Trump Considers Linking US Drug Prices to Global Benchmarks

The Trump administration is weighing a controversial policy that would tie the cost of US prescription drugs to the lower prices paid by other wealthy nations—a move that has prompted alarm within the pharmaceutical industry and raised antitrust and innovation concerns, according to Reuters.

Citing two unnamed pharmaceutical executives, Reuters reported that the initiative—known as international reference pricing—is currently under serious consideration by the agency responsible for Medicare and Medicaid. The sources, who were not authorized to speak publicly, said the proposal is viewed as the most significant threat to the industry’s pricing power and innovation capacity.

One of the sources said government health officials directly communicated that the proposal was under active review, characterizing it as a “mid-level priority” within the administration’s broader agenda to curb drug costs. According to Reuters, the same source described the proposal as the industry’s biggest “existential threat,” citing its potential to severely disrupt U.S. biosciences innovation.

The United States consistently pays more for prescription medications than any other developed nation—often three times as much. As per Reuters, former President Donald Trump has long expressed a desire to close that pricing gap, though he has not publicly endorsed a specific mechanism during his current term. A prior effort to implement reference pricing during his first term was blocked in federal court.

Although reference pricing was not included in Trump’s recent executive order on healthcare, Reuters notes that the directive’s call for better value in Medicare drug purchases may create an opening for the policy to reemerge in a revised form.

A conservative think tank, the America First Policy Institute, has revived the concept in policy papers suggesting that reference pricing could be introduced through Medicare’s existing drug price negotiation authority. The think tank’s proposal dovetails with cost-cutting provisions in the Biden-era Inflation Reduction Act, which authorized the U.S. government to negotiate prices for its most expensive medications. However, as Reuters reported, even those negotiated prices remain significantly higher than what is paid in countries like Japan and Sweden.

Related: Senate Judiciary Committee Advances Bipartisan Bills to Address Drug Pricing and Competition

Pharmaceutical Research and Manufacturers of America (PhRMA), the industry’s chief lobbying group, has previously registered its opposition to international reference pricing with Congress, according to lobbying disclosures cited by Reuters.

The implementation of such a policy would likely begin as a pilot program within the Centers for Medicare and Medicaid Services (CMS), specifically through its innovation arm, CMMI. These pilot programs can span multiple years and may affect both Medicare and Medicaid populations.

Experts caution that the practical rollout of reference pricing would face steep hurdles. Anna Kaltenboeck, a health economist at Verdant Research, told Reuters that CMS may lack the necessary workforce, especially amid layoffs and staffing challenges reported at the Department of Health and Human Services. More than 10,000 staff have exited the agency in recent years, through buyouts and early retirements, according to HHS data cited by Reuters.

Additionally, regulatory experts argue that aligning U.S. drug prices with those in other countries is far from straightforward. Rena Conti, a health policy scholar at Boston University, noted to Reuters that drug availability and pricing transparency vary widely between nations, complicating efforts to adopt a uniform benchmark. Drugmakers might even respond by raising prices abroad to offset potential losses in the U.S. market.

With over 600 new medicines approved since 2022, and thousands more already on the market, the potential for market distortion is substantial. According to a study published in JAMA and cited by Reuters, 92% of these drugs were available in the U.S., compared to 80% in Germany—a disparity that could complicate efforts to use foreign prices as benchmarks.

While the Trump administration frames the policy as a taxpayer safeguard, critics warn it may inadvertently trigger global pricing shifts, stifle innovation, and invite regulatory scrutiny, especially if drugmakers are seen as colluding to manipulate international benchmarks.

Source: Reuters