why in detail, but the nutshell of the argument is that forcing someone to sell you something for less than the fair market value of the good or service will result in a reluctant seller and an eager buyer. The reluctant seller will make only what he absolutely needs to, since he’s selling for less than the market calls for. The buyer will scarf up every bit of what’s on sale, which in short order won’t be much.
Price controls for medicines lead to scarcity and long wait times: Nearly 90 percent of new medicines launched between 2012 and 2021 were available in the U.S., compared with barely 50 percent in countries such as France, Japan, and Canada. And while almost 80 percent of new medicines reach U.S. patients within a year of launch, the average in G-20 countries is just 16 percent — proof that government price-setting means fewer cures delivered far later.
Price controls on drugs are a relic of the Biden administration, which passed drug price controls in Medicare in 2022’s so-called Inflation Reduction Act (IRA). This law is already chilling investment in new treatments for deadly diseases such as cancer. A study by Vital Transformation, a health-care-focused consultancy, found a 35 percent drop in early-stage drug development by small and midsize biotechnology companies since the IRA’s passage, with investment shifting away from diseases that disproportionately affect seniors — including Alzheimer’s, strokes, and several major cancers. That means fewer therapies in the pipeline today and fewer cures for seniors tomorrow.
President Trump would be wise to avoid President Biden’s costly IRA price-control mistake. But he’s on to something when it comes to going after the foreign freeloading. In partnership with drug manufacturers, Trump should scratch his tariff itch by telling the price-controlling Europeans that they will either pay fair market value for drugs or face the consequences. Trump has no problem doing that with other goods or services, or to get our trade partners to change their behavior, and he should jump into this project with gusto. Of course, he will need the cooperation of the drug manufacturers themselves, but they should be eager to partner with the president to get more dollars into the global prescription drug system.
The market is rife with opportunity to call out the games that foreign governments play — such as the U.K.’s clawback system, which lets the government set artificially low drug budgets and then force companies to pay back the “overage” when reality proves them wrong. It’s like a rigged casino: The house always wins, and American innovators are left footing the bill.
Instead of importing these schemes, Trump should use America’s leverage in trade talks to stop them. He can tell Europe: “If you want access to U.S. breakthroughs, you pay fair value, without clawbacks or backdoor rationing.” That’s a market principle conservatives can stand behind.
This extra money — along with domestic reforms at home such as allowing direct-to-consumer sales, as well as cutting out “pharmacy benefit manager” (PBM) middlemen that keep list prices high so they make a profit off the spread — should allow drug companies to lower the sticker price on prescription medicines in America. Doing so would not mean any less money available for new cures and breakthroughs, since the Europeans and others will finally be paying what these things cost. American patients will no longer overpay so that socialized medicine regimes abroad can underpay.
The result will be a globally consistent drug price, the same in Cleveland as in London or Paris or Berlin. That price will be a real price that sends real market signals, not an inflated one “negotiated” down by PBM middlemen to a net price, with the PBM pocketing the difference. The price will just be . . . well, the price. Consumers will have confidence that they’re not getting ripped off, and they will be able to buy directly from the manufacturer if they choose to. Shopping for prescription drugs — like shopping for groceries or clothes or anything else — will be defined by prices that reflect reality, are transparent, and are comparable around the world.
But all of this can happen only if Trump doesn’t take the easy way out — punt on pressuring the foreign freeloaders, and instead just import the lowest price control he can find over there and impose it here. That would result in all of the downsides of price controls and none of the upsides of a competitive, robust, and transparent free market. Only President Trump has the gumption to tell countries to accept his terms, or else. He should use that to finally deliver a sane prescription drug market to the American people.