President Donald Trump has promoted significant prescription drug savings, exceeding $500 billion over a decade, attributed to his administration’s policies. However, these projected savings appear largely aspirational, stemming from anticipated outcomes rather than concrete actions already implemented.
A key policy, the "most favored nation" (MFN) approach, aims to align U.S. drug prices with those in other developed countries. A White House Council of Economic Advisers report indicates that the majority of these projected savings, an estimated $529 billion, are based on the assumption that all future drug launches in the U.S. will adopt MFN pricing. An additional $64.3 billion in savings is anticipated from applying MFN pricing to Medicaid.
At a recent event, President Trump stated, "Over the next 10 years, the Council of Economic Advisers estimates that our most favored nation drug policies will save Americans over $500 billion. And this has been the greatest breakthrough in lowering healthcare costs in modern history." Similarly, Dr. Mehmet Oz, administrator of the Centers for Medicare & Medicaid Services, remarked, "Think about the $600 billion of savings to the average American over the next 10 years… It’s just a massive number that they voluntarily, sort of, gave back because the president went after them."
However, there is limited evidence to support claims of drug companies agreeing to return such substantial savings to Americans. To date, the administration has secured voluntary agreements with 17 drug companies to reduce prices. While the White House and these companies have reported commitments to introduce new drugs at MFN prices and offer them to states for Medicaid, the specific terms of these agreements remain undisclosed. Furthermore, some companies have indicated that these arrangements may expire after three years.
Experts express uncertainty regarding the validity and accuracy of these substantial savings estimates. Juliette Cubanski, vice president and director of the Program on Medicare Policy at KFF, noted, "Right now we just have a lot more questions than we have answers, and that makes it really difficult to assess the validity or accuracy or even ballpark-ness of this very large estimate of savings in the White House report." She added that assessing the impact of current voluntary deals is challenging due to unanswered questions, such as the scope of MFN pricing for manufacturers’ drugs.
When asked for more details on the actions taken to achieve the reported savings, a White House spokesperson indicated that the research report contained all underlying assumptions. CMS did not provide a comment.
The projected savings in the Council of Economic Advisers report do not stem from discounts offered on the TrumpRx website. Previously, it was noted that prices on this site for brand-name drugs negotiated through voluntary deals offer savings only in specific circumstances, such as for fertility or weight loss drugs not covered by insurance. For many, insurance plans provide more favorable pricing than paying cash. The Council of Economic Advisers analysis did estimate $4.6 billion in 10-year savings for Americans paying for fertility treatments through TrumpRx.
Additionally, TrumpRx has begun directing users to existing websites for generic drug discounts. However, as the Council of Economic Advisers analysis itself acknowledges, generic drugs are already more affordable in the U.S. compared to other high-income nations and are not the focus of MFN policies.
It is well-documented that the U.S. generally pays more for brand-name prescription drugs than other countries. A RAND Corporation analysis indicated that in 2022, U.S. prices for these drugs were more than triple those in other high-income nations after accounting for rebates. However, the implications of policies aimed at standardizing drug prices remain uncertain. Past claims of significant victories on drug prices by the President have been met with skepticism, as the MFN approach faces considerable uncertainties and may require legislative action for full implementation.
Jeromie Ballreich, an associate professor at Johns Hopkins Bloomberg School of Public Health, stated, “We’ve seen no indication from pharma, from other key stakeholders, that this $600 billion number is real.” He suggested that such a substantial impact on pharmaceutical company revenue would likely be disclosed to shareholders.
Missing Details from the Administration’s Agreements
Experts have indicated that a comprehensive evaluation of the estimated nearly $600 billion in savings is hampered by a lack of detailed information regarding current and future MFN policies. Joseph Antos, a senior fellow emeritus at the American Enterprise Institute, described the report as "partly a report and mostly a press release," making independent analysis difficult.
Andrew Mulcahy, a senior health economist at RAND, stated that while significant savings are theoretically achievable with a broad MFN policy, the administration’s actions to date only offer "semblances" of such a policy. He explained that by linking prices to those in other countries, substantial savings are possible, but current plans are unlikely to realize the estimates in the Council of Economic Advisers report for various reasons.
A critical aspect is the duration of the voluntary agreements. To achieve nearly $600 billion in savings, Jens Grueger, a partner at Boston Consulting Group, emphasized the assumption that MFN pricing "will be implemented through legislation and affect all new product launches going forward." However, he noted that current deals appear to be limited to the President’s term in office. Securities and Exchange Commission filings from some companies suggest these agreements are limited, with at least two specifying a three-year duration, as reported by STAT.
Cubanski highlighted the challenge of estimating 10-year savings based on deals that may only last three years, unless Congress enacts legislation to codify MFN pricing. She also pointed out that many Republicans in Congress oppose government negotiation of drug prices. Rena Conti, a health economist at Boston University, characterized the assumption of MFN legislation as "hypothetical at best, as there is no movement in Congress to pass legislation."
Another key consideration is the exact scope of companies’ commitments regarding pricing for newly launched drugs. The bulk of the estimated savings, $529 billion, relies on the assumption that new drugs will be widely offered at MFN prices over the next decade. The Council of Economic Advisers report defines MFN pricing as setting U.S. prices at the second-lowest rate among a select group of countries, adjusted for GDP per capita. The report’s savings projections were made by comparing historical prices in these countries and applying the MFN policy, then extrapolating over 10 years with an assumed growth rate.
Ballreich expressed concern about the assumption that drug companies that met with the White House actually agreed to this pricing structure. While White House announcements and fact sheets mention commitments to provide MFN prices on "all new innovative" or "all new" medicines, SEC filings have sometimes indicated limitations, such as agreements to price "certain future medicines" at or below MFN levels, or have noted "certain exceptions." Three companies recently declined to confirm whether new drugs would launch at MFN prices to STAT News.
Questions Surrounding Medicaid Savings
Similar uncertainties exist regarding the estimated $64.3 billion in savings for Medicaid. While press releases about voluntary deals indicate that companies will provide MFN prices to state Medicaid programs for some drugs, the extent of participation and the specific drugs included remain unclear. A KFF analysis noted that participation in the voluntary Medicaid initiative, GENEROUS, is voluntary for both drugmakers and states, and the duration and scope of drug inclusion are uncertain.
The prices paid by states for Medicaid drugs are not publicly disclosed. However, researchers have previously indicated that these prices are generally already the lowest in the U.S., making it difficult to ascertain if MFN deals will offer improvements over existing Medicaid pricing. Mulcahy suggested it is more likely that companies are formalizing existing discounts rather than incurring significant revenue losses.
Ballreich mentioned that in an upcoming study, his team estimated first-year savings for the GENEROUS program at approximately one-third of the Council of Economic Advisers’ projection. This estimate assumed full participation but also factored in existing Medicaid mechanisms for drug price reduction.
Obstacles to Achieving MFN Savings
Even if policies were enacted to mandate MFN pricing for all drug companies and payers, the actual savings for the U.S. remain uncertain. MFN policies could have unforeseen impacts on global drug prices. While the President has suggested companies might offset U.S. revenue losses by increasing prices elsewhere, researchers are skeptical that other high-income countries would accept significantly higher rates.
Antos also raised concerns that MFN policies could disincentivize the market entry of some drugs, potentially impacting future innovation, a factor he believes was not sufficiently considered in the Council of Economic Advisers estimate. A White House release touted the MFN initiative as "projected to save Americans $500 billion over the next decade while protecting innovation and expanding access." However, Cubanski cautioned that a significant drop in pharmaceutical company revenues could lead to reduced innovation.
The projections also do not account for potential pushback from drugmakers and other countries. Grueger suggested that while MFN pricing might be achievable for drugs addressing high unmet medical needs, other countries weigh patient benefits against costs in determining drug prices. For a majority of products, he predicted that companies might opt not to launch them outside the U.S. to protect U.S. prices, a sentiment echoed by pharmaceutical executives. This could result in lower prices in reference countries not being available, thereby limiting U.S. price reductions. Cubanski added that it is common for drugs to launch in the U.S. before other countries, complicating the process of setting MFN prices for new drugs.
Researchers also questioned the administration’s capacity to verify compliance with MFN pricing promises. While drugmakers report list prices, actual transaction prices often involve discounts. The Council of Economic Advisers report acknowledges that drugmakers will report net prices, but experts are unsure how the government will independently validate these figures. Antos noted that while audits are mentioned, the lack of complete disclosure and a basis for systematic verification raises concerns. He pointed out that the Council of Economic Advisers analysis itself does not rely on net prices due to the "confidential nature of rebates" and the absence of existing net pricing data sets.
Mulcahy explained that the data used by the Council of Economic Advisers is based on gross prices derived from various methodologies and invoice data, which, while the best available, has limitations. He expressed concern that the MFN pricing deals could encourage greater secrecy around international drug prices, allowing companies to "hide discounts and backchannel funds." Ballreich suggested that drugmakers could find ways to circumvent MFN pricing through rebates or non-drug-specific taxes, and confidentiality agreements in other countries would further restrict price disclosure. Mulcahy concluded that "everyone wins except for consumers" under such arrangements.