Latest / Making Medicine / President Trump’s “Most Favored Nation” Drug Pricing Plan: Good Deal or Dangerous Gamble?

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President Trump’s “Most Favored Nation” Drug Pricing Plan: Good Deal or Dangerous Gamble? · Making Medicine

0:00
Speaker 1: The term most favored nation takes us back to history,
0:03
Speaker 1: textbooks and the world of Adam Smith. Put yourself in
0:07
Speaker 1: the eighteenth century, and as countries are beginning to develop
0:11
Speaker 1: trading relationships, they decide to say to each other, let's
0:15
Speaker 1: be each other's best friends. Let's be each other's most
0:18
Speaker 1: favored nation. The US did this only two years into
0:21
Speaker 1: our foundings seventeen seventy eight. We say to France, we
0:25
Speaker 1: will be each other's most favored nation, will give ourselves
0:28
Speaker 1: the best preferences. We'll treat each other better than anyone else.
0:32
Speaker 1: This is what it was like to trade in the
0:34
Speaker 1: eighteenth century, that one country would get preferences from another,
0:39
Speaker 1: that they'd be a most favored nation. But fast forward
0:42
Speaker 1: two hundred years, just after World War Two, the economy
0:47
Speaker 1: is becoming globalized, and the idea that you would pick
0:50
Speaker 1: one best friend in a world of two hundred friends
0:53
Speaker 1: simply no longer made any economical sense, and so this
0:57
Speaker 1: concept went into the textbooks and was left for economic
1:01
Speaker 1: theory to gather dust for another fifty years. But it's
1:05
Speaker 1: back President Trump, and he's not the only one. A
1:08
Speaker 1: lot of populists on both sides of the Aisle keep
1:11
Speaker 1: saying America should be first, America should be that most
1:16
Speaker 1: favored nation. Hello everyone, and welcome back to the Making
1:25
Speaker 1: Medicine podcast, where science, policy and innovation meeting. As always,
1:30
Speaker 1: I'm your host John Stanford. Today, as you can imagine,
1:34
Speaker 1: is all about most favored nation, what it means, what
1:37
Speaker 1: its impact would be, and having a frank conversation about
1:40
Speaker 1: trade offs when it comes to making medicines. Let's get
1:43
Speaker 1: into the show. We now hear about most favored nation
1:47
Speaker 1: really only in the context of pharmaceuticals, medicines and drug pricing.
1:52
Speaker 1: And it's grown because this idea has settled in that
1:56
Speaker 1: the US pays substantially more for drugs than in other
2:00
Speaker 1: developed countries, which is true. There's no denying that you
2:04
Speaker 1: can get the same medicine often for less, sometimes fifty
2:08
Speaker 1: percent less, in Europe, in Canada, in Japan, and we've
2:12
Speaker 1: seen stories of people traveling around the world in order
2:16
Speaker 1: to secure that pricing. And so, as President Trump, who
2:20
Speaker 1: is the ultimate populist, is looking to put forward policy
2:23
Speaker 1: proposals to the American public, he has settled in that
2:27
Speaker 1: one of his solutions to the healthcare payment crisis we
2:30
Speaker 1: have in this country is going to be making us
2:33
Speaker 1: our most favored nations and can you think of anything more,
2:37
Speaker 1: Donald Trump, anything more negotiator. I'm going to get the
2:40
Speaker 1: best deal. In May, he came out and he said
2:43
Speaker 1: he will get America this most Favored Nation status with
2:47
Speaker 1: the major drug makers. Now, the details, of course, were
2:50
Speaker 1: few and far between, but a few months have gone
2:53
Speaker 1: by and it's back in the news because Donald Trump
2:56
Speaker 1: is not pleased with his efforts to get that most
3:00
Speaker 1: Favored Nation status when it comes to the purchasing of drugs.
3:03
Speaker 1: So recently he sent a letter to the major manufacturer
3:07
Speaker 1: seventeen of them, saying, you need to offer us the
3:10
Speaker 1: same price you offer the lowest around the world. You
3:14
Speaker 1: need to give us that most Favored Nation status or else.
3:18
Speaker 1: And frankly, if you read the letter, it says or else.
3:22
Speaker 1: It's funny. There's a Wall Street Journal article that we'll
3:24
Speaker 1: link to at the bottom of this episode that basically says,
3:28
Speaker 1: it's a nice medicine you got there. It'd be a
3:31
Speaker 1: shame if something happened to it. That's the tone of
3:34
Speaker 1: this letter out of the Trump administration. And what has
3:36
Speaker 1: us all talking about most Favored nation today? I think
3:39
Speaker 1: Donald Trump and similar to President Biden before him, and
3:44
Speaker 1: scores of individuals in Congress. You know, they see drug
3:47
Speaker 1: pricing as a popular topic to talk about, and that's
3:50
Speaker 1: one of the reasons we unpack it on the podcast
3:52
Speaker 1: so often. But President Trump is special and when he
3:55
Speaker 1: was announcing that this was going to be a focus,
3:58
Speaker 1: it wasn't just the good politics. He seemed personally invested
4:02
Speaker 1: because of this story from his friend. He described him
4:06
Speaker 1: as highly neurotic and that he was taking medicine what
4:10
Speaker 1: he called the fat shot, one of the recent GLP ones,
4:14
Speaker 1: and he told a story about the cost of that
4:17
Speaker 1: medicine in the UK being less than one hundred bucks
4:19
Speaker 1: a month, and that his friend came over to New
4:22
Speaker 1: York and it was thirteen hundred dollars. And that seems
4:26
Speaker 1: to have sat in his mind, as we often see
4:29
Speaker 1: with President Trump, something personal and individual, and he's now
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Speaker 1: talking about this policy in the aggregate based upon that
4:37
Speaker 1: story and knowing full well that this is good politics,
4:41
Speaker 1: because why do drugs cost more in the United States
4:44
Speaker 1: than they do abroad? And what would it mean if
4:47
Speaker 1: we set the same prices here as they did. The
4:50
Speaker 1: arguments for MFN are simple and pretty easy to understand
4:54
Speaker 1: people think it's unfair that the same medicine costs two
4:58
Speaker 1: very different prices depending on the country or in But unfortunately,
5:04
Speaker 1: as with all things healthcare, it's far more complex than that.
5:07
Speaker 1: But it's easy to say I'm for something where we
5:11
Speaker 1: pay less here it's not fair, and that's why there's
5:14
Speaker 1: so much traction behind the sentiment for most favored nation.
5:19
Speaker 1: Reaction to this proposal from industry, as you would imagine,
5:22
Speaker 1: is strongly opposed. It would cripple to the tune of
5:26
Speaker 1: a trillion dollars the industry. It would put companies out
5:29
Speaker 1: of business, and it wouldn't just hurt the medicines of
5:32
Speaker 1: tomorrow that we talk about so much, it would hurt
5:34
Speaker 1: the medicines of today. Even CMS admitted that one in
5:38
Speaker 1: five medicines might no longer be utilized in a post
5:42
Speaker 1: MFN world. So that's twenty percent of the drugs taken
5:45
Speaker 1: in this country that might no longer be available because frankly,
5:49
Speaker 1: the manufacturers can't afford to do them. Then let's factor
5:53
Speaker 1: in that they have no money left over for R
5:55
Speaker 1: and D. The reality is is that the rest of
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Speaker 1: the world is free riding off of a man innovation
6:01
Speaker 1: seventy percent of new drugs come out of this country,
6:04
Speaker 1: and we pay for all of them. The first pill
6:07
Speaker 1: costs two three billion dollars, and the problem is we're
6:11
Speaker 1: the only ones shouldering that cost. The next pill may
6:14
Speaker 1: only cost a dollar, and that's what the price control
6:17
Speaker 1: is being set upon. But that first pill, the fifteen
6:21
Speaker 1: to twenty years spent developing it, dreaming it, the intellectual
6:25
Speaker 1: property that goes into it and protects it, all of
6:28
Speaker 1: that seems to be burdened by the United States, and
6:31
Speaker 1: that's getting frustrating. It's really hard to want to be
6:35
Speaker 1: in a world where we have to invent the world's
6:37
Speaker 1: medicine and pay the most for it. And that's what's
6:40
Speaker 1: driving this conversation. The reality just simply isn't that we
6:44
Speaker 1: can import those price controls, because then no one's paying
6:47
Speaker 1: for the innovation. And we should remember this is happening
6:50
Speaker 1: at a time where someone would be gleeful to pay
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Speaker 1: for it. China is waiting in the wings for intellectual
6:56
Speaker 1: property companies and medicines to move they as they play
7:01
Speaker 1: a much longer and larger geopolitical game. So most favor
7:05
Speaker 1: nation would save money for the US government. There's no
7:08
Speaker 1: denying that, but it's yet to be seen how it
7:10
Speaker 1: would save any money for patients and would absolutely eviscerate
7:14
Speaker 1: both the large pharmaceutical ecosystem and the small biotechs that
7:18
Speaker 1: generate so much innovation. There's no better feeling than knowing
7:22
Speaker 1: you've got a good deal, and most favor nations better
7:25
Speaker 1: than that. It's knowing you got the best deal. It's
7:28
Speaker 1: like when you walk into Costco. No one walks out
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Speaker 1: of Costco thinking I wonder if I should have price
7:33
Speaker 1: shopped around. They've really established in the mind of the
7:36
Speaker 1: consumer that they are the best available price, and anything
7:40
Speaker 1: you get there, you are getting at the best available price.
7:44
Speaker 1: And it's very natural to say, well, why can't we
7:46
Speaker 1: have that in the world of medicines, And the reality
7:49
Speaker 1: is it just isn't that simple. The problem with the
7:52
Speaker 1: costco analogy for medicine is it takes into account the
7:55
Speaker 1: second drug that might be manufactured at low cost and
7:59
Speaker 1: can be sold at las cost at scale. They don't
8:01
Speaker 1: have the first drug, which cost two billion, three billion
8:05
Speaker 1: dollars and took ten twenty years to develop. There's simply
8:08
Speaker 1: no analogy in the cost co world of something that
8:12
Speaker 1: is so complex as developing a new medicine, but it's
8:14
Speaker 1: sunk into the minds of individuals that we should be
8:17
Speaker 1: getting a better deal, and they're not wrong. The US
8:20
Speaker 1: has tools in order to make other countries pay their
8:23
Speaker 1: fair share, and it's absolutely obvious that they're not paying
8:27
Speaker 1: their fair share. Our friends over it No Patients Left
8:30
Speaker 1: Behind put out a recent study that showed at least
8:33
Speaker 1: twenty six percent of the cost of drugs that Americans
8:37
Speaker 1: pay is global free riding. Other countries that should be,
8:41
Speaker 1: could be, and need to be paying more aren't paying
8:44
Speaker 1: their fair share, and our drugs are twenty six percent
8:47
Speaker 1: more expensive. But I think we also have to think
8:50
Speaker 1: about what we have in our system that other countries don't.
8:54
Speaker 1: In a price controlled universal healthcare system like the NHS
8:59
Speaker 1: in Great Britain, they call a drug company they say
9:02
Speaker 1: we're willing to pay this price, take it or leave it,
9:04
Speaker 1: and sometimes that means patients miss out, and that's it.
9:08
Speaker 1: That's all the actors in the supply train, the drug
9:10
Speaker 1: company and the NHS agree to a deal well below
9:15
Speaker 1: the value of the medicine. In the United States, over
9:19
Speaker 1: the last fifty years, we have developed so many middlemen
9:23
Speaker 1: between the innovator that manufactures are drug and the patient.
9:27
Speaker 1: The now fifty cents on every dollar spent on pharmaceuticals
9:31
Speaker 1: in this country goes to someone other than the manufacturer.
9:34
Speaker 1: These are those PBMs you've been hearing about that Congress
9:37
Speaker 1: wants to reform. And so when you think about the
9:40
Speaker 1: cost of our medicines, we already have a fifty percent
9:44
Speaker 1: markup that we really should be doing something about. So domestically,
9:49
Speaker 1: there are options to lower the price of drugs by
9:52
Speaker 1: removing those middlemen and ensuring that the savings that they
9:56
Speaker 1: realize don't go to large fortune ten companies but instead
10:00
Speaker 1: go to the patients that are ultimately taking the drug.
10:03
Speaker 1: But we should also be looking for solutions around the world.
10:06
Speaker 1: The US does swing a big bat look at the
10:10
Speaker 1: tariff conversation we're having, but we've missed opportunities in Japan,
10:15
Speaker 1: the European Union to insist, like we do for national defense,
10:19
Speaker 1: that they pay their fair share. Donald Trump very successfully
10:22
Speaker 1: went to the NATO countries and insisted that they start
10:25
Speaker 1: spending more on defense and that they not fre ride
10:29
Speaker 1: on the major trillion dollar investments the US makes each
10:32
Speaker 1: year in global weaponry. A similar conversation has to be
10:36
Speaker 1: had about innovative pharmaceuticals because the reality is, if we
10:40
Speaker 1: start paying what other countries pay, not only will we
10:44
Speaker 1: lose the medicines of tomorrow, but we're very well going
10:47
Speaker 1: to lose the medicines of today. I think it's important
10:50
Speaker 1: to remember in comparing our healthcare system to those in
10:53
Speaker 1: Europe or other socialized countries, it's not in apples to
10:58
Speaker 1: apples or apples to orange is comparison. It's in apples
11:01
Speaker 1: to zebra one. And one of the big factors in
11:04
Speaker 1: that is generics. Generics make up nine to ten prescriptions
11:08
Speaker 1: in the United States that we fill. We save trillions
11:12
Speaker 1: of dollars each decade by moving away from branded pharmaceuticals
11:16
Speaker 1: to low cost generics that really frankly reflect the cost
11:20
Speaker 1: of production and very little else. Other foreign countries don't
11:25
Speaker 1: have robust generics markets. In Europe, they would love nothing
11:29
Speaker 1: more than to see a strong generic market, but they
11:32
Speaker 1: killed the outlook for that market by setting price controls
11:36
Speaker 1: on the branded medicines. Going back to our cost co example,
11:40
Speaker 1: think of the Kirkland brand. Think of the ability to
11:43
Speaker 1: sell that exact same drug at a much lower price
11:47
Speaker 1: under a different brand. It's not a perfect comparison, I'll
11:50
Speaker 1: grant that, but I do think it keeps in mind
11:53
Speaker 1: that that's how our system works and works well. In
11:56
Speaker 1: the United States. The very coffee you get from the
11:59
Speaker 1: Kirkland brand is the same Starbucks coffee you pay ten
12:03
Speaker 1: times more for when you walk into a Starbucks or
12:06
Speaker 1: when you buy their beans. The tuna is the same
12:09
Speaker 1: tuna as a high end brand, But when you walk
12:12
Speaker 1: into a costco you're accessing all of that previous innovation
12:16
Speaker 1: at a much lower price. That is actually how it's working,
12:20
Speaker 1: and that doesn't exist in Europe, and we should be
12:23
Speaker 1: mindful of that. It is a very challenging time already
12:26
Speaker 1: for the generics industry, and when you hear news about shortages,
12:30
Speaker 1: that's what they're talking about. They're talking about they're just
12:33
Speaker 1: not being enough money in the system for generics to
12:36
Speaker 1: be made. That's the direction we would head in, and
12:39
Speaker 1: head in fast in a most favored nation. Reality Incubate's
12:44
Speaker 1: going to be looking deeper, as I'm sure several other
12:47
Speaker 1: folks will be researching, is are the cost savings real here?
12:51
Speaker 1: We have to remember that a proposal like this is
12:54
Speaker 1: being used politically in the short term, but what are
12:57
Speaker 1: the long term costs of moving away from a generics industry.
13:00
Speaker 1: I think they would eat a lot into the initial
13:03
Speaker 1: celebration of getting our drugs at lower prices, to say
13:07
Speaker 1: nothing of the fact that the drugs might not be available,
13:09
Speaker 1: and we certainly wouldn't have the money for R and
13:11
Speaker 1: D to invest further. The President has given a clear
13:15
Speaker 1: deadline for companies to respond and to react and to
13:19
Speaker 1: lower their prices. That's about where the clarity ends, because
13:23
Speaker 1: what's not even clear is what he would do in
13:26
Speaker 1: terms of enforcement should they not lower their prices, but
13:29
Speaker 1: also what kind of legal authority he has, And there's
13:32
Speaker 1: a lot to debate there. But I think the key
13:35
Speaker 1: takeaway is we really don't know what Trump's next move is.
13:40
Speaker 1: What we do know is that this is something he
13:42
Speaker 1: is very focused on and is investing a lot of
13:44
Speaker 1: energy in now. Something that we also should pay attention
13:48
Speaker 1: to because he mentioned it in May and he mentioned
13:50
Speaker 1: it in these letters is the growing consideration of direct
13:54
Speaker 1: to consumer or I guess in this case, direct to
13:57
Speaker 1: patient sales and the savings that can be lies there
14:00
Speaker 1: if we cut out those middlemen. There's a great example,
14:04
Speaker 1: and this is already happening. Lily, for example, has begun
14:08
Speaker 1: to sell its GLP one at a discount by going
14:12
Speaker 1: direct to the patient, and it's not a nominal discount.
14:16
Speaker 1: Their drug, which costs roughly one thousand dollars a month,
14:19
Speaker 1: goes down to four hundred a month when you sign
14:21
Speaker 1: up for their direct to consumer or direct to patient
14:24
Speaker 1: savings program. So the President's not wrong to look in
14:28
Speaker 1: that direction for a solution here. That's the caret opportunity,
14:32
Speaker 1: and we'll probably see the rise of more of these
14:34
Speaker 1: direct to consumer, direct to patient solutions. But the stick
14:39
Speaker 1: is one that frankly, we can all live without. So
14:42
Speaker 1: where does this leave us, Well, we don't know what
14:45
Speaker 1: the next moves will be, but one thing we feel
14:47
Speaker 1: strongly about we already are the most favored nation. The
14:51
Speaker 1: United States is the medicine cabinet of the world. We
14:54
Speaker 1: develop almost all of the new drugs, and our citizenry
14:58
Speaker 1: has access to them far early than everyone else. It's
15:01
Speaker 1: true that we pay more for the same drugs here
15:05
Speaker 1: than we do abroad, and that's a flaw of a
15:08
Speaker 1: broken system, a system of too many middlemen in the
15:11
Speaker 1: US and a system of countries around the world not
15:14
Speaker 1: paying their fair share. We're going to be working alongside
15:18
Speaker 1: the Trump administration to address both those concerns because we
15:22
Speaker 1: should be able to drive down prices here and have
15:25
Speaker 1: a more efficient system that saves not just the government
15:28
Speaker 1: money but patients as well. So no matter your perspective,
15:32
Speaker 1: whether you think we already are the most favored nation
15:35
Speaker 1: or you'd like to be one, it's clear that this
15:38
Speaker 1: conversation is going to continue, and that addressing the cost
15:42
Speaker 1: of medicine here and around the world is going to
15:45
Speaker 1: remain a topic of interest to the President to us
15:48
Speaker 1: here at to incubate into millions of Americans who take
15:51
Speaker 1: them as patients. But if we're going to move forward
15:53
Speaker 1: on addressing the broken health payer system in this country,
15:57
Speaker 1: it's going to start with honest conversations like this one.
16:01
Speaker 1: It's clear that most Favored Nation is something we should
16:03
Speaker 1: be talking about. It would come with substantial consequences, but
16:08
Speaker 1: it's also given rise to other pieces of the conversation
16:11
Speaker 1: about removing the middlemen and allowing a direct to patient
16:14
Speaker 1: market to begin to grow. That would be transformational, frankly,
16:18
Speaker 1: but still keep the guardrails of innovation in place. So
16:23
Speaker 1: we look forward to having this conversation. We'll continue to
16:26
Speaker 1: be providing updates, and we're certain this is something we'll
16:29
Speaker 1: continue to hear from the President about. Do you have
16:32
Speaker 1: a thought or a question about MFN or anything else
16:35
Speaker 1: we've talked about in today's episode, Drop a comment and
16:38
Speaker 1: we'll be sure to answer it next week. That's all
16:41
Speaker 1: for this episode of the Making Medicine Podcast. Reminder to
16:44
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16:47
Speaker 1: to date on the world of policy and innovation. Follow
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16:52
Speaker 1: description of this video, and as always, keep innovating. Do