WASHINGTON: President Donald Trump has pledged to make prescription drug prices in the United States the lowest in the world. However, a key part of that effort is facing resistance from many mid-sized and smaller pharmaceutical companies, raising questions about how widely the administration's pricing reforms can ultimately reduce medication costs.
According to a Reuters report, the Trump administration has secured agreements with 17 of the world's largest pharmaceutical companies under a "most-favored-nation" (MFN) pricing initiative. The approach seeks to lower the prices of certain medicines in the United States by aligning them more closely with prices paid in other developed countries, where prescription drugs often cost significantly less.
The White House has said the agreements already signed account for approximately 86 per cent of the U.S. branded prescription drug market by sales. Administration officials estimate the initiative could generate about $64.3 billion in combined federal and state savings over the next 10 years, although healthcare policy experts caution that the projections remain uncertain and depend on participation levels and future implementation.
At the centre of the initiative is a voluntary pilot programme administered by the U.S. Centers for Medicare & Medicaid Services (CMS). The programme would allow participating pharmaceutical companies to offer certain medicines to Medicaid, which provides healthcare coverage to more than 80 million low-income Americans, at prices comparable to those paid in other developed countries for a period of five years.
The programme's application period, originally scheduled to close on March 31, was extended twice before finally ending on June 11.
Despite the extensions, participation among smaller pharmaceutical companies appears limited.
Reuters reported that among 19 mid-sized pharmaceutical companies contacted regarding the initiative, only Japan-based Astellas Pharma confirmed that it had applied to participate. The company said it believed submitting an application represented the most constructive course of action in a complex and rapidly evolving policy environment.
Germany's Bayer and Japan's Daiichi Sankyo said they were still evaluating their options despite missing the application deadline, while several other companies either declined to comment or did not respond to Reuters' inquiries.
Industry observers say smaller pharmaceutical companies often face different economic realities than multinational drugmakers.
Ionis Pharmaceuticals Chief Executive Officer Brett Monia told Reuters that companies like his do not have extensive portfolios of medicines that allow them to negotiate broad pricing arrangements.
"We don't have the breadth of drugs on the market that we can cut deals," Monia said.
Several pharmaceutical industry lobbyists also told Reuters that many smaller and mid-sized companies see little commercial advantage in voluntarily participating in a programme that could significantly limit their pricing flexibility and potentially reduce revenues from a relatively small number of products.
"There is no real upside," one industry lobbyist told Reuters, speaking anonymously because they were not authorised to discuss the matter publicly.
A CMS spokesperson, however, said pharmaceutical manufacturers had shown "robust interest" in the model and that the agency had received a significant number of applications.
The Medicaid pilot forms part of a broader Trump administration strategy to lower prescription drug costs in the United States, where medicine prices remain among the highest globally. U.S. Medicaid drug spending alone reached approximately $60 billion in 2024.
Healthcare economists have long noted that prescription medicines generally cost more in the United States because the country historically has allowed manufacturers greater pricing freedom and has undertaken less direct government negotiation over drug prices than many other high-income nations.
Analysts say the financial impact of the Medicaid programme may be smaller than projected because Medicaid already receives substantial statutory discounts on many medicines, sometimes exceeding 80 per cent of list prices. In some cases, these discounted prices may already approach those paid by other developed countries.
Drug manufacturers that do not participate in the Medicaid pilot could also face additional pressure.
Reuters reported that CMS is considering two other pilot programmes that could affect the larger Medicare programme, which provides health insurance to older Americans and accounts for pharmaceutical spending estimated to be two to three times larger than Medicaid's drug expenditures. Some of these programmes could begin as early as October.
The pharmaceutical industry has raised legal concerns regarding the administration's pricing initiatives. Industry groups, including the Biotechnology Innovation Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA), argue that certain government pricing models may exceed federal authority and raise constitutional questions.
Pricing consultant Brian Reid told Reuters that some companies may be waiting for further regulatory guidance and potential court rulings before committing to pricing agreements.
"This is a pretty extraordinary use of CMS's power that hasn't quite been tested," Reid said.
As the administration pushes forward with its promise to lower prescription drug prices, the response from smaller and mid-sized pharmaceutical companies could play a crucial role in determining whether Trump's goal of delivering the world's lowest drug prices becomes a reality or remains difficult to achieve.
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